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  • Post #1
  • Quote
  • First Post: Nov 1, 2007 10:46pm Nov 1, 2007 10:46pm
Generally speaking, we all know the lower end of brokers to offer .01 lot sizes. But what about the other end? I'm using a system loosely based on tkimble's weekly system and in order for me to hit my reasonable income target, I'd need to open really large lots (100+ lots).

Generally speaking, what is the reasonable upper limit on the lots you can open in one trade with minimal slippage?
  •  Coder
  • | Joined May 2006 | Status: Think Fast, Live Free! | 119 Posts | Online Now
Hello Ronald Raygun,

Look at the attached picture. The red box represents 24.3 million.
So your 10 mil is not an unreasonable trade at an ECN broker.

If you trade a minor currency, or trade during a quite time, you will be partially filled.
You can then either cancel the unfilled amount, or wait around hoping
to get filled.

If you try this trade at a non-ECN broker, without prior notice to the broker,
you will loose big time with slippage. Don't even attempt it.

The only consideration will be leverage. You will need a very large account
to open this many lots with an ECN broker.

Have fun,

Coder
Attached Image
Quoting Coder
Hello Ronald Raygun,

Look at the attached picture. The red box represents 24.3 million.
So your 10 mil is not an unreasonable trade at an ECN broker.

If you trade a minor currency, or trade during a quite time, you will be partially filled.
You can then either cancel the unfilled amount, or wait around hoping
to get filled.

If you try this trade at a non-ECN broker, without prior notice to the broker,
you will loose big time with slippage. Don't even attempt it.

The only consideration will be leverage. You will need a very large account
to open this many lots with an ECN broker.

Have fun,

Coder
I will plus this quote. Only an ECN broker will authorizes you to open such enormous orders but you will need quite a big account as ECN broker wont give you 100 leverage with a big account...

If your starting equity is 2-3 million that should be ok, otherwise, dont even think about it.

Note : MBT is the closest to an ECN broker and i think they should be ok. On their level 3 book, you can see a lot of order starting from 5 lots to 1000+ lots on eur/usd for example.
Hey guys!

Thanks for your replies. So, what would your recommended maximum for a traditional broker be? Should I place one big order with one account or split it into several smaller orders from several accounts?

For my variation of tkimble's system to work on an ECN, I would need at least 100:1 leverage to be able to double my account every 100 pips. And 200:1 leverage to fully apply my system. Is this something reasonable to expect?
Quoting Ronald Raygun
Hey guys!

Thanks for your replies. So, what would your recommended maximum for a traditional broker be? Should I place one big order with one account or split it into several smaller orders from several accounts?

For my variation of tkimble's system to work on an ECN, I would need at least 100:1 leverage to be able to double my account every 100 pips. And 200:1 leverage to fully apply my system. Is this something reasonable to expect?
you won't get 100:1 leverage on a multi million dollar account. I don't know how your system works, but doubling your account every 100 pips doesn't sound realistic.
  •  Coder
  • | Joined May 2006 | Status: Think Fast, Live Free! | 119 Posts | Online Now
With a normal retail broker, I have never traded more than 2 standard
lots without slippage.

Find a good ECN broker, the going rate is about $30/million per side.
So to open and close 1mil, it would cost you $60 in commissions.

Have a look at the broker forum on this site for a list of ECN brokers.

Coder
  • Post #7
  • Quote
  • Edited 8:17am Nov 3, 2007 8:07am | Edited 8:17am
Excuse my seemingly naive stance, I'm 17 years old and will be pulling the trigger in my first live trade in two weeks so I'll need all the information I can get.

Anyway: Tkimble posted a weekly scalping strategy somewhere on the forums. It looked good, and after reading through the thread and taking notes on the various variations with their benefits/drawbacks, I made my own.

My strategy requires incredible amounts of leverage in order for the risk to be low, and return to be astronomically high. It is recreated below:

Quote
Global Rules:

  1. When opening a trade, stoploss is set to 30pips
  2. Lot sizing: Lots should be sized so that 1 pip up or down will equal 1% account increase/decrease. (That's how I can manage to double my account most weeks).
  3. After a trade is in the money 50pips, move the stoploss to breakeven.

