absolut Support in near Zero Currency pair.

Gwan,

I think the only way I will understand what you are saying is if you spell out step by step what you mean. Would you mind posting the details for how you would fund an account and do a single trade such as you are describing? Please tell me the following. I am in the US so I think in dollars:

1) How many dollars would you put in the account to start it?

2) What would be the single example trade you would enter? What currency pair, what leverage, what lot size, how many lots, etc.?

3) What do you project the outcome to be for very large excursions of the exchange rate for the pair? In particular, for leverage greater than 1:1, please explain how you can avoid being wiped out by a sufficiently large move.

Thanks,

yokumoku

It is bassically only use Money Management to keep the bankcrupt away.

a. since you pin point the importance of the base currency effect, let's use USD base currency since it is more common.......

b. and use pair that its pips is calculated in USD too, and for safety pick the one that has positive swap in long position ,eg: NZD/USD...(today price is 0.7350)

c. convert that 0.7350 as 7350 pips to simplify the matter ,that means our equity need to withstand 7350 pips per position (if we take the position now)

( if you watch closely it is almost the same as margin lv% (just keep margin lv above 7350% or pip value of currency pair of your pick for open position) )

in 1:100 leverage:
if 1 micro lot, need $73.5 + margin min & requirement
if 10 micro lot, need $735 + margin min & requirement

in simplest way i can think:
a. we decide base currency
b. we decide the pair to trade
c. we calculate how much position our equity can withstand
d. put buy position (one way trading)
walla, that's all folks....

i leave the entry system for that buy position to you ,
as for me , i just do one way grid trading (put buy stop and limit in every few interval & put the take profit in few pips after).

trading system that help : range trading, swing trading,
indicator that help : h4 S&R and longer

for question number 3, thank you for the notice, it is like providing an equity for 1:1 trade. and that's the reason you are away from wipe out.

since you can hold the position for a very very long time frame, please treat any position as such.

Thank you for your input

good thread Gwan

Hi Gwan,

Okay, I understand now, but I think you are making some very serious errors:

1) For your example, 1 pip in a micro lot of NZD/USD is $0.10. This is 10 times bigger than you are thinking.

2) This means 7350 pips = $735.00

3) This means that 1% margin is only $7.35.

Conclusions:

1) If you fund this position with only $7.35 for a long micro lot of NZD/USD (this is 1% margin, or 100:1 leverage) you will go bankrupt very easily (as soon as there is a 1% decline in NZD)

2) Perhaps you mean to fund this position with $735.00 for a long micro lot of NZD/USD. This is 100% margin or 1:1 leverage. Of course in this case you will never go bankrupt. But you might as well just put your money in a NZD savings account and leave it there. Without leverage what is the point of forex?

3) If you fund with $73.50 as you stated, this is 10% margin or 10:1 leverage. You can withstand a larger decline of the NZD, but you are still not protected against bankruptcy.

I think you are trading with large risk that you are not aware of. If you doubt my calculations, you can confirm them using the FX calculators I found at OANDA.

I also noticed that you think there is some value in splitting a full lot into 100 micro lots. You seem to think this will lower your risk. Again I think you are making a big mistake. This is like getting 100 $1 bills in exchange for a $100 bill. They are exactly the same. If you create 100 micro positions that are the same as 1/100 of a full position, you have not changed your risk at all.

yokumoku

there is a bit diffrent in calculating mini and standard account
i use mini account where in 1 lot, it is $1 a pip
(in standard account 1 lot is $10 a pip)

but then again mybroker (interbankfx) use the "standard lot" , "mini lot" , & " micro lot" for both kind of account in 1/10 difference in size..... as long as you get the meaning, all of the other is just technical and interpretation

for splitting position, it is based / helped by seeing Support of hourly/monthly time frame

let's just say the lowest price we found in nzd/usd is about 0.5650 in (may 2003?) and today price is 0.7350, so there is 1700 pip difference.
with 50 position (micro lot in mini acc) and grid (interval) arrangement..... 1700:50 = 34 (can be adjusted to the nearst S&R afterward)

so we place the position in 34 pips intervall..... it may sound easy, but the price may never goes back to fill all of the intervall,
so we create an estimation & split the interval based on highest & lowest price ....... (this splitting is a bit dangerous for short time frame as you can see)
ps: i my self doubtfully will ever use the fullest range of this interval arrangement... and of course it is just an example.

