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PPC - Thingamumbobbies

  • #1
  • First Post: Sep 29, 2005 8:40pm Sep 29, 2005 8:40pm
I want to talk about PPC (Protect Precious Capital). For "Thingamumbobbies" you may freely exchange words like "facts", "rules", "principles", "strategies", "guidelines", "fishing lines" or "elephants"......whatever works for you. I don't want anyone getting bent out of shape if we don't stick to the "facts". Besides, this is my thread, and I really don't care if by page 2, the discussion turns to how to best replace the clutch in a 1975 VW Beetle.

Seriously, here are a few loose ideas I have bouncing around in my head (lots of room in there by the way), for how to best protect your hard earned/won capital.

1. Don't trade! This is by far the most effective strategy as you are assured you won't lose any capital! Effective, but not practical, as we would all like to make at least a little money. So, let me expand that to: Don't trade unless you can take only an A trade having the highest chance of success and the lowest chance of loss.

2. Move stops to BE as quickly as possible! You should set a pip profit, 10, 15 or whatever that once hit will prompt you to move your stop to break even. The quicker you can eliminate the risk the better. I don't like break even trades, so as soon as I can do so, I've been moving my stops to 1 pip beyond break even. That way I'll at least get something out of the trade even if it's only a dollar.

3. Use consistent position sizing! Whatever money management strategy you use, do so consistently for each and every trade. You have one trade you don't feel very confident about so you risk only 1%. On another trade you have great confidence so you risk 4%. You can't fool the market. It knows how much you are risking and will move accordingly. Remember, the market is designed to disappoint the largest number of traders. Inconsistent position sizing will dig you a deeper hole faster, and then make it harder to get out. If you pick 2%, then use 2% on each and every trade! Period!


Okay folks. Take it from here with additional elephants of your own, or feel free to dispute mine. I'm open for improvement.

Dial
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  • #2
  • Edited 9:36pm Sep 29, 2005 9:26pm | Edited 9:36pm
Move stops to BE as quickly as possible!

This depends on your risk and target, a little hard to discuss globally. If you are risking 50 pips (stop of 50) and each time you get to +10 you go to break even, you are likely to wipe out quickly. There is no point in moving the stop to B/E if that is still within the recent volitility of the product you are trading. Best to keep the stop in the 'Value Zone" which is where price has not been recently.

I am trading mainly cable with an initial stop of between 8 and 13.

My rule is to move the stop to B/E at +13 and at the same time exit 1/3rd of the total position. By exiting a 1/3rd, if the market stops me out at initial stop or a B/E stop I still get paid.

I have found that moving the stop to B/E while still in single figures causes too many B/E trades, as there is a high likelyhood of Cable (not all products) come back 10 pips.

Once at +7 / +10 I let myself bring the stop closer though still in the 'Value Zone". If support is at spread 30/33 and I long at 33, that means I would have an initial stop of say 8 which is 25, the first move would be to 27 and then to B/e at +13. Cable often retests my entry and having the stop at 27 (after it's first move) still means that price has to move into virgin territory to stop me out. ( Keep in mind that my system includes entering tight on a sup or res area).

I think you also have to ask yourself that by price returning to your entry does that mean the trade is still no longer a positive set up for you.

Use consistent position sizing!

Best to stick to one size IMHO. ' Confident Level" is a little hard to judge and has no effect on the market 'Confident Level' might be more related to your current mood than how good the trade is. Trade your edge, every time it appears, in the knowlegde that over a reasonable sample (20+ trades ?) you will be up. If thats not the case go back to the design center.

Sorry to ramble on !
  • #3
  • Sep 29, 2005 9:41pm Sep 29, 2005 9:41pm
Quoting diallist
I want to talk about PPC (Protect Precious Capital). For "Thingamumbobbies" you may freely exchange words like "facts", "rules", "principles", "strategies", "guidelines", "fishing lines" or "elephants"......whatever works for you.
Dial
Charles this is a great post by you (not that I am surprised mind you). I would like to add the following. When you have an "A" trade setup, take it and pull the trigger. Do not hesitate. This will build confidence over time. All the best to you Charles.
Steven
  • #4
  • Sep 30, 2005 12:34am Sep 30, 2005 12:34am
Quoting hagadol
Move stops to BE as quickly as possible!


I am trading mainly cable with an initial stop of between 8 and 13.


Is this based on your risk management rules or is it generally at a technical level?