Trading Rules:

  1. At the start of each trading week, (Sunday 5:00PM my time => 12:00AM my broker's time I think.) Open four orders.

  1. Buy Stop: At previous close + 50pips. If the current price is above this entry because of a 50+ pip gap up, open a buy stop at current price + 50pips. Take Profit of 100 Pips. (This is to guarantee that the account value will at least double as a result of this trade.)
  2. Buy Stop: At previous close + 50pips. If the current price is above this entry because of a 50+ pip gap up, open a buy stop at current price + 50pips. Take profit 30 minutes before the close at the end of the week. (This is to guarantee that any greater-than-100pip movements are captured and taken as profit.)
  3. Sell Stop: At previous close - 50pips. If the current price is below this entry, because of a 50+ pip gap down, open a sell stop at current price - 50pips. Take Profit is 100 pips.(This is to guarantee that the account value will at least double as a result of this trade.)

  1. Sell Stop: At previous close - 50pips. If the current price is below this entry, because of a 50+ pip gap down, open a sell stop at current price - 50pips. Take profit 30 minutes before the close at the end of the week. (This is to guarantee that any greater-than-100pip movements are captured and taken as profit.)

  1. When one order is filled, move the opposite order to the previous close or current open, depending on which value you used to calculate your initial orders.
  2. If you get stopped out and the other order is filled, then reopen the stopped out side 20 pips away from the second order's stoploss. (for Example, I Buy, get stopped out, then sell, place the buy 20 pips above sell's stoploss).

Account Type:

  1. This strategy works best on a minimum 200:1 leverage account. That way, I can open at least two trades where one pip is 1% of account value. If I only had a 100:1 leverage account, use the 100 pip take profit strategy ONLY.

Here is a chart of projected account values assuming that the market goes in my favor: (Attached)

Now, according to OHLC data over the past 30 years, the average range of the market (Open to high and open to low) is about 147 pips, assuming that I didn't use a take profit of 100 pips.


Projected Values.pdf: Assumes that I only take 100 pips profit per trade.
GBPUSD10080Range.pdf: Defines the range of the week. From open to close
GBPUSD10090.pdf: Applies my trading strategy to the data. Assumes that I open normally and close at the end of the week.
Attached File(s)
File Type: pdf Projected values.pdf   10 KB | 703 downloads
File Type: pdf GBPUSD10080Range.pdf   52 KB | 634 downloads
File Type: pdf GBPUSD10080.pdf   79 KB | 590 downloads
Just tell us how fast you blow up your first account. This will be instructive

Do you realize, that on your first trade you will have allready lost 30% of your equity and on the 2nd 51% and on the 3rd 65.7%... And i can garantee you that losing 3 trade in a row is absolutely possible...

How long have you been trading this strategy on a demo account ?
"Lot sizing: Lots should be sized so that 1 pip up or down will equal 1% account increase/decrease."


So with one bad trade your account is down 30% (30 pip stoploss), and 2 bad trades in a row basically put you out of business?

Besides, when you trade EUR/USD like that, you need at least 1:200, and even then you are trading near max-margin (you will probably get a margin-call before your stop is even hit). With GBP/USD you cant even open a trade with 1:200 (i.e. 10k account, $100/pip = 1 mio. units, margin requirement 1:200 at current rate is a bit over 10k already).

You are 17 years old, you arent in a hurry at all, i would suggest sticking with a demo account for now, if you really have to try this sort of over-leveraged strategy.
Quoting melpheos
Just tell us how fast you blow up your first account. This will be instructive

Do you realize, that on your first trade you will have allready lost 30% of your equity and on the 2nd 51% and on the 3rd 65.7%... And i can garantee you that losing 3 trade in a row is absolutely possible...

How long have you been trading this strategy on a demo account ?

I've been using this strategy for about 2 months now, with much better success than all the previous strategies I have tried and in part automated over the past three years. (Yes, I have been paper trading on and off for three years on several platforms, metatrader being the most recent.)

I understand your point that the market could whipsaw violently and force me to stop out thrice. And, as far as I can tell, that would simply mean that I would need to readjust the opposite position accordingly to reflect the new account balance. Granted my cash on cash return will be lower, but my profit margin should remain the same.

I'm not sure if you have read through the entirety of this thread. (http://www.forexfactory.com/showthread.php?t=11937) But I can say that there has been plenty of speculation, testing, and modification of the original strategy that I can safely say that--in theory at least--I should be able to double my account weekly.

I don't see myself as that stupid. Which is why I will only start with $200, in a 500:1 leverage account. I have no personal experience with slippage and I guess the best way to learn is to try it first hand.

You may think that $200 is a lot for a 17 yr old, and for most of them, you're right. However, I've been making money since I was 11 or 12, through several small (< $100,000 revenue/year) corporations. I can afford to blow up this account, and it's much better to blow up now with $200 instead of with a million dollar account. I'm sure you'll agree.


