Going to have a little fun and build a system from scratch as if I was a new trader with limited knowledge. I have a $5,000 virtual account.
The rules will be as follows:
1. I will enter at least one trade per day and it will be a random entry by flipping a coin. Heads I buy, Tails I sell.
2. I will trade only the EURUSD H1 chart using no indicators.
3. I will use the previous swing as a stop loss as long as the stop does not exceed 100 pips or 2% of my $5,000 account as each pip will be $1. If the previous swing is too large then I can use my maximum stop which again is 100 pips. Stop loss will be 5 pips above or below the swing.
4. My R:R will be 3:1. Therefore my profit target will always be 3x my stop loss.
5. Once I have entered a trade I must let it run to either the stop loss or profit target. I may not exit early under any circumstances.
6. I can only have one trade at any given time. Once the trade closes I can again enter using the coin-toss for entry.
7. After 10 trades I will evaluate, make observations and "tweak" the system. Once I have made any changes I will again make 10 trades and do the same. This will continue until the system becomes profitable.
Clearly there is no strategy here yet. Entries are random.
A major point of doing this is to put aside most if not all of your assumptions and biases regarding trading. One example I can think of is "trading with the trend". It is difficult because most of us including myself have deeply ingrained beliefs regarding trading. So as ridiculous as it may seem I chose the coin flip as an entry method to eliminate any assumptions about why one should sell or buy. By choosing swings as a way of placing a stop loss I've already introduced an assumption or bias into this but I'm willing to accept that for now.
It's probably apparent to many that I'm making an attempt to drive home the importance of money management to include R:R and trade size as THE most important aspect of beginning a potential trading lifestyle. I believe the 95% that fail in trading are highly likely to either diminish the importance of money management or completely consider it irrelevant.
As I think about what kind of trading strategy I would like to end up with, I know I want something that requires a minimum amount of screen time. Given that the following seems important:
1. I would like to use limit orders as the dominant form of entry.
2. I don't want to second guess my entries. In other words once an entry has occurred it must go to profit target or stop loss.
3. Once a trade has hit profit or stop loss I would like to be able to look at the chart and identify the next trade. This may occur immediately or it may occur later as a limit order. This does not necessarily mean an "always in the market" strategy.
4. There will also need to be criteria to trash a limit order that does not get filled.
I don't know where this will go but I thing it can be an interesting and perhaps profitable learning experience.
Participation and suggestions are welcome.
The rules will be as follows:
1. I will enter at least one trade per day and it will be a random entry by flipping a coin. Heads I buy, Tails I sell.
2. I will trade only the EURUSD H1 chart using no indicators.
3. I will use the previous swing as a stop loss as long as the stop does not exceed 100 pips or 2% of my $5,000 account as each pip will be $1. If the previous swing is too large then I can use my maximum stop which again is 100 pips. Stop loss will be 5 pips above or below the swing.
4. My R:R will be 3:1. Therefore my profit target will always be 3x my stop loss.
5. Once I have entered a trade I must let it run to either the stop loss or profit target. I may not exit early under any circumstances.
6. I can only have one trade at any given time. Once the trade closes I can again enter using the coin-toss for entry.
7. After 10 trades I will evaluate, make observations and "tweak" the system. Once I have made any changes I will again make 10 trades and do the same. This will continue until the system becomes profitable.
Clearly there is no strategy here yet. Entries are random.
A major point of doing this is to put aside most if not all of your assumptions and biases regarding trading. One example I can think of is "trading with the trend". It is difficult because most of us including myself have deeply ingrained beliefs regarding trading. So as ridiculous as it may seem I chose the coin flip as an entry method to eliminate any assumptions about why one should sell or buy. By choosing swings as a way of placing a stop loss I've already introduced an assumption or bias into this but I'm willing to accept that for now.
It's probably apparent to many that I'm making an attempt to drive home the importance of money management to include R:R and trade size as THE most important aspect of beginning a potential trading lifestyle. I believe the 95% that fail in trading are highly likely to either diminish the importance of money management or completely consider it irrelevant.
As I think about what kind of trading strategy I would like to end up with, I know I want something that requires a minimum amount of screen time. Given that the following seems important:
1. I would like to use limit orders as the dominant form of entry.
2. I don't want to second guess my entries. In other words once an entry has occurred it must go to profit target or stop loss.
3. Once a trade has hit profit or stop loss I would like to be able to look at the chart and identify the next trade. This may occur immediately or it may occur later as a limit order. This does not necessarily mean an "always in the market" strategy.
4. There will also need to be criteria to trash a limit order that does not get filled.
I don't know where this will go but I thing it can be an interesting and perhaps profitable learning experience.
Participation and suggestions are welcome.
Thanks Winston.
)) well , after 10 trades we will discover that you are in profit and all the EA's and indicators are garbage and RR is the King. Excited to see the end result..
