position-sizing/pyramiding strategies to decrease risk? | Forex Factory

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position-sizing/pyramiding strategies to decrease risk?

  • #1
  • First Post: Edited 4:52am Mar 7, 2018 2:30am | Edited 4:52am
Suppose you are given a 70% accurate strategy (r:r = 1:1)

How can you decrease your risk further?

Would you choose pyramiding?
Would you choose clustering?
Would you choose some-sort of averaging?
Would you split up your initial entry-amount & re-enter at better prices(pullbacks)?
Which risk-management technique will be most suitable for this case? (taking probability & fixed r:r into consideration )

What are some of the most common position-sizing strategies to decrease risk?

The purpose of this discussion :

Its hard to increase probability of most "mechanical systems" , after a certain point. If you join a 70% accurate strategy with another 70% accurate analytical-stuff, the systems probability rather gets decreased. So most strategies can't be further improved via more & more technical-analysis.

Then, money-management is the only way left to "decrease the risk" which means improvement to the system (if there's any room for it).
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  • #2
  • Mar 7, 2018 2:59am Mar 7, 2018 2:59am
pyramiding
pyramiding is what can make you 1000 pips on a 300 pip move

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  • #3
  • Mar 7, 2018 3:06am Mar 7, 2018 3:06am
Quoting tm9
Suppose you are given a 70% accurate strategy (r:r = 1:1)
IMHO ... If you have a consistant 70% WR with 1:1 RR ... there's definitely no reason to change anything in the way you are trading.
MT4/MT5 EAs/Indicators/Alerts coder
  • #4
  • Mar 7, 2018 3:17am Mar 7, 2018 3:17am
I pyramid all my trend-following positions. As soon as the trade is opened, I've got a duplicate order set that will trigger when the unrealised gain equals the initial trade's capital risk. I keep on doing this until we get a pull-back or the trend weakens so badly that I wouldn't be joining in fresh at that stage. This keeps the capital risk at no more than the original amount but allows for a parabolic increase in profits as more pyramids are added.
  • #5
  • Mar 7, 2018 3:22am Mar 7, 2018 3:22am
Subs. Thanks and
Regards
  • #6
  • Mar 7, 2018 3:26am Mar 7, 2018 3:26am
trend-following positions. As soon as the trade is opened I've got a duplicate order set that will trigger
Is that a pending order. Thanks
  • #7
  • Mar 7, 2018 3:29am Mar 7, 2018 3:29am
Which one would you prefer ?

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No guts, no glory
  • #8
  • Mar 7, 2018 3:39am Mar 7, 2018 3:39am
Quoting abokwaik
Which one would you prefer ? {image} {image} {image} {image} {image}

None of these. I don't use TP's on trend-following trades, I aim to have as many positions open as possible if the trend is continuing. I re-set the SL on all previous trades when the latest one is opened, the SL on all (short) trades is the same distance above entry as the original SL was above the first trade's entry.
  • #9
  • Mar 7, 2018 3:44am Mar 7, 2018 3:44am
Quoting tomorton
{quote} None of these. I don't use TP's on trend-following trades, I aim to have as many positions open as possible if the trend is continuing. I re-set the SL on all previous trades when the latest one is opened, the SL on all (short) trades is the same distance above entry as the original SL was above the first trade's entry.
My favorite "The Ladder System".
No guts, no glory
  • #10
  • Mar 7, 2018 3:54am Mar 7, 2018 3:54am
Quoting abokwaik
{quote} My favorite "The Ladder System".

Looks like what I'm doing. People say trend-following only works in trending markets. Like that's a problem. Obviously if the market's not trending, there is't even a first trade!

Wish I had seen your system earlier. Well done indeed.
  • #11
  • Mar 7, 2018 4:16am Mar 7, 2018 4:16am
Quoting abokwaik
Which one would you prefer ? {image} {image} {image} {image} {image}
I see # 2 as an interesting scenario looks like a 1:2
I See # 3 as one trade even though 3 entries- I like the potential reward on that. 1:2
I See # 7 as the more ideal scenario, should this be a "ladder based system" interesting placement of the stoploss is it like 1:4, 1:3, 1:2. I am not sure... or 1:3,1:2,1:2
R:R "Percentage Focus"
  • #12
  • Mar 7, 2018 4:21am Mar 7, 2018 4:21am
Quoting abokwaik
{quote} My favorite "The Ladder System".
number 1 is closer to what the pros are using , else no other one is good for selling top buy bottom strategy.
  • #13
  • Mar 7, 2018 4:27am Mar 7, 2018 4:27am
Quoting FerruFx
{quote} IMHO ... If you have a consistant 70% WR with 1:1 RR ... there's definitely no reason to change anything in the way you are trading.
Yes its profitable on its own, but I'd still like to search if there's more ways to reduce risk. You are right in statistical sense.