Steve
I was here, here I was. Was I here? Yes I was!
  • #5
  • Sep 30, 2005 1:13am Sep 30, 2005 1:13am
Quoting diallist
I want to talk about PPC (Protect Precious Capital). For "Thingamumbobbies" you may freely exchange words like "facts", "rules", "principles", "strategies", "guidelines", "fishing lines" or "elephants"......whatever works for you. I don't want anyone getting bent out of shape if we don't stick to the "facts". Besides, this is my thread, and I really don't care if by page 2, the discussion turns to how to best replace the clutch in a 1975 VW Beetle.

Seriously, here are a few loose ideas I have bouncing around in my head (lots of room in there by the way), for how to best protect your hard earned/won capital.

1. Don't trade! This is by far the most effective strategy as you are assured you won't lose any capital! Effective, but not practical, as we would all like to make at least a little money. So, let me expand that to: Don't trade unless you can take only an A trade having the highest chance of success and the lowest chance of loss.

2. Move stops to BE as quickly as possible! You should set a pip profit, 10, 15 or whatever that once hit will prompt you to move your stop to break even. The quicker you can eliminate the risk the better. I don't like break even trades, so as soon as I can do so, I've been moving my stops to 1 pip beyond break even. That way I'll at least get something out of the trade even if it's only a dollar.

3. Use consistent position sizing! Whatever money management strategy you use, do so consistently for each and every trade. You have one trade you don't feel very confident about so you risk only 1%. On another trade you have great confidence so you risk 4%. You can't fool the market. It knows how much you are risking and will move accordingly. Remember, the market is designed to disappoint the largest number of traders. Inconsistent position sizing will dig you a deeper hole faster, and then make it harder to get out. If you pick 2%, then use 2% on each and every trade! Period!


Okay folks. Take it from here with additional elephants of your own, or feel free to dispute mine. I'm open for improvement.

Dial
good stuff dial.
  • #6
  • Sep 30, 2005 2:15am Sep 30, 2005 2:15am
Both. I trade at or within a few pips of key levels. If I am at the key level the stop will be spread +5. If I am entering 5 pips higher (for a long) then my stop will be at spread +10. If price bounces higher of the level I will usually not enter and wait for a retest of the level. My key rule is to get the stop 5 pips away from the where price has been. So in order for my initial stop to be taken out price has to make a new low (for a long trade).

I am taking entries of a 1min chart, supported by the higher time frame trend.

Quoting SterlingTDR
Is this based on your risk management rules or is it generally at a technical level?

Steve
  • #7
  • Sep 30, 2005 5:14am Sep 30, 2005 5:14am
Quoting diallist
3. Use consistent position sizing! Whatever money management strategy you use, do so consistently for each and every trade. You have one trade you don't feel very confident about so you risk only 1%. On another trade you have great confidence so you risk 4%. You can't fool the market. It knows how much you are risking and will move accordingly. Remember, the market is designed to disappoint the largest number of traders. Inconsistent position sizing will dig you a deeper hole faster, and then make it harder to get out. If you pick 2%, then use 2% on each and every trade! Period!
i know you and jim both practice the art of adjusting your position size relative to your confidence. im not saying that is wrong, but it will only work if your confidence level is a consistent predictor of the trade's probability. if your confidence level is not in line with the actual probability of the trade, this practice will hurt you badly.

i, for one, do not think my confidence level is in line with the probability. i treat every trade the same. my main basis for this i learned from william eckhardt. think about this...if you know that the trade you are about to make is inferior to any other trade, why would you even take it at all? wouldnt you only take the highest probability trades? for this reason, i am either off or on, and if i am on i bet the same amount no matter how i feel.
Relax and be happy.
  • #8
  • Sep 30, 2005 5:17am Sep 30, 2005 5:17am
Quoting diallist
1. Don't trade! This is by far the most effective strategy as you are assured you won't lose any capital! Effective, but not practical, as we would all like to make at least a little money. So, let me expand that to: Don't trade unless you can take only an A trade having the highest chance of success and the lowest chance of loss.
this is the greatest PPC of them all. an essential lesson to learn. i was reading remenicenses tonight and livingston goes into detail about the importance of sitting on the sidelines.
Relax and be happy.
  • #9
  • Sep 30, 2005 5:18am Sep 30, 2005 5:18am
how about this one as an addition...

4. Stick to your rules
Relax and be happy.
  • #10
  • Sep 30, 2005 5:45am Sep 30, 2005 5:45am
Quoting merlin
how about this one as an addition...