Quoting shrike
"Lot sizing: Lots should be sized so that 1 pip up or down will equal 1% account increase/decrease."


So with one bad trade your account is down 30% (30 pip stoploss), and 2 bad trades in a row basically put you out of business?

Besides, when you trade EUR/USD like that, you need at least 1:200, and even then you are trading near max-margin (you will probably get a margin-call before your stop is even hit). With GBP/USD you cant even open a trade with 1:200 (i.e. 10k account, $100/pip = 1 mio. units, margin requirement 1:200 at current rate is a bit over 10k already).

You are 17 years old, you arent in a hurry at all, i would suggest sticking with a demo account for now, if you really have to try this sort of over-leveraged strategy.
You're right about the leverage. My losses would force a change in the lot size of the opposite trade should I get stopped out. Some people on the other thread suggest to stop trading if stopped out twice in a week.

I know about margin call and NorthFinance's terms state quite clearly that they will send out a margin call and close the trades if my account reaches 0. They guarantee that it will not go negative nor hold me liable for that.

I'm not sure if you are familiar with Robert Kiyosaki, but I do understand and believe in the general philosophy of his argument. So far I have the real estate and business sides of my triangle strong, I'm now working on the paper side.


I understand all of your concerns and acknowledge your sincerity. However, I think I'll take the chance. With my whole financial picture, I can afford to do this maybe 20-30 times based on the reserve I have set aside for trading.

If I win, good; if I lose, better.
Ronald,

I admire your tenacity and it's obvious that you've done a lot of calculations. I wish you all the best.

One thing I should point out is that you're really only working on theory, not actual practice, i.e. success in a demo account does not equal success in a live account.

Also, historical averages are just that, averages. Things are very different in the real market, and what happened 30 years ago may not happen today.

Witness the GBP and CAD recently. GBP has reached a 26-year high and CAD has reached (I believe) a 50-year high. Those figures really mess up the 30-year averages, don't they?

I had also figured out that I could double my account every week -- in theory. It worked in the demos, but it certainly has not done so with live trading.

BTW, I'm also a huge fan of Robert Kiyosaki. My take on his philosophies, though, is that he advocates passive income. Personally, I wouldn't consider Forex trading as passive income, since you don't make any money if you're not trading, unlike Real Estate and absentee business ownership.

If you're as well off financially as you claim (no offence intended), why don't you invest in notes (private mortgages) as paper assets? That's certainly passive.

Either way, I wish you success. It's good to see someone getting started on the right track at an early age.

Terry
NOTE to moderator: I understand that this thread is already going off topic, if you deem it necessary, kindly delete/move the offending posts.

Hey terry,

Yes I used to do notes, but in light of the recent subprime meltdown, I'm hesitant to go back for awhile. Of the numerous relatively small loans my family offered, my portion lost about $15,000 after foreclosure expenses. Still had a new profit, but the market is becoming increasingly thin, that I pulled out and moved to Tax lien certificates, it's a close cousin to paper, but I felt it still was more real estate.

You're right about the averages, and I just need to readjust my excel calculations to show me the 30 year average, then the 29 year, and so on so I can see which way the average is going. Also, I attribute the new highs to increased trading volume. Why? After the tech bubble burst, the investors that pulled their money out had to put it somewhere else. Kiyosaki along with other "experts" speculate that the money fled to real estate, and commodities. After I saw increased advertising for FOREX, I figured that's where the money is flowing and so I started training myself to trade it.

You're also right about the passive income portion of Kiyosaki's philosophy. The obvious answer of course would be to simply program an Expert Advisor. Yes, that's true, but there is no way I can account for absolutely every possible market scenario. No amount of speculation and theory can replace the real thing. My other paper options include stocks, options, futures, and mortgages. I play with Apple options, particularly before a macworld convention or WWDC, but I don't think it's substantial enough to make my paper side of my triangle as strong as my business and real estate. The leverage through stock is simply too small for me to make a decent profit, futures I'm not too familiar with and can't understand anyway, and buying mortgages aren't really in my range at the moment. I simply can't afford to be throwing around hundreds of thousands around. i can afford to be throwing hundreds around so that leads me to Forex.

Besides, if I do blow up, to me it'll be just another $100-200 lesson as opposed to another potential $20,000-30,000 lesson in private mortgages.
It's just a lot cheaper.

Happy trading everyone. I'm about to take the plunge!
Quoting Ronald Raygun
NOTE to moderator: I understand that this thread is already going off topic, if you deem it necessary, kindly delete/move the offending posts.

