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O.K. So Here Is My Question

  • #1
  • First Post: Nov 15, 2006 6:59am Nov 15, 2006 6:59am
Ok- I have read many posts about Dealing Desks, the game of Forex, ECNs and the rules. I have never seriously traded live before. So: 1. I have $1,000 to invest. 2. I have a system that on backtesting is profitable, even if slightly. 3. It uses 10 pip targets and 15 pip stops. 4. I have an EA through MetaTrader 5. The system is flexible, I can change it every month to keep up with market conditions.

Question 1: What do I do- or more importantly- who do I use? If I lose the $1,000 it won't kill me but I would rather be profitable nonetheless, obviously.

Question 2: If the EA is profitable on a demo account with forward testing, how will a live account with money on the line change things?

Question 3: Should I just walk away and forget it altogether. All of these posts really have me terrified that the playing field is so skewed you have to have stops of 50+ pips to avoid that arm reaching back and stopping you out. Put another way: On todays playing field, do 15 pip stops have a chance?

Thanks.
"Its not where your at, but where your coming from"
  • #2
  • Nov 15, 2006 7:16am Nov 15, 2006 7:16am
There's probably a lot of different answers to your question. A lot will depend on your broker, but, there are things you can do to minimize their impact on you. For instance, rather than hardcoding the stop into the order, I use a stop set in the EA. This way, the broker never sees my SL. The downside is that if my EA goes down, I'm left unprotected. I've started putting "disaster" stops into my order as a counter.

On the 15 pip SL, yes, if your system supports it, then, you should be OK. My SL's on a 15m breakout strategy are around 20 pips and I think I could go a little tighter than that. I'm hesitant, though, because what I see in backtesting isn't always what I get forward testing when the price bounces around.
  • #3
  • Nov 15, 2006 7:21am Nov 15, 2006 7:21am
Also, I should mention this. I recommended, on this forum a while back, CoesFX's MT4 platform. CoesFX is (was) an ECN. I had OUTSTANDING experiences with them from an execution perspective. (CoesFX, it seems, has blown themselves away with poor company management and NFA compliance.)

The trick with them was that they were really an IB to other dealers. So, even though my orders would get routed to a dealing platform, my orders were anonymous and never messed with. In fact, I think Coes may have had something in their agreement requiring the dealers to just pass through CoesFX client orders - in other words - no monkey business.

What's interesting about this is that since then, I found out that the primary broker they used was FXDD. Well, I had a TERRIBLE experience with FXDD directly. I closed my account within the first month. But, I had a great experience trading with FXDD through CoesFX. It definitely made a difference.

If there's another IB out there that uses this model, it wouldn't be a bad thing to investigate.
  • #4
  • Nov 15, 2006 7:56am Nov 15, 2006 7:56am
Thanks for the reply, I appreciate it.
"Its not where your at, but where your coming from"
  • #5
  • Nov 15, 2006 8:01am Nov 15, 2006 8:01am
Quoting athalon7
Ok- I have read many posts about Dealing Desks, the game of Forex, ECNs and the rules. I have never seriously traded live before. So: 1. I have $1,000 to invest. 2. I have a system that on backtesting is profitable, even if slightly. 3. It uses 10 pip targets and 15 pip stops. 4. I have an EA through MetaTrader 5. The system is flexible, I can change it every month to keep up with market conditions.

.............

Put another way: On todays playing field, do 15 pip stops have a chance?

Thanks.
Hi athalon7

NO chance...zero.....absolutely NIL chance !!!!!

Anyone who tells you otherwise is not a real trader.
  • #6
  • Nov 15, 2006 8:18am Nov 15, 2006 8:18am
Jacko - I've got over 550 screenshots of backtested charts that says otherwise. My true SL is 17 pips, but, I add in spread as well, bringing me to around 20.

athalon7 - try your system and see how it works. A 15 pip SL will be tight, but, I'd be leary of anyone telling you you have no chance at anything you want to try. Test it, try it and validate it.



Quoting jacko
Hi athalon7

NO chance...zero.....absolutely NIL chance !!!!!

Anyone who tells you otherwise is not a real trader.
  • #7
  • Nov 15, 2006 8:27am Nov 15, 2006 8:27am
Quoting stockwet
Jacko - I've got over 550 screenshots of backtested charts that says otherwise. My true SL is 17 pips, but, I add in spread as well, bringing me to around 20.

athalon7 - try your system and see how it works. A 15 pip SL will be tight, but, I'd be leary of anyone telling you you have no chance at anything you want to try. Test it, try it and validate it.
athalon7

Please post your results after you have tried it and tested it.
  • #8
  • Nov 15, 2006 9:15am Nov 15, 2006 9:15am
Quoting athalon7
3. It uses 10 pip targets and 15 pip stops.
Thanks.
The difficulty with 10 pip targets and 15 pip stops is that there is a required win/loss ratio of 6 out of 10 to just break even (transaction costs not included). My opinion would be that the mathematics is stacked against you every time you are prepared to lose more than you are looking to win.

