Hi ,
I've been reading a post by phil on the advanced trading forum:
http://forexfactory.com/showthread.php?t=50528
Here is an extract:
The problem with this simple method of adding 1 more initial lot size each time you think the market will rebounce is at the first steps of it:
It is okay to bank 6 when you have 7 positions (last one losing). But what about being breakeven when you are at the second step (2 initial lot size) and that the last one is a loser: you sell both and are breakeven.
So, I wonder if there is any know position sizing management for that kind of strategy. I thought about one:
Instead of adding 1 initial lot size, ie:
#1 (that the initial enter): 1 lot
#2: 2 lot (you lose here you are breakeven)
#3: 3 lot (you lose here you bank 2/3)
#4: 4 lot (you lose here you bank 3/4)
I would rather use this method, add half of your previous position to your current one:
#1: 1 lot
#2: +.5 lot = 1.5 position (you lose that last enter, you still bank 0.5 initial position lot)
#3: +.75 lot = 2.25 position
#4: +1.125 lot = 3.375 position
Of course after the 3rd re-entry (#4), you are .625 less than with normal position sizing (would be 4 instead of 3.375) but you risk/ratio has been smaller.
Hope I explained that clearly.
I've been reading a post by phil on the advanced trading forum:
http://forexfactory.com/showthread.php?t=50528
Here is an extract:
QuoteDislikedThe way to combat this is to assume that the last winning position will be donated back to the market when the trend is over. If you’ve won three consecutive times, it’s reasonable to assume that you’ll be able to keep two of them. Six wins under your belt, it’s likely you’ll be able to bank at least five of them. This mentality allows us to continue participating in a trend, rather than sitting on the sidelines. If we can resign ourselves to the idea of donating the last trade, we’ll be more likely to continue participating in the trend until it becomes exhausted.
The problem with this simple method of adding 1 more initial lot size each time you think the market will rebounce is at the first steps of it:
It is okay to bank 6 when you have 7 positions (last one losing). But what about being breakeven when you are at the second step (2 initial lot size) and that the last one is a loser: you sell both and are breakeven.
So, I wonder if there is any know position sizing management for that kind of strategy. I thought about one:
Instead of adding 1 initial lot size, ie:
#1 (that the initial enter): 1 lot
#2: 2 lot (you lose here you are breakeven)
#3: 3 lot (you lose here you bank 2/3)
#4: 4 lot (you lose here you bank 3/4)
I would rather use this method, add half of your previous position to your current one:
#1: 1 lot
#2: +.5 lot = 1.5 position (you lose that last enter, you still bank 0.5 initial position lot)
#3: +.75 lot = 2.25 position
#4: +1.125 lot = 3.375 position
Of course after the 3rd re-entry (#4), you are .625 less than with normal position sizing (would be 4 instead of 3.375) but you risk/ratio has been smaller.
Hope I explained that clearly.
I used to be schizophrenic, but now we are sane.
