Easier said than done!!! | Forex Factory

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Attachments: Easier said than done!!!
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Easier said than done!!!

  • #1
  • First Post: Dec 1, 2007 8:27am Dec 1, 2007 8:27am
Hi,
Just a thought, thou impractically possible, I wonder how many people would have actually been successful doing this.

Let's say if you are very choosy about your trades, and let's also assume that ur lucky enough to get 10 wins in a row with a RR of 3:1, then compounding can be a fruitful tool.

Ingredients:
10 wins
RR 3:1
Compounding system
Starting account balance $1,000

Recipe:
Your initial risk is $50 per trade. You risk increases with every win, i.e. you risk half of your winnings in the next trade. For eg, if you risk $50 in your 1st trade, and your win is $150 (RR 3), then for your 2nd trade you risk $75 for a win of $225.

Result:
Trade 1, Risk $50, Win $150, Balance $1,150
Trade 2, Risk $75, Win $225, Balance $1,375
Trade 3, Risk $113, Win $339, Balance $1,713
Trade 4, Risk $169, Win $506, Balance $2,219
Trade 5, Risk $253, Win $759, Balance $2,978
Trade 6, Risk $380, Win $1,139, Balance $4,117
Trade 7, Risk $570, Win $1,709, Balance $5,826
Trade 8, Risk $854, Win $2,563, Balance $8,389
Trade 9, Risk $1,281, Win $3,844, Balance $12,233
Trade 10, Risk $1,922, Win $5,767, Balance $18,000

But again, as the title suggests, it's easier said than done!!! But that doesn't necessarily mean it's not possible
  • #2
  • Edited 8:38am Dec 1, 2007 8:36am | Edited 8:38am
.........
  • #3
  • Dec 1, 2007 8:40am Dec 1, 2007 8:40am
Quoting Mina
5% risk is too much for my appetite
I agree with you completely on a normal account.
Would it be too risky with say the $100 you were going to take your firend out to dinner on? LOL
  • #4
  • Dec 1, 2007 8:42am Dec 1, 2007 8:42am
where I live I won't take claudia shciffer for a 100$ meal
  • #5
  • Dec 1, 2007 8:46am Dec 1, 2007 8:46am
Quoting Mina
where I live I won't take cluadia shciffer for a 100$ meal
I am sure that is true, but then adjust the beginning balance to a level that means what my intent of the statement was. Cost of living is of course different all over the world.

If a person is trading in FOREX with money they can not afford to lose, they need to re-evaluate. That is the definition of trading with scared money.
  • #6
  • Dec 1, 2007 8:47am Dec 1, 2007 8:47am
The problem here is to understand how much you are really risking , some people thunk that the real risk is the distance between the entry and stop-loss , if you think sothe above equation will wipe you out unless of curse you know what the real risk and put the stop-loss exactly at that level
  • #7
  • Dec 1, 2007 8:50am Dec 1, 2007 8:50am
Quoting smjones
I am sure that is true, but then adjust the beginning balance to a level that means what my intent of the statement was. Cost of living is of course different all over the world.

If a person is trading in FOREX with money they can not afford to lose, they need to re-evaluate. That is the definition of trading with scared money.
come on man I was joking I'm not trading with scared money neither I'm trading with a 100$ account still .. where I live I won't take cluadia shciffer for a 100$ meal
  • #8
  • Dec 1, 2007 8:53am Dec 1, 2007 8:53am
Quoting Mina
Where I live I won't take cluadia shciffer for a 100$ meal
I will! Can you set me up?
  • #9
  • Dec 1, 2007 8:54am Dec 1, 2007 8:54am
Quoting fx_amateur
The problem here is to understand how much you are really risking , some people thunk that the real risk is the distance between the entry and stop-loss , if you think sothe above equation will wipe you out unless of curse you know what the real risk and put the stop-loss exactly at that level
fx-amateur why don't you talk in plain english ?
I guess what you mean is choose the right area to put your stoploss first then adjust the position size accordingly right?

on another thought I never thought of risking half of the winnings in the next trade actually this seems like a good idea even if the sequence was 1win:3loss you will still be profitable
  • #10
  • Dec 1, 2007 8:56am Dec 1, 2007 8:56am
Quoting smjones
I will! Can you set me up?
I wouldn't have been browsing this forum dude
  • #11
  • Dec 1, 2007 9:02am Dec 1, 2007 9:02am
Quoting Mina
I wouldn't have been browsing this forum dude


I guess my point is that one could try any of these rags to riches approaches as long as they understood what they were actually getting into and accept that the money is already gone... It is indeed a form of gambling, but that in itself is not a bad thing, if the odds are in the favor of the gambler. I just would not do one of these with my trading account at large

It's kind of like thinking about getting a date with Claudia Shiffer, one can dream can't they? LOL
  • #12
  • Dec 1, 2007 9:02am Dec 1, 2007 9:02am
Quoting Mina
fx-amateur why don't you talk in plain english ?
I guess what you mean is choose the right area to put your stoploss first then adjust the position size accordingly right?

on another thought I never thought of risking half of the winnings in the next trade actually this seems like a good idea even if the sequence was 1win:3loss you will still be profitable
What I mean is that most people I know have problems to determine the correct risk level but instead they use local s/r levels to put a stop-loss there which means that they get stopped out frequently

furthermore risk ratio of 3:1 is unrealistic for consistent profits , especially if you would like to combine it with a stop-loss at a realistic level you will have problems to make successful trades with this reward ratio

most people actually would just say something like stop-loss is 100 pips so I need to gun for a profit of 300 pips?!
  • #13
  • Dec 1, 2007 9:06am Dec 1, 2007 9:06am
  •  TrevA
  • | Joined Oct 2007 | Status: my brain has a mind of its own | 166 Posts
Quoting kevmcfoster
Hi,

Ingredients:
10 wins
RR 3:1
Compounding system
Starting account balance $1,000

Recipe:
Your initial risk is $50 per trade. You risk increases with every win, i.e. you risk half of your winnings in the next trade. For eg, if you risk $50 in your 1st trade, and your win is $150 (RR 3), then for your 2nd trade you risk $75 for a win of $225.