4. Stick to your rules
Make that #5,
4. Have some rules
  • #11
  • Sep 30, 2005 5:54am Sep 30, 2005 5:54am
Quoting marejp
Make that #5,
4. Have some rules
LOL!!!
Relax and be happy.
  • #12
  • Sep 30, 2005 9:09am Sep 30, 2005 9:09am
Quoting merlin
i know you and jim both practice the art of adjusting your position size relative to your confidence. im not saying that is wrong, but it will only work if your confidence level is a consistent predictor of the trade's probability. if your confidence level is not in line with the actual probability of the trade, this practice will hurt you badly.

i, for one, do not think my confidence level is in line with the probability. i treat every trade the same. my main basis for this i learned from william eckhardt. think about this...if you know that the trade you are about to make is inferior to any other trade, why would you even take it at all? wouldnt you only take the highest probability trades? for this reason, i am either off or on, and if i am on i bet the same amount no matter how i feel.
Merlin, I think we are in agreement here. I didn't express myself clearly enough. When I gave the example of risking 1% on one trade and 4% on another based on how confident one feels, I meant that as an example of how NOT to do it. I was advocating, as you said, treating every trade the same, with identical position sizing for each and every trade.

This point was driven home to me during the month of September. For September I had a net pip gain of about 300 pips, but My account had a net loss of about 3%. Up in pips, but down in equity. Why did this happen? Because I did what I now advocate NOT doing. I risked more on higher confidence trades and less on lower confidence trades. The result was my winners didn't win as much as my losers lost, hence the loss in equity. I went back and calculated what would have happened if I had used a fixed 3% risk on each trade. I would have had a positive gain in equity of about 15%. Hope that was clear.
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  • #13
  • Oct 3, 2005 5:20pm Oct 3, 2005 5:20pm
Quote
I am trading mainly cable with an initial stop of between 8 and 13.

With stops this small, wouldn't hedging be a better option than taking the loss? Once you're at -13 in a long trade, why not freeze that trade by openning a short. Sooner or later price will move to a point where you're going to open another position (long or short). At that point you take the profit of the hedged trade, and with the new trade, you have to get back your loss plus the spread. As for the extra margin ... depends who your broker is. FxSolutions and GCI Trading don't take extra margin for hedging, only the spread.
Keeping it Simple
  • #14
  • Oct 4, 2005 2:44am Oct 4, 2005 2:44am
Quoting hagadol
Both. I trade at or within a few pips of key levels. If I am at the key level the stop will be spread +5. If I am entering 5 pips higher (for a long) then my stop will be at spread +10. If price bounces higher of the level I will usually not enter and wait for a retest of the level. My key rule is to get the stop 5 pips away from the where price has been. So in order for my initial stop to be taken out price has to make a new low (for a long trade).

I am taking entries of a 1min chart, supported by the higher time frame trend.
Ok. Are your stops "hard" or are they mental?
I was here, here I was. Was I here? Yes I was!
  • #15
  • Oct 4, 2005 3:24am Oct 4, 2005 3:24am
I am not sure I understand what you are saying exactly but...........If I get to my stop position, it is still not certain that the market is going in the other direction. The stop is just the max amount I decide to risk. Often I get stopped and the market goes in the direction of the stopped trade. There is no certainty in this business.



Quoting habeeb
With stops this small, wouldn't hedging be a better option than taking the loss? Once you're at -13 in a long trade, why not freeze that trade by openning a short. Sooner or later price will move to a point where you're going to open another position (long or short). At that point you take the profit of the hedged trade, and with the new trade, you have to get back your loss plus the spread. As for the extra margin ... depends who your broker is. FxSolutions and GCI Trading don't take extra margin for hedging, only the spread.
  • #16
  • Oct 4, 2005 3:28am Oct 4, 2005 3:28am
Mental.

So if I decide to have a mental stop of 10, I will have a hard (automated) stop 4/5 pips out from that.

There are two reasons:

1. So the broker does not know my position.

2. If the actual stop is auto and I decide to exit 1/2 pips before, sometimes the brokers exit and still execute the stop (they have more than one dealer executing), leaving me with a new position, if it is fast moving. Having a 4/5 pip barrier, seems to stop this.


Quoting SterlingTDR
Ok. Are your stops "hard" or are they mental?
  • #17
  • Last Post: Oct 4, 2005 3:56am Oct 4, 2005 3:56am
Quoting hagadol
Mental.

So if I decide to have a mental stop of 10, I will have a hard (automated) stop 4/5 pips out from that.

There are two reasons:

1. So the broker does not know my position.
Very wise. Good for you.
I exclusively trade the Cable and I've found that this market has very little respect for the conventional. I trade using 2hr, 15min, and 5 min charts. I place a hard "disaster stop" about a 125-150 pips from the area where my mental stop is located. I say "area" because I never have an exact price in mind. I have an idea where the trade becomes invalid and I should call it quits, but much depends on price action at the time.
I was here, here I was. Was I here? Yes I was!
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