Gwan, I think we are going around in circles. I wrote about micro lots and $0.10 pips because your example used a micro lot. If you are in fact trading mini lots then yes, one pip is $1.00 for your example, but everything else changes by 10 as well. My conclusions do not.

Frankly I can't really tell what you are doing in terms of leverage. It seems sometimes you are saying you use 100:1 and other times 1:1. So you either have no leverage, or you are not protected from bankruptcy. I don't see that you have beaten the risk of going broke when using leverage. There is no "Absolute Support" such as you describe.

The grid trading method you describe sounds like a way of pyramiding many small lots in the direction of a winning trade. This may work sometimes, but it will not protect you against bankruptcy either.

Best of luck with your trading.

yokumoku

Grid trading is deadly (dooh)... while i waiting the wave to swing back, i realize a silly bit thingy.... put intervall as "buy limit" will give heavy drawdown when there is sudden downtrend/movement ... but when it is placed as "buy stop" although the price may be trigered and the price may goes back down again, it is not as dangerous........
it may makes me miss few position, but it is saver

eg: we put buy stop in 10 interval and 10 take profit, nomater how high the price goes up, and and down, it will leave about 2 position open (per set up)

ps: temporary retracement is still in question

with Margin Lv, more active approach can be done, it is like calculating risk
ps: there is some margin lv calculation error in previous post

fact, in MT 4 :
ML = 100 * Equity / Used Margin
Equity = Balance + floating profit
Used Margin = 0.5 * Lot size * 100 (in IBFX mini account)

so Margin Level ( ML ) is reflecting our account ability to withstand our position. since it takes $ 0.5 per 0.01 lot ,if we count 1 cent a pip then
ML *0.5 = equity as pip value (compared to open position size)

( and the explaination ends here, detail calculation is not crucial )

reason of using it: when open many micro position or smaller without stop loss, we can see global power of that position affecting equity, by number ...especially when doing continuous trading.

Personal level ( based on trial and error so don't ask how ) :
Going a month vacation , leave Margin Lv above 7500% ( limit order shall not triger 3000% )
Average ML = 3000 %
Panic Lv = 1400 %
hope for miracle Lv= 600 %

necessary consideration:
this is somekind of endless race,, pips that is gained against price movement.
the key is to keep it smooth, keep the Margin level in comfort zone.

Scaling up and down /averaging is the main arsenal.

miss calculation : hedge is not counted by ML, it must be noticed manually

To take Loss as fake Break Even Point??:
With the power of many in positive swap side, just add up few days swap and close one position as compensation. or just use up today / 1 trade profit and close loosing position with opossing value.( the less it is used, the better the effect can compound).

Arr, a bit late in notice ( it is easy math, seriously)

True Leverage = Position Size / Account Size ; (Diallist say)
we can adjust it with value per pip into :
True Leverage = Position Size / (Account Size*value per pip)
(Position Size a.k.a total Contract size)

ML ( % ) = 100 * Equity / Used Margin
Equity = Balance + floating profit
Equity = ML * Used Margin / 100
Ballance + floating profit = ML * Used Margin / 100
Ballance = ML*Used Margin/100 - floating profit
Used Margin = 0.5 * Lot size * 100 (in IBFX mini account)

total mini contract size = 10.000 * Lot size
Account size = Ballance = Equity - floating profit
Contract size = Used margin * 2/100 * 10.000 = Used Margin * 200

True Leverage
= Contract size / Ballance
= Used Margin*200 / (ML*Used Margin/100-floating profit)

sorry my math is bad, lets assume floating profit = 0
so :

True Leverage
= Used Margin*200/(ML*Used Margin/100)
= 20000 / ML

eg, ML = 20000 % , it means we use 1 : 1 true leverage in IBFX mini account

Limitation:
best counting for 1 pair & 1 way trading dirrection
in multiple pair, pip value may gives a bit altered number
hedge is not calculated, but won't kill silently

After wandering in FF, i found some method /system that basically put yesterday profit/ some few trade profit and risk it into today / 1 trade:

1 profit hedge, after the profit accumulated, wait for a signal to close 1 side, ride, and close the other side.

