In this episode of Truth About FX, Walter talks about the most aggressive trading system — and is there really such thing? He talks about positioning and what makes an aggressive system “aggressive”.
Download (Duration: 04:24 / 5:04 MB)
In This Episode:
00:34 – aggressive and crazy
01:43 – more sophisticated
02:45 – super aggressive
03:56 – pancaking
05:54 – worth a lot
07:16 – it kills you
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Hi, Walter. This question comes quite a bit but what is the most aggressive trading system you’ve ever seen?
Walter: Wow, there’s so many. I mean, you know any kind of a Martingale thing is pretty aggressive and seems crazy to me but I guess if we’re just talking about something that I consider tradable, probably systems where you’re really piling in on a winner.
Like, pyramiding or some sort of pyramiding system where you add to your winners. I used to do this about ten years ago. Now really — nine years ago now — what I used to do is whenever I was giving in a strong trend, I would add positions as it gets closer to my target.
Now, I wouldn’t do it on every position but I did it on those where it looked like the market had a long ways to go. So if it looks like it can move really, really strongly in my favor — if it went — I would add these positions and it would be like for example, you took 3 lots in your first position then it goes 50% on the way to your target, I might add 5 lots.
Then it goes 70% to my target, I might add 6 lots and then when it goes 80% to my target, I might add 9 lots. I’ve got like all of these at the end of the position. You’ve got so many and there wasn’t really any breakeven set. I didn’t have breakeven thing.
I am more sophisticated now. I use sort of a breakeven thing. A lot of traders do this where if it retraces against you, you get popped out breakeven rather than actually risking too much. But, back in those days, I would set an alarm.
So when these got triggered, I would have to wake up usually in the middle of the night when the New York Session starts trading and I’d go in and basically get out of these crazy positions where I had… You know originally I had 3 lots on, now I’ve got 14 or something.
To me, that was probably I guess the most aggressive system. It’s difficult because you had to be really quick to get out of those even if you haven’t necessarily hit your target and you have to be okay with your last position, maybe even losing a little bit of money because there’s risk on that.
From my point of view, as a tradable system, that’s probably the most aggressive but any of those systems where they have a loser then they double down and take twice the size on the next trade because they supposed that they’re not going to have so many x number of losers in a row or something.
Any sort of pseudo Martingale. I think those are super aggressive but for my trading the most aggressive thing I’ve done is just really like I said pile onto a winner, like that pyramiding into it.
What about you? Have you ever used anything that you consider super aggressive?
Hugh: By nature, I am not an aggressive trader but I guess, the most aggressive one I’ve tried, was Bill Williams and his “Trading Chaos Method”.
Hugh: Yeah, that’s the same thing. Like, he has all different signals and maybe like ten signals will fire off in one trade and he’ll get into 15, 20 positions and then just cash it out in the end.
Walter: Yeah, he’s adding. That’s interesting. What timeframe? I’m just curious because I’ve looked to that and I tested. I read the book when it came out and all that but it was difficult for me to make it work. Which timeframe are you looking at on that one?
Hugh: I was looking at the daily’s but there are just so many trades that it was impossible to track them, in my opinion. Are there any specific names of systems or can people learn stuff from your forum about aggressive systems like that?
Walter: Sure, yeah. There’s a bunch of videos on pancaking in the personal trading program which is, of course, in the forum. If you’re interested in this, pancaking is where I would start. That’s my approach for pyramiding. It’s pancaking trades.
Beyond that, I would say another thing that you might do is look at Bill Williams. Try and see if you can search pyramiding on the internet. You can find a lot about that. Another way to do it, basically is — in pyramiding there’s two ways.
There’s like the reverse pyramid where your first position is the smallest and you add bigger ones as you go, as you’re closer to your target. Your thinking there of course is that the closer you get to your target, the more likely it is to be hit. That is what I used to do with my pancakes.
You can also add the same size or you can add smaller sizes so your first position is actually the largest. There’s an even a better one actually where you can go… You have a really, really big original position or fairly large original position and then the next positions gets smaller. It’s like a regular pyramid but then as you go back out and get closer to your target, they’ll start to get bigger again.
It’s like hourglass pyramid or whatever. What’s nice about that is you can adjust your stop loss so if you have it right, you can adjust your stop loss so that what ends up happening is you get stopped out at break even.
That’s a really clever way to do it too. I would look up. If you guys want it, I can link my pyramid for you. There’s a guy, a South African guy, who is really good at this and he’s got courses and stuff on that. I’ll link that up for anyone interested in that too because that is his whole model of trading and I think it makes a lot of sense.
It’s frustrating of course because you get stopped out at breakeven quite a bit, maybe a third of your position end up being stopped at break even. But, when you do hit one, it’s worth a lot to your account.
I’ll link that up in the shownotes for you guys so you can check out his stuff. I think he’s a candidate and all that kind of thing or whatever. I don’t know why people do that with trading systems.
Have a look at that and see if that makes sense to you but I think it’s a better approach than what I used to do on these huge, large positions that it’s a little bit daunting when you try to “finego” your way knowing that you’ve got all these top heavy positions sort of at the end of the trades. I wouldn’t recommend reverse pyramiding, really.
Hugh: So, is that why you stopped trading it? It was just too stressful?
Walter: I don’t like waking up anymore in the middle of the night. I’ve got my stuff set up now where, literally, I have semi-automated stuff. I’ll go, “Well, there’s a trend on that pair. It would be great if I could get into the trend and so I’ll just setup my…” You know Mark Fletcher in our forum? He does a lot of really good coding and stuff like that so he’s coded something for us where you’ll take the trade when you’re sleeping, adjust and all that, so I just do a lot of that stuff. I don’t really want to wake up and try and figure out if I should wait for TP target or get out early or whatever. All that stuff is … I’m just too old for that, man.
Hugh: I know what you mean. I used to do that too. I’d stay up in the middle of the night, it doesn’t work.
Walter: Yeah. It kills you, doesn’t it? You lose you sleep and it just kills you. I mean, it’s not worth it. For me, I guess as I get older, I’m trying to go more and more sort of semi-automated and I find that works fairly well.
I’ll put those resources down there for you guys. I’ll put a video on pancaking for you so you can see how I approach it and then I’ll put the links down there so you guys can check all that stuff in the shownotes.
Hugh: Okay. Cool. Thanks, Walter! That’s awesome.