Following David's post here http://www.forexfactory.com/showthread.php?t=71674 I thought I'd update this post http://www.forexfactory.com/showthread.php?p=1777029 with an adjustment I've incorporated since trading a much larger account...
OK, I'll try and sum up how I trade GBPJPY and the rules I apply....
Firstly the rules...
1. I will hold a maximum of 10 positions at any one time. Update - maximum of 5 trades open in any one direction.
2. Each position has a t/p of 50 pips and a s/l of 1000 pips.
3. Position size is 0.2% of account balance. So, each winning trade equates to a 0.1% profit and each losing trade equates to a 2% loss.
4. All trades are left to hit their s/l or t/p unless a trade is in profit at New York close, in which case it is closed manually.
OK, that was the easy part. From here on in it is more difficult to explain because my method is discretionary. I still work full-time so basically miss virtually all the London session unless I'm on holiday.
Since I started trading I've used almost exclusively the daily charts and that is where we begin. As I study the daily chart I'm asking myself...
Are we ranging? - if so where are the tops and bottoms of the range?
Are we trending? - if so, where are the likely support, resistence areas where we may consolidate or pull-back?
Have we just broken through an established range? If so, where should the price head towards before pausing again?
I trade using candlesticks and am also looking for classic reversal signs - you may know these as pin bars - check james16 thread for more info.
I then look at the 4 hour charts downwards and go through the same process which gives me a shorter term outlook on things but always keeping the longer term in mind.
Entries are actually taken from the 5 minute charts, again taking the overall bias in mind. I try not to put all my eggs in one basket so to speak - if I'm short biased doesn't mean I'll necesarily be holding 10 short positions. Update - see point 1 above. By holding only 5 positions at any time either long or short, this prevents unnecessary risk if we end up on the wrong side of the market. Say for example the market is rising and I'm holding 5 short positions already, I cannot open any further short positions until either 1) The market reverses and starts to clear out an existing short, or 2) One of the shorts is stopped out and therefore frees up a position. In a wide range the method works extremely well. When the market breaks out and starts to trend it becomes more tricky but the above rule forces me to trade with the trend until it tells me otherwise. A lot of my entries are by no means perfect but that really doesn't matter. As with all methods it's the discipline of sticking with the plan.
With the risk/reward ratio being so poor (in some people's eyes), I need to profit 20 trades out of 21 to break even. As some of you know, I started a version of this method in September and have been pretty successful thus far.
November & December has brought in a more conservative method but still over 200 consecutive profitable trades. I will have stop losses hit at some point but overall I believe I can be consistently profitable. The important thing for me is not to have more than 1 or 2 positions 'stranded' at the edge of a range.
Money management is incredibly important as is faith in the system. I have seen first hand people trying to trade my system and either disregard position size (sometimes increasing tenfold) or bailing out of trades at -200, -500 pips and therefore taking an unecessary loss.
I know this won't answer all your questions and because I'm using my own discretion for entries that would be impossible. However, I hope this has given you something to think about by looking at this business from a slightly different angle.
Kind regards
Steve
I'll post a full update at the end of this month but as of today results are as follows.
My own live account since Nov 1st 2007
Net Pip gain (after losses) 13024 pips
Current unrealised drawdown 2923 pips
Number of trades 343
Winning trades 338
Losing trades 5
98.54% success rate
My managed account (opened 16th Jan 2008)
Here, I don't record in pips but $
Start Balance $103529
Current Balance $124439
Account Value $108595
Number of trades 107
Winning trades 107
Losing Trades 0
100% success rate
So, on the managed account I'm currently up around 4% including unrealised drawdown but the important thing to me is that I've banked enough to cover my worst case scenario of 5 stop losses being hit. Of course I'll continue to bank pips before that happens as we're currently still well within the 204 to 214 range.
Kind Regards
Steve
OK, I'll try and sum up how I trade GBPJPY and the rules I apply....
Firstly the rules...
1. I will hold a maximum of 10 positions at any one time. Update - maximum of 5 trades open in any one direction.
2. Each position has a t/p of 50 pips and a s/l of 1000 pips.
3. Position size is 0.2% of account balance. So, each winning trade equates to a 0.1% profit and each losing trade equates to a 2% loss.
4. All trades are left to hit their s/l or t/p unless a trade is in profit at New York close, in which case it is closed manually.
OK, that was the easy part. From here on in it is more difficult to explain because my method is discretionary. I still work full-time so basically miss virtually all the London session unless I'm on holiday.
Since I started trading I've used almost exclusively the daily charts and that is where we begin. As I study the daily chart I'm asking myself...
Are we ranging? - if so where are the tops and bottoms of the range?
Are we trending? - if so, where are the likely support, resistence areas where we may consolidate or pull-back?
Have we just broken through an established range? If so, where should the price head towards before pausing again?
I trade using candlesticks and am also looking for classic reversal signs - you may know these as pin bars - check james16 thread for more info.
I then look at the 4 hour charts downwards and go through the same process which gives me a shorter term outlook on things but always keeping the longer term in mind.
Entries are actually taken from the 5 minute charts, again taking the overall bias in mind. I try not to put all my eggs in one basket so to speak - if I'm short biased doesn't mean I'll necesarily be holding 10 short positions. Update - see point 1 above. By holding only 5 positions at any time either long or short, this prevents unnecessary risk if we end up on the wrong side of the market. Say for example the market is rising and I'm holding 5 short positions already, I cannot open any further short positions until either 1) The market reverses and starts to clear out an existing short, or 2) One of the shorts is stopped out and therefore frees up a position. In a wide range the method works extremely well. When the market breaks out and starts to trend it becomes more tricky but the above rule forces me to trade with the trend until it tells me otherwise. A lot of my entries are by no means perfect but that really doesn't matter. As with all methods it's the discipline of sticking with the plan.
With the risk/reward ratio being so poor (in some people's eyes), I need to profit 20 trades out of 21 to break even. As some of you know, I started a version of this method in September and have been pretty successful thus far.
November & December has brought in a more conservative method but still over 200 consecutive profitable trades. I will have stop losses hit at some point but overall I believe I can be consistently profitable. The important thing for me is not to have more than 1 or 2 positions 'stranded' at the edge of a range.
Money management is incredibly important as is faith in the system. I have seen first hand people trying to trade my system and either disregard position size (sometimes increasing tenfold) or bailing out of trades at -200, -500 pips and therefore taking an unecessary loss.
I know this won't answer all your questions and because I'm using my own discretion for entries that would be impossible. However, I hope this has given you something to think about by looking at this business from a slightly different angle.
Kind regards
Steve
I'll post a full update at the end of this month but as of today results are as follows.
My own live account since Nov 1st 2007
Net Pip gain (after losses) 13024 pips
Current unrealised drawdown 2923 pips
Number of trades 343
Winning trades 338
Losing trades 5
98.54% success rate
My managed account (opened 16th Jan 2008)
Here, I don't record in pips but $
Start Balance $103529
Current Balance $124439
Account Value $108595
Number of trades 107
Winning trades 107
Losing Trades 0
100% success rate
So, on the managed account I'm currently up around 4% including unrealised drawdown but the important thing to me is that I've banked enough to cover my worst case scenario of 5 stop losses being hit. Of course I'll continue to bank pips before that happens as we're currently still well within the 204 to 214 range.
Kind Regards
Steve