james16 Chart Thread

Thanks for the endorsement Mike but asking members to read ALL my posts would be tantamount to asking them to read something that contains {guestimate} 60% chaff&laff:40% crop.

I said CROP. with an "O" not crap.

and I would still tell them to do it

very nice Bemac, what a great way to build a possition.i sometimes take 15 min bars and have been thinking on how they could be built into a longer running trade. increasing the SL is a must but neither did i want to risk what i just made to stay in. great solution. for someyone as impulsive and undisciplined as i am implimenting a more rule based trading method is always a good idea. this is something i will be testing i like it a lot.!!
from your experience do you find price kind enough to accomodate on a regular basis? and what % of the profit are you locking in? the 80% you mentioned? this seems a lot to me,at least initially??
cheers
jon

Nothing wrong with taking some off the table and movng to break even or 18 pips away from break even (in you case) to net you zero pips if it stops you out. It might mean that you get stopped out then turn in your favor, so what. Many times it won't.

Think of that for a monment. Your in a trade, with nothing to loss and a very high potential gain as an outcome. How many times would you take that deal?

Of course, on has to worry about the loser that will wipe out 5 of these trades.......just something to think about.

As in most things in Trading, there are variables involved.
Depends on my perspective of the Trade.

I've used 15P to Kick in with 24% pullback... I've also used 250P to Kick in with 39% pullback.
Just depends on how You see the Market.

Hope it gleans a few P for you.

ye sounds very like the way i am starting to impliment the idea, i basically wait for the break on a daily/4h set up and try and trade the move as a trend on the hourly/15 min charts. i like IBs to add as they offer a low SL or a BEOB/BUOB which engulfs a small consolodation.And of course a nice looking pin at a retrace. i did pretty well out of it on the eu/au move, although im out now.There is also a possibility of getting in a move which didnt give any PA when it started. if the momentum is there its worth a small initial risk, say .5-1%, on entering say a 1h IB.
keep me posted on youir success
cheers
jon

Yes, I understand what your saying.

That's why the quality of the setup is so important. "A" catagory setups need only apply.

not to beat a dead dog but....

i am afraid i don't agree with you Mike and maybe im a visionary or maybe a dreamer or what but for me i don't usually risk more than my reward and I dont think that will change coz that is my style so im back to the risk 2% reward 2% its simple math and a simple concept the real question is of psychology coz i don't think you need "brass balls" i think if you have a proven system and clear data supporting your real factual numbers over time than how come you can't compound your way all the way up?

It boils down to 2 things

1. confidence and that can only come by experience and a proven method
2. Dicipline which means having a plan and sticking to it. people say owe well if its a 1/4 million on the line or whatever well yes but that is why you don't just start trading those kinds of numbers coz the mind likely cannot handle it. but if you started out with 10k and slowly built it up over the years which could only be possible throught the act of dicipline right???

please set me straight what is the reason you cannot continue to risk a set amount?

also i realize about locking in profit i really do but does that mean you have to have a greater s/l than profit? or is it that the profit target doesnt get hit??? coz if you a. have a method you are confident and b. trade your method with dicipline than why can't you make it work?

sorry for the rant and again i don't mean any negative im just trying to understand what the thought is on this.

thanks, john

btw jaroo makes my point in terms of r:r

cheers much appreciated

jon

I am certainly not saying you can't keep your risk constant. I am trying to shatter a few myths. The first and most common is the X% per week(example your 6% a week just need 3 good trades a week at 2% risk per trade). It just isn't the real realities of trading unfortunately. Do some do it, I am sure, everything has its exceptions. Is it where ones mind should be when learning to be profitable. Defintely not. Most people who risk 2% a trade will find their accounts drawing down rather quickly with these goals.

Can you keep your risk constant no matter your account size? Absolutely, I never said different. But many people will not trade 3% of a 2million account, vs a 10k account. Why? Well were talking about a lot more money. Again theoretically everything you said is fine and good. But when it comes down to it, things are just different. It is real money were talkinga bout here.

The person who trades at 2% risk now. Say they go through drawdowns of 20-30% throughout the year. The difference mentally b/w 20-30% drawdown on a small 10k account vs a 1mil account is very different. Will you be the exception. I don't know that answer.

