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Atomic_Sheep Jan 6, 2008 4:57am | Post# 1

Long position or short position
 
The name may be a little misleading because I actually want to talk about the duration of a position rather than the direction.

I think most will agree that although the market may obviously be trending this very instant, doesnt necessarily mean its going to be doing so in the next second. Who knows when its going to reverse or start going sideways. As a result I'm wondering what the best strategy might be to combat this phenomenon? If you open lets say one position per signal and hold it until the signal expires then you are risking not enjoying profits from the entire move as the price might reverse quickly and your exit signal might occur post such a move, resulting in this sudden move eating into your hard earned profits. So I'm wondering whether other people have looked into what the best strategy would be... whether it be to open just one position as I described or open lets say 1 position per bar and close it at the end of the bar as long as the signal is still showing an up trend for example in which case you would be buying every bar and then start selling when the signals pointing downwards. So it's sort of like a scalping strategy but going with the trend... like a series of scalps with the trend so to speak. Obviously the system can't be as simple as that as even in an uptrend theres retracements etc etc... but from a hypothetical point of view what do you think would/should be the better strategy?

tdion Jan 6, 2008 5:11am | Post# 2

I will go out on a limb here and say it can't be done.

The reason is, once you open a trade, you are exposing yourself to risk in the opposite direction. Nothing you can do will stop this. It's the American way... you committed to something, and now you will pay the fiddler if you are wrong.

And let's not forget the spread and rollover premiums (which always favor the broker)

Atomic_Sheep Jan 6, 2008 5:54am | Post# 3

So you're saying the best way is to open 1 position and wait it out/take profit at a level you are happy with?

tdion Jan 6, 2008 6:02am | Post# 4

Well, I am not an expert, but common sense tells me a few things:

1) You only have a finite amount of capital. So if you trade without stops, and you are wrong, you will wipe out a large part of your account with a single trade.

2) You will pay the broker a new spread every time you open and close a position. So you'd be deducting pips.

3) You can not ever count on calling a top, bottom, or continuation of a trend correctly.

That's about all there is to it. Sorry, but escaping the 95% club is hard to do, so be cautious, and know your risks.

Good luck.

Atomic_Sheep Jan 6, 2008 6:57am | Post# 5

1.) I understand that but the idea is to trade small positions that would equate to what you would have traded in total had you just done one trade

2.) Yer this point is the one that I think is probably the killer of trading lots of smaller trades

3.) Thats why I suggested using shorter time span trades

And I'm not quite sure what you meant by 95% club.

I'm just getting the feeling that I perhaps didnt explain myself well enough... what I meant is because you cant find tops and bottoms you will be exiting and entering positions at times that could be improved... i.e. by getting closer to the tops and bottoms. If you could pick tops and bottoms perfectly then you would simply trade 1 trade at a time and your trading will look a lot like the zig zag indicator... 1 trade from a bottom to the top... followed by another trade from that next top to the next bottom and so on and so forth. But as we have concluded finding the tops and bottoms is impossible so what I suggested was trading lots of smaller lot trades but also 1 at a time... that way your trading will look more like a moving average. But thinking about it as I write, I'm starting to realise that although the trades in the middle of the change from short to long or vice versa, you will be profitable, the ones near the extrema of the move, will of course become losses which will coupled with the spreads, probably equate to the same profits that you would have achieved by simply entering into 1 "normal"/longer term trade trade.

tdion Jan 6, 2008 7:03am | Post# 6

95% club = the widely accepted percentage of forex trades that are not profitable.

As for your points: Given what you have suggested, the idea is very good for strong trending markets that aren't correcting beyond your stop loss. (Assuming you reopen a new trade every 50 pip interval, or whatever, your stop is going to be applied to the new entry)

Unfortunately, you can't predict these types of markets, and what pairs they will appear in.

I surely don't want to discourage you.... I am just trying to let you know that any strategy will have weaknesses the majority of the time. You can and will get every type of market condition from time to time, more often than not, one that will cause you to stop out.

1.) I understand that but the idea is to trade small positions that would equate to what you would have traded in total had you just done one trade

2.) Yer this point is the one that I think is probably the killer of trading lots of smaller trades

3.) Thats why I suggested using shorter time span trades

And I'm not quite sure what you meant by 95% club.

Atomic_Sheep Jan 6, 2008 7:25am | Post# 7

Ah yes that club lol...

Yer fair point... about the strong and weak points.


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