Most people would tend to believe that a risk/reward ratio of 2:1 or better is required to ensure profitability. If you had a 20 pip stop and a 40 pip target then the required win/loss ratio to break even would be reduced to a little less than 4 out of 10.

I think central to any trading strategy is issues such as risk/reward and win/loss ratios. These factors alone will give you insight as to whether your trading career will be short lived or if you will achieve what most new comers do not and still be trading 12 months from now.

Your trading method is just an 'edge', it is the risk management that makes it sharp.

Risk is not a sexy subject - most spend hours in considering what method to trade and very few pay equal attention to the mathematics of risk. Study risk and you considerably increase your chances of still playing the game 12 months from now is my advice.

As far as back testing results go well I don't know anyone who has achieved the same results forward testing in a live market that they did when back testing on historical data. This does not discount the value of backtesting but I think we should realize its limitations.

Your question about brokers - well if you are going to trade with such tight stops then transactions costs are going to be one of the major issues in your choice.

As far as 15 pip stops being realistic well you already have different answers on that. Me personally I would not consider trading with such small stops - for me attempting to scalp 10 points per trade is not an attractive proposition but that is my opinion others would tell you it is achievable.

I wish you every success.

Monaco
  • #9
  • Nov 15, 2006 9:42am Nov 15, 2006 9:42am
I appreciate the responses. When I said 10 pip target, 15 pip stop, I included the spread in the calculation. In other words, when we get price quotes, they are the bid price. The ask price is always the bid +spread. I speant a LOT of time trying to figure this out how when looking at my model. In other words, the 10 pip profit already includes the spread because you are minus the spread right from the get go (buy the ask, sell the bid).


One last question: If the market is as liquid as it is supposed to be, how can a broker target any one client? In other words, if the broker goes after somebody's stop, wouldn't that help somebody else? I guess its the slippage in quotes.
"Its not where your at, but where your coming from"
  • #10
  • Nov 15, 2006 9:44am Nov 15, 2006 9:44am
People tend to put their stops in congregated areas. So when stop hunting happens it is to the most likely area where the majority of stops would be.



Quoting athalon7
I appreciate the responses. When I said 10 pip target, 15 pip stop, I included the spread in the calculation. In other words, when we get price quotes, they are the bid price. The ask price is always the bid +spread. I speant a LOT of time trying to figure this out how when looking at my model. In other words, the 10 pip profit already includes the spread because you are minus the spread right from the get go (buy the ask, sell the bid).


One last question: If the market is as liquid as it is supposed to be, how can a broker target any one client? In other words, if the broker goes after somebody's stop, wouldn't that help somebody else? I guess its the slippage in quotes.
  • #11
  • Nov 15, 2006 9:48am Nov 15, 2006 9:48am
Quote
People tend to put their stops in congregated areas. So when stop hunting happens it is to the most likely area where the majority of stops would be


Yes- I understand. The ole round number thing.
"Its not where your at, but where your coming from"
  • #12
  • Nov 15, 2006 9:52am Nov 15, 2006 9:52am
Well yes round numbers, but also most people know were major supply and resistance line are and daily pivots and fib numbers. The larger stop hunters also know that the stops will be usually about 5 pips away from these.. So It is like shooting fish in barrel. I have done this myself. Especially with USDJPY. You can see when they are starting their hunt and you can tag along for scraps...

Quoting athalon7
Yes- I understand. The ole round number thing.
  • #13
  • Nov 15, 2006 9:57am Nov 15, 2006 9:57am
Quoting smjones
Well yes round numbers, but also most people know were major supply and resistance line are and daily pivots and fib numbers. The larger stop hunters also know that the stops will be usually about 5 pips away from these.. So It is like shooting fish in barrel. I have done this myself. Especially with USDJPY. You can see when they are starting their hunt and you can tag along for scraps...
And how is this accomplished? Speed of reversal, Fib reversal, pivots, or what? Or all. I would think maybe a combination like resistance at a round number etc. I would be interested in your elaboration. Thanks.
"Its not where your at, but where your coming from"
  • #14
  • Last Post: Nov 15, 2006 10:00am Nov 15, 2006 10:00am
Quoting stockwet
Jacko - I've got over 550 screenshots of backtested charts that says otherwise. My true SL is 17 pips, but, I add in spread as well, bringing me to around 20.

athalon7 - try your system and see how it works. A 15 pip SL will be tight, but, I'd be leary of anyone telling you you have no chance at anything you want to try. Test it, try it and validate it.
I'll give it a try no doubt. We'll see I guess. Thanks.
"Its not where your at, but where your coming from"
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