About Bulls and Bears

Money Management Algorithm - Metatrader 4

2010-07-09T16:12:00.000-07:00

This algorithm is the first program which I written for Metatrader. Not a bad ideea , because I use it for all my trading algorithms. I do semi-algorithmic trading (I decide myself whether I open a trade or not) for "Breakout" setup and I do a lot of experiments with a retracement setup.

The algorithm has 2 main functions:

CalculatePositionLots - it calculates the lots (or mini-lots) function by the given account size (can be your entire risk capital, not only that from Metatrader) ,your allowed risk, your entry price, and your stop loss.
CalculateChanceRiskRelation - this function is trivial, but extremely important in order to take a decision whether you enter or not in a transaction.

#property copyright "Marius Huianu"
#property link      "http://www.marius-huianu.de/"
#property library


/**
 * Calculates a position size which is dependent by the the account size,
 * the allowed risk (if you have 1% risk, than give 1 as argment ) and the transaction properties.
 *
 */
double calculatePositionLots(
  double entryPrice,
  double stopLossPrice,
  double maxAllowedPercentageRisk,
  bool isShort,
  string instrument,
  double accountSize){


  //calculate the maximum amount of money which can be lost
  double depotRisk = accountSize * (maxAllowedPercentageRisk/100);


  //the risk per instrument
  double riskPerInstrument = entryPrice - stopLossPrice;
  if(isShort){
     riskPerInstrument = - riskPerInstrument;
  }


  double variableCurrencyConversion =  convertToDepotCurrency(instrument, true);


  double result = 0;
  if(variableCurrencyConversion != 0){
     result =  depotRisk / (riskPerInstrument * variableCurrencyConversion);
     result = NormalizeDouble(result/100000, 2);
  }
  return (result);
}


/**
 * Converts a currency into the depot currency
 */
double convertToDepotCurrency(string symbol, bool convertVariableCurrency){
  double value = 1.00;
  string symbolCurrency = NULL;


  //a symbol has the following structure: BASE_CURRENCY+VARIABLE_CURRENCY
  if(convertVariableCurrency){
     symbolCurrency = StringSubstr(symbol, 3, 5);
  } else { // this is the base currency
     symbolCurrency = StringSubstr(symbol, 0, 3);
  }
  if(symbolCurrency != AccountCurrency()){
     string newPair = StringConcatenate(symbolCurrency, AccountCurrency());
     value = MarketInfo(newPair, MODE_BID);


     if(value == 0){
        string pair = StringConcatenate(AccountCurrency(), symbolCurrency);
        pair = StringTrimLeft(pair);
        pair = StringTrimRight(pair);
        double v = MarketInfo(pair, MODE_BID);
        Print("new calculated pair =" + pair + "; value =" + v );
        if(v != 0){
           value = 1/v;
        }
     }
  }
  return (value);
}


/**
 *
 */
double calculateChanceRiskRelation(double entryPrice, double stopLossPrice, double targetPrice){
  double risk = entryPrice - stopLossPrice;
  double chance = targetPrice - entryPrice;
  double raport = chance/risk;
  return (raport);
}

Target reached - Long on EUR/USD

2010-07-01T12:31:00.000-07:00

As I expected, the Wolve Wave which formed yesterday evening on EUR/USD (1 and 4 hours chart) reached today in the afternoon (Central Europe Time) its target. The profit exceeded with more than 4 times the capital puted at risk. Actually a such reward/risk relationship is quite normal for a trade using the Wolfe Wave pattern.

EUR/USD - 4 hours chart

EUR/USD - 1 hour chart

Long on EUR/USD?

2010-06-29T14:49:00.000-07:00

Right now, I found a good shaped Wolfe Wave, which already reached the point 5. It is clearly visible on the one hour and 4 hours chart. I placed a "stop buy" order at the level of the horizontal green line and a "stop sell" (stop loss order) at the level of the lowest red lide. The initial target is on the level of the highest horizontal ed line. The transaction mangement will be done on the 1 hour chart.

