This method does use the same indicators as Don Steinitz. But his entries were entire crap for what I was doing. Entering in this manner (go ahead and backtest it, please) gives 6:1 win to loss ratios, and I think that they are much more on the swing trade side than the day trade side he was on. Also, regarding MM, I never really understood why you need only risk 1% of your account every trade. As long as you recalculate your percentages every time, you can never "technically" get down to zero dollars. Here, let's take an example.
5 losses in a row of -500 pips (high side) would be an 80% loss each time
25 wins in a row of +300 pips (low side) would be a 48% gain each time, but let's make it just 40% for sake of showing what will happen
I will post my results from the past, but here's what would happen with a 100,000 USD account.
1) 20,000 USD
2) 4000 USD
3) 800 USD
4) 160 USD
5) 32 USD
Down to 32 bucks
6) 44
7) 63
8) 87
9) 122
10) 170
11) 238
12) 333
13) 467
14) 654
15) 915
16) 1281
17) 1793
18) 2511
19) 3515
20) 4921
21) 6889
22) 9645
23) 13503
24) 18904
25) 26466
26) 37053
27) 51874
28) 72624
29) 101673
30) 142343
Now, you all might be thinking,
"hey wait, you broke even on 5 bad trades and 24 good trades.... doesn't look very profitable to me..."
Well, this is, of course, saying that we got 5 trades that went ENTIRELY against us. Typically, out of the 5 losers, only two of them go entirely against us (-500 pips). The other three go to -200 pips. Also, we greatly undervalued the profit potential here. Saying 300 pips is our average gain is just plain downright low. I would have to go with more like 550-650 pips average. And now you should be able to see the profitability. 500 pips average gain, 350-400 pips average loss, with a 5:1 win loss ratio (In my testing, the average loss was about 280 pips, the average gain was 750 pips, and the win to loss was 6:1). You bank money.
With different risk models starting with 100,000 USD, assuming we make 500 pips with a 400 pip loss on average with a 5:1 win loss ratio over the past 8 years:
5% risk: 276,113 USD multiplied the account by about 3 in 8 years (1.15% monthly returns)
10% risk: 714,093 USD multiplied the account by 7 in 8 years (2.05% montly returns)
20% risk: 3,989,565 USD multiplied the account by 30 in 8 years (3.61% montly returns)
50% risk: 196,353,084 USD multiplied the account by 2,000 in 8 years (8.24% monthly returns)
80% risk: 1,454,955,016 USD multiplied the account by 14,000 in 8 years (10.5% montly returns)
99% risk: 947,276,773 USD multiplied the account by 9,500 in 8 years (10.0% monthly returns)
All of this IS about compounding. I really don't understand why we wouldn't want to trade with a 50+% risk. I CAN see that in the upper levels, profit does start to come down, so there IS a maximum level. But, by my calculations, this is a conservative calculation and risk level. Please reply, I appreciate criticism if it makes me understand things.
5 losses in a row of -500 pips (high side) would be an 80% loss each time
25 wins in a row of +300 pips (low side) would be a 48% gain each time, but let's make it just 40% for sake of showing what will happen
I will post my results from the past, but here's what would happen with a 100,000 USD account.
1) 20,000 USD
2) 4000 USD
3) 800 USD
4) 160 USD
5) 32 USD
Down to 32 bucks
6) 44
7) 63
8) 87
9) 122
10) 170
11) 238
12) 333
13) 467
14) 654
15) 915
16) 1281
17) 1793
18) 2511
19) 3515
20) 4921
21) 6889
22) 9645
23) 13503
24) 18904
25) 26466
26) 37053
27) 51874
28) 72624
29) 101673
30) 142343
Now, you all might be thinking,
"hey wait, you broke even on 5 bad trades and 24 good trades.... doesn't look very profitable to me..."
Well, this is, of course, saying that we got 5 trades that went ENTIRELY against us. Typically, out of the 5 losers, only two of them go entirely against us (-500 pips). The other three go to -200 pips. Also, we greatly undervalued the profit potential here. Saying 300 pips is our average gain is just plain downright low. I would have to go with more like 550-650 pips average. And now you should be able to see the profitability. 500 pips average gain, 350-400 pips average loss, with a 5:1 win loss ratio (In my testing, the average loss was about 280 pips, the average gain was 750 pips, and the win to loss was 6:1). You bank money.
With different risk models starting with 100,000 USD, assuming we make 500 pips with a 400 pip loss on average with a 5:1 win loss ratio over the past 8 years:
5% risk: 276,113 USD multiplied the account by about 3 in 8 years (1.15% monthly returns)
10% risk: 714,093 USD multiplied the account by 7 in 8 years (2.05% montly returns)
20% risk: 3,989,565 USD multiplied the account by 30 in 8 years (3.61% montly returns)
50% risk: 196,353,084 USD multiplied the account by 2,000 in 8 years (8.24% monthly returns)
80% risk: 1,454,955,016 USD multiplied the account by 14,000 in 8 years (10.5% montly returns)
99% risk: 947,276,773 USD multiplied the account by 9,500 in 8 years (10.0% monthly returns)
All of this IS about compounding. I really don't understand why we wouldn't want to trade with a 50+% risk. I CAN see that in the upper levels, profit does start to come down, so there IS a maximum level. But, by my calculations, this is a conservative calculation and risk level. Please reply, I appreciate criticism if it makes me understand things.