Also as far as the risk to reward, that topic has been beaten to death so much I am not going to go into it more then this. Your risk reward means nothing as long as you are profitable. Someone who takes of a few pips here and there is fine if they are consistently winning and pulling in money like that. The myth that you have to go for 1:1 or 1:2 risk to reward, is nothing more then a forex "slogan". It is whatever works for you.

Early on in a trading career a lot of concepts seem great, and they are fine to stick to. But as you get your hands deeper into it you realize that you must still have the reality of what you do. If you are comfortable trading 3% risk of a million dollar account, kudos to you and there is NOTHING wrong with it. But there is also nothing wrong with reducing your risk as your account grows(which is what most people I know do), to help with those fluctuations above a certain amount. And every real trader I know(that is someone with a larger account), has done something to protect themselves(be it cut risk down or what not).


Hope that helps
Mike

http://www.forexfactory.com/showpost...ostcount=37579

*I am not trying to continue this discussion much further but I wanted to post my views on some of the recent postings in regards to growing an account. I am not trying to be rude or undermine the senior members at all, they are responsible for teaching me how to trade, with that said feel free to read on. The following is my experience with dreaming of becoming rich for the past two years.*

Is it possible to grow a $5k account to $1m in a few years?
Absolutley!
Is it realistically or likely to happen?
No!
But can it?
Yes!
Will you?
That is up to you.

As a beginner I wholeheartedly agree that you should not be focusing on getting x% a week or setting profit goals. I also strongly believe you should not jump into this after one winning trade and expect to quit your job and make a living off of your trading because according to the excel spread sheet you will be making your old monthly salary in one week in approximately one month of xx returns compounded per day..... I hope you see what I am getting at. I was guilty of dreaming like that. While I am a firm believer in positive thinking, anything is possible, if you believe you will achieve and all those mantras -playing around with possible return scenarios in a spreadsheet is simply a waste of time. I believe that this is where most of the xx% per week goals come from and distract most newbie traders from what is important. And that is actually learning to trade and becoming confident in your method so when a loss does come you won't care and will be able to take that next trade. - Lesson - Listen to the senior members when they say don't set profit goals, just focus on trading your method confidently.

So now that you know not to waste time playing with compounding I am sure you have done it at least once or probably a second time after more back testing results showed a slightly better W/L ratio. And whats that? If you increase the risk per trade by .2% to 5.75% per trade you will hit $1m before your next birthday!

The truth is, its a long, long, long road from 5k to 1m. And to do that fast would mean you either need to force the market to give you more trade opportunities or take more risk per trade. Sadly we don't control the markets and by looking for more trades to grow an account you will be violating the major J16 rule of being PICKY! and will probably overtrade and blow up that small account asap, so no taking more trades is not the way to becoming a millionaire.

Taking more risk is. First off, you shouldn't take more risk. Risk is bad, risk is what traders need to limit and decrease. Risk is what we want less of. In Trade your way to financial freedom by Van Tharp he recommends the 2%/6% rule which is no more than 2% of your account per trade and no more than 6% of your account at on time (no more than 3 open trades at 2%). This is a great rule in general. If you are just starting out learning to trade do what I did. Put $100 in Oanda, trade it at 1% per trade until you are profitable for 3 months or confident in your method (which ever comes LATER), and after every closed trade mentally add three more zeros to the amount profited. Like everyone here says, no need to lose money learning to trade.

Once you have a proven method you trust and are confident in, if you want to be like me and try to grow your small account in a little more unconventional manor you need to understand why just about all the senior members are telling you to stop setting xx% per week profit goals, why they are saying a small account to millionaire is not realistic, and why you will most likely fail along the way. I will tell you why.

A) Profit goals go against the purpose of trader in minimizing risk. It also will force us in taking B+ trades and put pressure on us to force the market to give us returns. We don't and can't do that. We take what the market gives and minimize our risk in the process.

B) You will most likely fail along the way because you will become impatient with your small account and small returns using conventional MM taking A+ trades and being picky. Trading like James teaches or simply trading the right way in taking the best setups only and using your head (2%/6%) may force you to start taking more trades as you begin to view them as growth to your account and not potential losses to minimize. This is why you should keep your job and trade on the side. Slowly add money to your account as it grows from your trading profits and in no time you will be seeing strong returns as long as you don't rush it and blow up along the way.

