Hi Gravito and members. Thank you all for commencing and continueing this useful thread. Trendtrading is one of the successful straatigies in forex. Before advancing any further briefly about me. In forex for quite some time. Upon unsuccessfully working with many strategies ( including combination of techno commercial decisions ) , I switched over to studying Trend Trading with following basic steps.
1. IDENTIFING TREND AND TRADING IN SAME DIRECTION.
2. PROPER RISK/REWARD RATIO.
3. PRECISE ENTRY AND EXIT POINTS.
Now let me elaborate further. Many traders and experts preach that R/R ratio should be minimum 1:1.5, 1:2, 1:2.5, 1:3 etc. Let's go for a R/R ratio of just 1:1.5. Means for every 75 pip reward, we risk 50 pips, let,s say after covering spreads on daily candles. Now though there are many, probably 20-30 or more trend trading opportunities per month in forex, as we are aiming for R/R ratio of 1.0 : 1.5, let's say we find only 10 opportunities per month.
If we flip a coin one time heads may come, twice also heads may come, thrice also heads may come, but if we flip for 100s of times, it will average out to 50% heads and 50% tails, as per theory of probablity. In the same way in forex also let's say we hit a win/lose ratio of 50%:50%. Now back to our original equation of 10 trend trades X win /lose ratio of 50-50% X R/R ratio of 50 Pips/ 75 Pips, will yield 12.5% per month of returns.
It means if we take a mini account of $ 1000/ , total 10 trades per month, 5 losses of 50 pips each and 5 wins of 75 pips each, net gain per month is 125 pips ie. $ 125/ gain over $ 1000/ initial capital which works out to $ 1500/year profit, ie 150% return. This is with a normal win lose ratio of 50%-50%. If we can improve the ratio to 55% win and 45% loss ( as we are using trend trading and other techno fundamental data ) it will work out to 225% gain per annum, that too with out calculating on cumulative basis.
Hence friends, trend trading, with a bare minimum R/R ratio of 1.0:1.5 and precise entry/exit stratigy can make wonders that too with only 10 trades a month. This strategy is excellent as explained.
Now we have to focus on how to adopt this strategy successfully and as a first step we need to study on HOW TO IDENTIFY TREND CORRECTLY ? CAN WE HAVE SOME DISCUSSION AND PATH FORWARD ON THE SAME? Thanks.
1. IDENTIFING TREND AND TRADING IN SAME DIRECTION.
2. PROPER RISK/REWARD RATIO.
3. PRECISE ENTRY AND EXIT POINTS.
Now let me elaborate further. Many traders and experts preach that R/R ratio should be minimum 1:1.5, 1:2, 1:2.5, 1:3 etc. Let's go for a R/R ratio of just 1:1.5. Means for every 75 pip reward, we risk 50 pips, let,s say after covering spreads on daily candles. Now though there are many, probably 20-30 or more trend trading opportunities per month in forex, as we are aiming for R/R ratio of 1.0 : 1.5, let's say we find only 10 opportunities per month.
If we flip a coin one time heads may come, twice also heads may come, thrice also heads may come, but if we flip for 100s of times, it will average out to 50% heads and 50% tails, as per theory of probablity. In the same way in forex also let's say we hit a win/lose ratio of 50%:50%. Now back to our original equation of 10 trend trades X win /lose ratio of 50-50% X R/R ratio of 50 Pips/ 75 Pips, will yield 12.5% per month of returns.
It means if we take a mini account of $ 1000/ , total 10 trades per month, 5 losses of 50 pips each and 5 wins of 75 pips each, net gain per month is 125 pips ie. $ 125/ gain over $ 1000/ initial capital which works out to $ 1500/year profit, ie 150% return. This is with a normal win lose ratio of 50%-50%. If we can improve the ratio to 55% win and 45% loss ( as we are using trend trading and other techno fundamental data ) it will work out to 225% gain per annum, that too with out calculating on cumulative basis.
Hence friends, trend trading, with a bare minimum R/R ratio of 1.0:1.5 and precise entry/exit stratigy can make wonders that too with only 10 trades a month. This strategy is excellent as explained.
Now we have to focus on how to adopt this strategy successfully and as a first step we need to study on HOW TO IDENTIFY TREND CORRECTLY ? CAN WE HAVE SOME DISCUSSION AND PATH FORWARD ON THE SAME? Thanks.
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