DislikedWhat will you do if it does advance past #6? I have observed some periods that might have you at 12# or more; this of course is more than one day of trading when trying to get a 100-pip TP. 10-23-06 thru 11-13-06 you will see a very low daily range for this time, not very many 100 pip days. A series like this could be disheartening for this money management. Have you considered this? Do you have any contingence plans?
I sometimes have concerns about the 40 pip stop too. If you count the spread into this stop (GBPJPY= 8 spread minimum) in reality you only have 32-pips between
when you will be stopped out and reversed ( not 40). This 32-pip spread can even be lower if the broker you use has a lot of daily spread volatility. On low volatility chop days this stop can be real depressing if you don’t either widen it or have a daily max trade limit…Ignored
I would trade up to 6 trades per day. The next day I would start over, win or lose. It would be like this 1) 0.4%, 2) 0.59%, 3) 0.89%...6) 3% (increasing by 1.5 each trade. Since Nov 06, I have only found 5 days that would hit #6. I did not go back further but I will comment on that in a moment (based on a $1000 trading account):
- Jan 10: -82.10 (all losses)
- Feb 28: -82.10 (all losses)
- Mar 14: +141.40
- Mar 15: -82.10 (all losses)
- Mar 16: -2.60
My reasoning is that I have been paper trading for about a year and finally went live last week. As you can see from above I had 3 days of 5-6 stops in my first week. With the exception of the week in Oct you are referring to, probably the worst week ever to go live! I lost a nice chunk of my account in 1 week. I was attempting to learn from my mistakes.
That being said, I have revisited this because there are some very nice runs on trade 1 or 2 that I would only have .4% or .59% invested. So, here is what I came up with:
Since Nov, here are the number trades needed to establish the daily trend at SL=40:
- 1 trade per day: 49 days
- 2 trades per day: 22 days
- 3 trades per day: 8 days
- 4 trades per day: 7 days
- 5 trades per day: 3 days
- 6 or more trades per day: 5 days
As you can see, most trends are established with 1 or 2 trades per day. I am now kicking around the idea of having a max of 1 or 2 losses per day & call it quits, because I will be trading bigger lots, I will make up for the other days.
I can't decide on 2 trades max at 1) 2% 2) 3% or 3 trades max at 1) 1.33% 2) 2% 3)3%.
40 pips I think is good. Some use 50. Lets say G/Y runs 100 pips against your position. Your net is -40 +60 = +20. At 50 SL, it is -50+50=0. I like 40 better but use what you feel comfortable with. My broker spread on G/Y is usually 6 or 7. Using tiered trades It would be -40+90=+50 or -50+75=+25 because I increase by 1.5x each trade.
Thanks for bringing me back to reality.