Its hard to increase probability of most "mechanical systems" , after a certain point. If you join a 70% accurate strategy with another 70% accurate analytical-stuff, the systems probability rather gets decreased. So most strategies can't be further improved via more & more technical-analysis.

Then, money-management is the only way left to "decrease the risk" which means improvement to the system (if there's any room for it).
  • #14
  • Mar 7, 2018 4:40am Mar 7, 2018 4:40am
Quoting abokwaik
{quote} My favorite "The Ladder System".
Thanks for the pictures. Its a great way of visualizing possible outcomes of each risk model.
I appreciate your efforts.
If you want to share anymore knowledge, please don't hesitate.
  • #15
  • Mar 7, 2018 5:08am Mar 7, 2018 5:08am
Quoting tm9
{quote} Yes its profitable on its own, but I'd still like to search if there's more ways to reduce risk. You are right in statistical sense. Its hard to increase probability of most "mechanical systems" , after a certain point. If you join a 70% accurate strategy with another 70% accurate analytical-stuff, the systems probability rather gets decreased. So most strategies can't be further improved via more & more technical-analysis. Then, money-management is the only way left to "decrease the risk" which means improvement to the system (if there's...
70% with 1:1 is next to HG!
If I had such a system I wouldn't bother 2 minutes with money management: Kelly is 40% per trade with such a system!!
Fiddling with the trades can only reduce your edge.
The risk reduction would come from diversification on as many markets as possible.
No greed. No fear. Just maths.
  • #16
  • Mar 7, 2018 5:12am Mar 7, 2018 5:12am
Quoting PrinceJ58
{quote} I see # 2 as an interesting scenario looks like a 1:2 I See # 3 as one trade even though 3 entries- I like the potential reward on that. 1:2 I See # 7 as the more ideal scenario, should this be a "ladder based system" interesting placement of the stoploss is it like 1:4, 1:3, 1:2. I am not sure... or 1:3,1:2,1:2
Quoting tm9
{quote} Thanks for the pictures. Its a great way of visualizing possible outcomes of each risk model. I appreciate your efforts. If you want to share anymore knowledge, please don't hesitate.
Few notes on the 7 scenarios above:

  1. Scenario (1):

    1. If TP1 is hit, and price retraces up to entry point, another order is opened at old open price, and same SL/TP for 1st position. Same thing with TP2.
    2. The cycle ends once TP3/SL3 is hit.

  2. Scenario (2):

    1. 2nd position is opened only of 1st position hit SL, while 3rd position is opened only of 2nd position hit SL.
    2. Total loss for teh cycle if all 3 positions hit SL is 3.
    3. The image is not scaled properly, but if any position hit TP, total net profit for the cycle should be 3.
    4. The cycle ends when any position hits TP.

More on this later, if there is an interest.

Maybe I put these in a quick EA to test them on different pairs when time permits.

No guts, no glory
  • #17
  • Mar 7, 2018 5:17am Mar 7, 2018 5:17am
I'd like to know your definition of "risk"! The term is used loosely and can cause a great deal of confusion.
  • #18
  • Mar 7, 2018 6:26am Mar 7, 2018 6:26am
Quoting PipMeUp
{quote} 70% with 1:1 is next to HG! If I had such a system I wouldn't bother 2 minutes with money management: Kelly is 40% per trade with such a system!! Fiddling with the trades can only reduce your edge. The risk reduction would come from diversification on as many markets as possible.
Who is Kelly?
  • #20
  • Mar 7, 2018 7:43am Mar 7, 2018 7:43am
Quoting Botan626
{quote} Who is Kelly?
I think he means this:
https://en.wikipedia.org/wiki/Kelly_criterion
"Men Who Can Both Be Right & Sit Tight Are Uncommon" ~ Jesse Livermore
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