EUR/USD chart 4 hours period

EUR/USD chart 1 hour period

BB Biotech

2010-06-06T08:07:00.000-07:00

GBP/USD: 2 Wolfe Waves, one after another with a Chance/Risk greater than 6!!!!!!!!

2009-09-18T13:58:00.000-07:00

Wedges and Wolfe Waves

2009-08-22T13:16:00.000-07:00

A wedge is a very known chart pattern and it signals a change of the trend. However this pattern is not so reliable in comparison with other chart patterns. Also the target price when trading a wedge is not so big. Personally I do not trade wedges.
However, a wedge can be in the same time a Wolfe Wave (when the conditions for the point 5 are fulfilled). When I meet this case, I consider it a very strong Wolfe Wave. The target price of the pattern will be always the target of the Wolfe Wave and not of the Wedge.
As an example, look at this Wedge and Wolfe Wave from EUR/JPY. Particulary EUR/JPY is known for the occurence of the wedges. I saw the pattern relatively late, that's why I entered in the trade only at the second break of the trend line.

Wolfe Wave: More than 300 pips profit with less than 40 pips risk

2009-04-19T12:13:00.000-07:00

I like to trade Wolfe Waves because they offer a rewarding chance in comparison with the risk. For example this forex trade on USD / CHF

Wolfe Wave (daily chart) and Channel (weekly chart) on QIAGEN

2009-01-24T14:50:00.000-08:00

Today, I placed an order for a "short sell" trade on QIAGEN. I hope, the order will be activated on Monday. The trade seems to be against the trend (actually, quite normal when is used an Wolfe Wave), but when you look on the weekly chart, you can see that the rising trend is exhausted and the long term trend is heading down. In addition, the Chance/Risk relationship looks very rewarding, minimum 3,2.

On the weekly chart exists a large channel which indicates again a signal in the same direction and with approximatively the same projected target as the Wolfe Wave on the daily chart.

Although, there are 2 strong signals at the same time, I still keep an 1% risk for this transaction. I will increase my position as soon as I will receive a new confirmation that the prices will fall down.

The Wolfe Wave Pattern: The Patience it's a virtue!

2008-12-16T05:15:00.000-08:00

For the trades with "Wolfe Wave" pattern, the patience it's , no doubt, a virtue. From the psychological point of view, a such trade is very demanding. In many cases a trader should wait a long time until the target is reached. That's not a problem for a day trader, but for a swing trader could be. Personally, I use Wolfe Wave pattern for day trading with CFDs, and for swing trading with regular stocks (no finance costs involved).

Beautiful "Wolfe Wave" Pattern

2008-12-15T13:57:00.000-08:00

Today, in the evening I caught a big move on S&P500 using the Wolfe Wave pattern. The target was reached quite fast, in my opinion, not an usual case for this pattern. As you see in the image from bellow, the waves are simetric, exactly as recommended by Linda Raschke in her book.

Interesting Trading Books

2008-12-13T06:50:00.000-08:00

In the last 2 years, I read quite a lot of books about trading. I think that now I can recommend the books which really helped me to improve my trading. These are:

- Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications, by John Murphy

- Tools and Tactics for the Master DayTrader: Battle-Tested Techniques for Day, Swing, and Position Traders

- Street Smarts: High Probability Short-Term Trading Strategies

The "Technical Analysis of the Financial Markets" helped me to get a deep understanding of the technical analysis. Many other traders consider this as the best technical analysis book.

The second book "Tools and Tactics for the Master DayTrader" prepared me for the the psychological side of trading and also to build my own trading strategy.

The third book is a collection of strategies. I use 3 strategies from here: "The Anti", "The Holy Grail" ( It's not really a holy grail :-), but well applied bring substantial profits), and "Wolfe Wave".

The Trading Journal

2007-05-03T15:12:00.000-07:00

You know, as a Trader, it is very important to keep a trading journal. I experimented in the past several formats, but now I am very happy with the one which is proposed here. I use an online version(on Google docs or Google spreadsheets) in order to have it always available from home or anther places. You could use Excel or Open Office. It is important to use such a software in order to be able to perform some calculations and sorting.