2. use previous profit in Stop Loss calculation to define lot size,.. target: high winning streak.

3. if trailling stop succeed and the position is still open, ,, consider it closed in profit , move to the next trade,,, .

4. averaging up, compounding

as number 4 is considered saver than number 1

by far, this is the maximum risk that i can found here in FF.....

imagine, if margin call is a broker way of stop loss, and to protect user from minus equity,

if i use 1 lot in mini in IBFX , it require $50, = $1 per pip
if SL= 30 pip below, equity needed = $80
R:R = 30/80 = 37.5% in 1 trade

the maximum risk is not that far isn't it? margin limiting our risk on the market.
the next added risk is because of wider SL,.....
but when margin call is applied in grid or multiple trading, since the margin call is one by one, what left in equity is less protected.

To do :
1. spread the grid with less $ to risk, use the leftover for the 2 nd set up
2. spread another one near S&R, spread another as stop order
3. adjust the limit/stop order active time if necessary

Why :
1. S&R , search for reversal.(bottom fishing)
2. as many implies, stop order in grid gives a bit better safety
3. time consumming for manual trade

limitation :
just like the other post.

ps:
replace 2 nd grid with another entry system if necessary.
use other system for exit.

if floating profit = realized profit, utillising previous profit into next trade may equal with averaging up (if no loss).
averaging up: adding lot into winning position
re entry : continue a closed trade in the same direction of the pair (add the size, and it looks like averaging up)

unlike averaging up, we can "pause" and resume the trade with re entry....

in the long term, if a trade direction in a pair is maintained, it can be considered as 1 trade with many re entry.......

but
since there is "pause" in re entry, we can freely move it into a diffrent pair, diffrent trade direction, while maintaining the ability of averaging up, or better more, the pyramid.
.................................................................
ps: this is just a diffrent point of view, no new thing has been created.
limitation :
- anyone can just say that it is merely an ordinary trade.
- break even point must be defined. breaching it would multiple the damage.

oh yes..... should somebody read this,.. all thing in this thread is some kind of a accumulated thought that pops up in the process.
Here's some few rules i keep :


1. Go follow the trend with positive swap.

My survival in live trade is merely because i mostly put buy in gbp/jpy and usd/jpy in this last 8 month of trade. the trend is good and the swap is on the same direction, this two alone has done a good job without the help of Stop loss.
2. Equity is Space, Position is the Matter.
3. Any System will do, as long as follow the 1. with the size of 2.
4. We can fool our self

i wonder why i always increase the lot size in shorter time frame.... after some thinking ,, some reason pop up
1. to chase today target
2. that's it
so i think, why about the target, why it makes me that way.... it is all down to mathematical calculation and operational fee..... and the bottom line is... my equity is too small / i'm getting greedy.

i start to scalp... again, with greed, i let the winning run to the Fib lv / just put SL above entry price... if looks like loss, cut it quick and re enter on the Fib lv ... wonder till when will this last.....

Fibonacci is like magnet, price rarely stop in the middle of the Fib.... still amazed by that...... and use it as the basic scalping rule.

i am broke

do you know? the pip value of USD / JPY varies depend on the value it self

so when you have buy in 123, and hedge with sell because of panicked a margin call on the down fall in 114
, you need few micro lot bigger to hedge it to withstand another fall to 110


walla, i lost half of my open and another half while try to unlock the hedge

margin call usually only gives back 50 pip

even when the price is right and the calculation is good, grid trading is just better keep far from margin call.

figuring out again...... now i move the SL above +1 as soon as possible , nomater what.... it will remove any risk as soon as possible, should it be hit, re enter in better price, just like most of people do

testing to get cheaper monthly internet connection , hopefully by seeing the chart pip by pip will gives me better understanding of scalping entry.

my previous? dial up $1,1 per hour, online for 3-5 min per hour only.

can't change the habit, seeing the tick chat, doesn't help,
tweaking SL in the run now.

instead 100% which is less than 1% in one go, i split it again, and increasing the size as the position is getting near to the stop loss.
....................
now that the USD is giving less swap , i considering GBP as replacement , it is harder to split one that is already small.... dooh

Getting used to something can make one careless,
doing it over and over again doesn't erase the possibility to do more error.

let the machine help, and there is no equity that too big....