C) It is not realistic because as I mentioned earlier you will probably either trade the right way and realize your not going to be turning that 5k into 1m incredibly fast if you adopt the mentality of each trade is account growth, more trades = more account growth (over trading). It is not realistic because you will focus too much on the money and not on the trading. It can happy over time if you grow it on the side while adding to it. The reason why I say its possible is because it really is. Taking more risk can make it possible but should you take more risk? As I said before, probably not. For my given situation I have decided on a certain and very specific level of risk that fits my current life situation.

I am about to graduate college which gives me a fall back plan in case this does blow up- so essentialy I will not be in the poor house if I fail. I am not quitting a job, this is something I can do in my spare time. I have $1000 to lose because I was planning a trip to Vegas for about the same that I ended up not going on (yet ) which I decided to risk in the market instead (a smarter gamble I think). This $1000 is only 33% of my trading capital and if my account reaches a draw down of this $1000 from its starting point then I stop trading, period paragraph. I understad and accept this risk I am taking. I will be trading my risk per trade at slighlty above conventional risk per trade because I have accepted this $1000 as a loss already and am detached from it. I have also developed a method of lowering my risk per trade from this high initial level as my account grows. So when I do have a $1m account I won't be dealing with huge swings and large draw downs. Not only have I accepted the risk and detached my emotions, not only do I have a back up plan if I fail, not only do I understand and am prepared for the large drawdowns that may come but I have spent two years learning how to trade and have spent hours upon hours testing my method (using what I learned here) and am I confident and comfortable to accept my losses as I accept my winners, I also am not shooting for $1m on a specific date because I expect to grow by x% per week (I accept what the market gives me).

Sorry if this post is a bit all over the place and jumped around at times. I am in a hurry as I finish and feel I could have done a better job getting my ideas across. No i did not have time to proofread. Basically I just wanted to say that don't become discouraged when seniors say you can't grow a small account into a large one rather focus on trading and being good at that and learn to understand yourself and what you can handle then know and fully understand both sides to the risk you are taking. Take care.

Chris

PS - went skydiving for the second time today ---- awesome.

Good post mike. I think you basically said most of what was churning inside of me just in a clearer and more concise way. Wish I saw this while I was writing that monster.

What are other people SHORT TP levels?

Alot of the new traders in this thread seem to take the 'you need 1:1!@#' and run with it. And it isnt really true. and, since it has bugged me for a while and I am waiting for my coffee...

<semi-offtopic rant>

I blame Van Tharp for this one. Well, actually, people who read Van Tharp but didnt really understand what he was trying to say, and then tried 'teaching' forums how to 'manage risk'.

The problem with this is that the version of Van Tharp's stuff you see parroted in forums is basically just a dumbed down version of expected value calculation.

The only time you need a R:R of greater than 1:1 is if you are doing a coinflip entry.

EV = (probability of success*profit) + (probability of failure*loss)

Obviously, the probability of success (s) and the probability of not success have to equal 1. So, assuming you have a 1:1 risk to reward (ie your risk equals your return), then you dont need PA or anything. Keeping in mind that

EV = (0.5 * r) + (0.5 * -r) = (.5r) + (-.5r) = 0.. or breakeven. Theoretically, with a big enough account (to handle variance), you could flip a coin on every 5 minute bar and still profit, as long as you had a TP which was 1 pip above your stoploss.

But this is a dumbass way of trading.

The entire point of everything James is teaching us is to find good entries, more than a coinflip. So, conservatively, lets say our A++++ trade gives us a 75% probability of being right.

EV = (.75 * r) + (0.25 * -r) = 0.5r with 1:1.

But we could even go with a stop of double our reward/takeprofit level.

EV = (0.75 * r) + (0.25 * -2r) = 0.25r

And that is ignoring the fact that we can manage losing trades, rather than take a full bar loss. Or that our profit target is likely a minimum profit we expect to see... often, price will keep heading our direction. Or that 75% probability is conservative for an awesome setup.