Hey terry,

Yes I used to do notes, but in light of the recent subprime meltdown, I'm hesitant to go back for awhile. Of the numerous relatively small loans my family offered, my portion lost about $15,000 after foreclosure expenses. Still had a new profit, but the market is becoming increasingly thin, that I pulled out and moved to Tax lien certificates, it's a close cousin to paper, but I felt it still was more real estate.

You're right about the averages, and I just need to readjust my excel calculations to show me the 30 year average, then the 29 year, and so on so I can see which way the average is going. Also, I attribute the new highs to increased trading volume. Why? After the tech bubble burst, the investors that pulled their money out had to put it somewhere else. Kiyosaki along with other "experts" speculate that the money fled to real estate, and commodities. After I saw increased advertising for FOREX, I figured that's where the money is flowing and so I started training myself to trade it.

You're also right about the passive income portion of Kiyosaki's philosophy. The obvious answer of course would be to simply program an Expert Advisor. Yes, that's true, but there is no way I can account for absolutely every possible market scenario. No amount of speculation and theory can replace the real thing. My other paper options include stocks, options, futures, and mortgages. I play with Apple options, particularly before a macworld convention or WWDC, but I don't think it's substantial enough to make my paper side of my triangle as strong as my business and real estate. The leverage through stock is simply too small for me to make a decent profit, futures I'm not too familiar with and can't understand anyway, and buying mortgages aren't really in my range at the moment. I simply can't afford to be throwing around hundreds of thousands around. i can afford to be throwing hundreds around so that leads me to Forex.

Besides, if I do blow up, to me it'll be just another $100-200 lesson as opposed to another potential $20,000-30,000 lesson in private mortgages.
It's just a lot cheaper.

Happy trading everyone. I'm about to take the plunge!
I give your money one month tops. Anyone fancy a sweepstake?
RR: My first response to this was from my rational side, but what the hell - good luck kid - just make sure you let us know what happens. So many times we see this type of thread and never hear from the poster again.
Quoting Ronald Raygun
I don't see myself as that stupid. Which is why I will only start with $200, in a 500:1 leverage account.
In trading, there is no bullshit. You either make money or you don't.
Quoting Ronald Raygun
NOTE to moderator: I understand that this thread is already going off topic, if you deem it necessary, kindly delete/move the offending posts.

Hey terry,

Yes I used to do notes, but in light of the recent subprime meltdown, I'm hesitant to go back for awhile. Of the numerous relatively small loans my family offered, my portion lost about $15,000 after foreclosure expenses. Still had a new profit, but the market is becoming increasingly thin, that I pulled out and moved to Tax lien certificates, it's a close cousin to paper, but I felt it still was more real estate.

You're right about the averages, and I just need to readjust my excel calculations to show me the 30 year average, then the 29 year, and so on so I can see which way the average is going. Also, I attribute the new highs to increased trading volume. Why? After the tech bubble burst, the investors that pulled their money out had to put it somewhere else. Kiyosaki along with other "experts" speculate that the money fled to real estate, and commodities. After I saw increased advertising for FOREX, I figured that's where the money is flowing and so I started training myself to trade it.

You're also right about the passive income portion of Kiyosaki's philosophy. The obvious answer of course would be to simply program an Expert Advisor. Yes, that's true, but there is no way I can account for absolutely every possible market scenario. No amount of speculation and theory can replace the real thing. My other paper options include stocks, options, futures, and mortgages. I play with Apple options, particularly before a macworld convention or WWDC, but I don't think it's substantial enough to make my paper side of my triangle as strong as my business and real estate. The leverage through stock is simply too small for me to make a decent profit, futures I'm not too familiar with and can't understand anyway, and buying mortgages aren't really in my range at the moment. I simply can't afford to be throwing around hundreds of thousands around. i can afford to be throwing hundreds around so that leads me to Forex.

Besides, if I do blow up, to me it'll be just another $100-200 lesson as opposed to another potential $20,000-30,000 lesson in private mortgages.
It's just a lot cheaper.

Happy trading everyone. I'm about to take the plunge!
Sounds like you're headed in the right direction. You're obviously checking things out thoroughly.

Be sure to keep us up to date on your progress, as mrgreen says. Even if it doesn't work out, it's a good lesson for everyone, and we can all learn from each other's mistakes. No shame in that at all.

Terry
oanda has microlots
Trading for a living!
  • Post #17
  • Quote
  • Last Post: Nov 23, 2007 12:51pm Nov 23, 2007 12:51pm
The wire went through (technical difficulty with my bank) and I will be able to start trading live on monday. Here's the thread for my journal as per your request.

http://www.forexfactory.com/showthread.php?t=57470
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