I wanted to start a thread based around what I think is the single most important factor in making vast sums of money trading.
Getting 100% of your capital riding a trend.
That is my constant aim whilst trading although opportunities to do so are extremely rare.
Catching a trend and holding your position long enough to get all your capital into it (whilst making sure your risk constantly decreases and your reward increases) is very difficult and requires a huge deal of patience and discipline and a good knowledge of price action.
I have attached an example from a trend in the Dax that occured from August 2006 through until February 2007 (7 months).
I don't expect people to tell me "of course hindsight is 20/20" - I know this. I am just posting a chart to give an idea of a perfect trend and how it could be traded with S/R and pin bars and more importantly, how a trader could build a position while decreasing their risk and increasing their gain.
To know what 100% of your capital is I would divide the equity size by the margin requirement for the market traded. In the case of the Dax on an account with £1,500 it would be:
£1,500 / 30 (margin required to trade £1 per tick in the Dax)
This equals £50 which is what I would like my total position size to eventually grow to so that I am using all of my money effectively. Please note that in the example below, adding in equal increments we would only have got up to £7 a tick (because we traded minimum size from the beginning due to our risk profile)
In the example, you will see that with your reward increasing and risk decreasing each time you add a position, you could have made 3,828 ticks from an initial risk of 86. Also - please note that this huge gain is only as far as the stops being hit on the last pin bar. The market then went up at least another 400 ticks after this.
What is interesting is that if (and I do not advise this) you were prepared to play with the markets money and come out with nothing at any stage (although never taking a loss) you could have turned an initial risk of £86 (£1 per tick on the first trade) into a reward of £72, 835.
Getting 100% of your capital riding a trend.
That is my constant aim whilst trading although opportunities to do so are extremely rare.
Catching a trend and holding your position long enough to get all your capital into it (whilst making sure your risk constantly decreases and your reward increases) is very difficult and requires a huge deal of patience and discipline and a good knowledge of price action.
I have attached an example from a trend in the Dax that occured from August 2006 through until February 2007 (7 months).
I don't expect people to tell me "of course hindsight is 20/20" - I know this. I am just posting a chart to give an idea of a perfect trend and how it could be traded with S/R and pin bars and more importantly, how a trader could build a position while decreasing their risk and increasing their gain.
To know what 100% of your capital is I would divide the equity size by the margin requirement for the market traded. In the case of the Dax on an account with £1,500 it would be:
£1,500 / 30 (margin required to trade £1 per tick in the Dax)
This equals £50 which is what I would like my total position size to eventually grow to so that I am using all of my money effectively. Please note that in the example below, adding in equal increments we would only have got up to £7 a tick (because we traded minimum size from the beginning due to our risk profile)
In the example, you will see that with your reward increasing and risk decreasing each time you add a position, you could have made 3,828 ticks from an initial risk of 86. Also - please note that this huge gain is only as far as the stops being hit on the last pin bar. The market then went up at least another 400 ticks after this.
What is interesting is that if (and I do not advise this) you were prepared to play with the markets money and come out with nothing at any stage (although never taking a loss) you could have turned an initial risk of £86 (£1 per tick on the first trade) into a reward of £72, 835.
Attached Image (click to enlarge)
