Money Management Question

Quoting Nick_likes_pips

Ok.. so I've recenly found some consistency with my trading, just trying to tweak the money management to milk the trades as much as possible.

I'm successful trading for 30,40 pips a pop intraday.. but trying to add a bit of swing trading to my current daytrading routine.

So for example..

I open 2 lots at market. Stop 30 pips below(or 50,60,whatever).
I close 1 lot at 30pips profit, move stop on the other lot to break
even, and shoot for the starss.

Sounds beautiful on paper.

But what happens if price takes out my break-even stop more often than running higher.. i'd effectively be taking an average profit of 30pips at 1 lot, while taking an average loss of 30pips at 2 lots. I realize the numbers will vary.. but its conceivable that this would lead to greater losses than gains, as I remember it happening in demo a while back when i tried this. Yet many people much more successful than I am manage to "cut the losers short and let the winners run" successfully. How would I do this properly?

Thanks!

Quoting Nick_likes_pips

Ok.. so I've recenly found some consistency with my trading, just trying to tweak the money management to milk the trades as much as possible.

I'm successful trading for 30,40 pips a pop intraday.. but trying to add a bit of swing trading to my current daytrading routine.

So for example..

I open 2 lots at market. Stop 30 pips below(or 50,60,whatever).
I close 1 lot at 30pips profit, move stop on the other lot to break
even, and shoot for the starss.

Sounds beautiful on paper.

But what happens if price takes out my break-even stop more often than running higher.. i'd effectively be taking an average profit of 30pips at 1 lot, while taking an average loss of 30pips at 2 lots. I realize the numbers will vary.. but its conceivable that this would lead to greater losses than gains, as I remember it happening in demo a while back when i tried this. Yet many people much more successful than I am manage to "cut the losers short and let the winners run" successfully. How would I do this properly?

Thanks!

Quoting Nick_likes_pips

I open 2 lots at market. Stop 30 pips below(or 50,60,whatever).
I close 1 lot at 30pips profit, move stop on the other lot to break
even, and shoot for the starss.

Sounds beautiful on paper.

Quoting mrgreen

I am not sure why this type of MM strategy is so popular. Why close the 1 lot at 30 PIPS, is the market telling you to do so? I am a firm believer in moving to BE as soon as possible/feasible. One of Jesse Livermore's rules was "Take 50% of your BIG winnings off the table." In the scenario you describe; by closing 50% at 30 PIPS you are closing w/ a 1% profit. (Assuming you are taking a 2% risk at an original SL of 30 PIPS.) Risking 2% to make 1% is not a "big winning" IMHO.
"Hoping" your other lot goes to the 'stars' is just gambling w/ the houses money - physiologically it comforts you, but does it make you more profitable?
This 1% is then lost if your 2nd lot goes back to break even, so you have effectively had a free trade. (Not bad if you learn something)
If your original trade hits the SL you are, as you state, taking your full 2% loss. Eventually, unless your system has a greater than ~60% wins, you will start to erode your trading capital.
Have you calculated your profit if you had moved both lots to BE at 30, then waited for the market to tell you to exit both lots?

Good Trading to You.

Quoting bullrock

The risk is 1% / unit. So the 2% is for the 2 units. Say the first hits 30 TP so there is the 1% profit and the risk was 1% for that unit so it is 1:1 ratio... Then the second unit can be whatever breakeven or 180 pips. In the first scenario it is a free ride but in the second it is 1:6 ratio... so the average is 1:3.5 which is not too bad... So the second unit can end up in Be or whatever the market gives.. IMHO this is not too bad.. The other thing is our friend is right. There is greater than 50% chance that the market will move at least 40 pips so it is safe to bail out some units and protect the rest because from there the probbability will drop.

Quoting mrgreen

Trading 2 full lots.

10 trades letting profit run.
3 BE = 0
5 Losses = 2(300 X 5) = 3000
2 Wins@ 180 PIPS = 2x(180 X 20) = 7200
Profit = 7200 - 3000 = 3200

Same 10 Trades w/ taking 1 lot profit at 30 PIPS.
3 BE = 0
5 Losses = 3000
2 Wins@ 180 PIPS = 1st Lot = 300 + 300 =600
Two lots 2(180X10) = 3600
Profit = 1200

With letting your profit run you could take 6 losses and still break even.
(It's late - I hope my math is right
The probability that a trade will go against you does not rise or decrease based on how many PIPS you may be up or down. Like a coin flip it still remains the same probability. We raise or lower the probability based on our rules and system.

Quote

The probability that a trade will go against you does not rise or decrease based on how many PIPS you may be up or down.

Quoting soultrader

all good answers.

the key - let the winners run.

you are effectively cutting the winner short by closing the partial.

Quoting Nick_likes_pips

I open 2 lots at market. Stop 30 pips below(or 50,60,whatever).
I close 1 lot at 30pips profit, move stop on the other lot to break
even, and shoot for the starss.

Sounds beautiful on paper.

But what happens if price takes out my break-even stop more often than running higher.. i'd effectively be taking an average profit of 30pips at 1 lot, while taking an average loss of 30pips at 2 lots. I realize the numbers will vary.. but its conceivable that this would lead to greater losses than gains, as I remember it happening in demo a while back when i tried this. Yet many people much more successful than I am manage to "cut the losers short and let the winners run" successfully. How would I do this properly?

Quoting philmcgrew

Nick, congratulations on figuring out what so many can not see. This realization will serve you well in your trading. Mr. Green's example was spot on. If you can resist the temptation to take a quick profit with a partial exit you will be rewarded.