There are problems, obviously. You cant really put an exact percentage on the probability of success. But you can ballpark it by looking for the best setups, how they have reacted before, etc.

Any more than this, and you start getting into risk modelling. Splitting out the chance is will go for 10 pips vs 100 pips vs 1000pips to construct a distribution of returns, the variance you expect in said distribution, etc. And it is entirely unnecesary for what we are talking. Why complicate things when you dont need to?

My entire point is what Mike said in one sentence. You really dont need a specific r:r ratio to enter a trade if you have a high chance of being right. And, unless the potential reward is HUGE, why are you taking shitty low probability entries?

Just concentrate on getting the trade right, and the dollars will look after themselves.

This stuff is easy. And obvious. But people dont bother thinking about it, they just hear from the interwebs that they needsome magical special r:r ratio and run with it.

It is all about EV, baby.

</rant>

*beats it to death, cornfield-in-Casino style*

You can still be very profitable even if your R:R is as low as .3 for example... so you can be risking $100 on a trade targeting $30. This seems to make no sense, but if you use a method that is right 85-90% of the time or more, you can have a very low R:R (such as .3) and still be profitable.


This might take a while to sink in, but I think this is very important for a trader to understand. The setups we aim for here have a very high probability of breaking in the right direction, so we can afford to have a lower R:R.

-Scott

edit: I agree this topic has been beaten to death, but I think it is one of the most important things for a trader to understand. Hopefully this helps someone who hasn't seen it in this way before.

Oh man. This was the next thing on my list to yell at people about.

Stop making compounding spreadsheets. You are fooling yourself. You cant just assume that every trade goes you way, which is exatly what your silly sheet is doing. If you get stopped out of one trade for your 2%, then hit your TP with your next 2%, you are not back to breakeven.

Some people in this thread have completely unrealistic expectations. Thinking big is awesome. Everyone should do it. But unrealistic expectations will only end up blowing up your account. You arent trading your $150 account into $1m, regardless of what your sheet tells you.

The whole problem with the 'i will just increase my trade size up to...58% of my account' is that you dont take into account variance. Some trades WILL go against you. The bigger your risk, the bigger the hit to your account. Compounding works BOTH ways.

There are strong technical reasons behind the 2% rule. It has to do with 'risk of ruin' calculations, which are completely non-trivial. It is the level that stops you blowing up your account and having to start from scratch. Increasing your risk from 2% to 4% dramatically changes your risk of ruin. And you dont want that.

The problem isnt that your goal of growing your account is bad. The problem is that your $200 account is massively undercapitalised for the trades you want to take.

growl.

You are braver than me. I went once (over the north shore of Oahu!) and will never, ever go again.

I dont think *anyone* in history has ever said more swear words in sixty seconds than I did that day!

It was an absolutely amazing experience though

hey mike and everyone else for that matter thanks for the input.

mike i do agree with what you say coz every really great trader that i know also minimises risk to much lower than 2% for example .5% and I also agree with what you are saying about r:r sort of and i am happy to say that I will come to more realistic conclusions by the time at at my first millie but in the meantime i will continue to keep an open mind about this and focus on limiting my risk which is a huge and i mean huge part of what im trying to do here.
learning is one thing practicing is another coz i can say with all honestly i have lost quite a bit of money over the past 4 years and i am determined to not blow up another account.

i remeber my first real lesson in this coz i started out with 1k and it grew to almost 30k inside of 2 months and i was following this stupid mm which boy you want to talk about overleveraged and over exposed how about up to 10% a trade!!! Did i have the balls your damn right i did coz i had my eye on the prize that nice big round number 50k and what happened?

i lost 2 trades in a row then i went long on eu and i had alot in the market and it started to move against me so i was leveraging nto it thinking "i know im right" lol!!! anyway long story short it was fomc day and the market just exploded against me in undr an hour i was down to under 5k in which i said f*** it and i left it in there to ride and i got margin called and of course a day later the market moved in my favor and i was so depressed and i vowed i would never ever let that happen again and i did it again 3 months later trading like a dummy.

so here i am determined to not make the same mistakes but i will never set my dreams aside coz this is why i do this, but this time im going to do it right and that is why im still demoing

sorry ive taken way to much space on this matter, john