Result:
Trade 1, Risk $50, Win $150, Balance $1,150
Trade 2, Risk $75, Win $225, Balance $1,375
Trade 3, Risk $113, Win $339, Balance $1,713
Trade 4, Risk $169, Win $506, Balance $2,219
Trade 5, Risk $253, Win $759, Balance $2,978
Trade 6, Risk $380, Win $1,139, Balance $4,117
Trade 7, Risk $570, Win $1,709, Balance $5,826
Trade 8, Risk $854, Win $2,563, Balance $8,389
Trade 9, Risk $1,281, Win $3,844, Balance $12,233
Trade 10, Risk $1,922, Win $5,767, Balance $18,000

But again, as the title suggests, it's easier said than done!!! But that doesn't necessarily mean it's not possible
Agreed, its much easier said than done. Are you assuming to risk 50% of your winnings as lots or stop-loss or both? It is possible with strict money management but the reality is that losses are a certainty

Attached is a compounding spreadsheet I wrote some time back to calculate compounding and pip values. It assumes you have solid money management and have pre-calculated stop/loss and pip values that fit your model.

I personally use this spreadsheet as part of my trading plan but use different starting capital, pip values etc and have pre-loaded the sheet with what I consider reasonable targets.

Enter your starting capital, the number of pips per stage (a stage can be an hour, day or week) and the value per pip as a percentage of capital into the sheet.

Stages are used because loosing trades are a certainty and provided that you have solid money management and a winning system then consistency will let you become very rich.

Once you achieve a stage then move onto the next stage and place trades with the recommended pip value in accordance with your money management for stop losses. If you loose then go back one or more stages and use the pip values for the capital you have.

I hope it's useful for somebody. Let me know if it needs corrections or can be improved.

TrevA
Attached File(s)
File Type: xls Trading Projections.xls   29 KB | 504 downloads
  • #14
  • Dec 1, 2007 9:43am Dec 1, 2007 9:43am
Quoting smjones


as long as they understood what they were actually getting into and accept that the money is already gone...
It's kind of like thinking about getting a date with Claudia Shiffer, one can dream can't they? LOL
I can't have said it better than that
  • #15
  • Dec 1, 2007 9:45am Dec 1, 2007 9:45am
Quoting fx_amateur
What I mean is that most people I know have problems to determine the correct risk level but instead they use local s/r levels to put a stop-loss there which means that they get stopped out frequently

furthermore risk ratio of 3:1 is unrealistic for consistent profits , especially if you would like to combine it with a stop-loss at a realistic level you will have problems to make successful trades with this reward ratio

most people actually would just say something like stop-loss is 100 pips so I need to gun for a profit of 300 pips?!
hint:
not if you're scalping with tight stoploss around a "most propably will be" turning points
  • #16
  • Dec 1, 2007 9:48am Dec 1, 2007 9:48am
Quoting Mina
hint:
not if you're scalping with tight stoploss around a "most propably will be" turning points
yes , I understand but this strategy does not have anything to do with serious trading as it is solely based on hope that you will be able to make more profitable trades than losing trades and the size of each profitable trade will be bigger , basically it is based on luck
  • #17
  • Dec 1, 2007 9:57am Dec 1, 2007 9:57am
take another look at what you typed

Quoting fx_amateur
yes , I understand but this strategy does not have anything to do with serious trading as it is solely based on hope that you will be able to make more profitable trades than losing trades and the size of each profitable trade will be bigger , basically it is based on luck
Quoting fx_amateur
as it is solely based on hope that you will be able to make more profitable trades than losing trades
ie: higher win%
Quoting fx_amateur
and the size of each profitable trade will be bigger
ie: higher R:R
actually I hope I can be consitent with this type of non serious trading
  • #18
  • Dec 1, 2007 10:03am Dec 1, 2007 10:03am
what I wanted to say is that you woud get stopped out frequently as in scalping you must use tight stop-losses which will definitely be much smaller than the required distance , I know what you mean you reduce the stop-loss distance and increase the position sizes in order to profit from fast small pip profits

this works , just you will get stopped out frequently which is why it is luck
  • #19
  • Dec 1, 2007 10:17am Dec 1, 2007 10:17am
no no no here's what I mean: a long position at a touch of a trendline wich price respected to the pip too many times, a touch of the lower bollinger band entery at 110.04 - just below is the phsychological level 110.00 and daily fibo 38 retracement at 109.7 - first profit target is 110.29 where I turn my sl to BE and let it ride too bad I cut my profit early on this one but still made a decent 5 %

this is not scalping this are high propability setups with tight SL
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  • #20
  • Last Post: Dec 1, 2007 11:02am Dec 1, 2007 11:02am
Yes , I understand how it works and I am not claiming it does not work , I just look at the market from a different perspective

The fact is that real trading only takes place outside of randomness and anything taking place on a 5 min . chart is as random as a coin toss

I know it is possible to make profits this way , I just don't like gambling
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