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  • #621
  • Apr 12, 2010 9:50am Apr 12, 2010 9:50am
Quoting pipmutt
See and I think a different way. Exploit trades which are profitable by increasing exposure, and conversely reduce exposure when they're not. Trade every opportunity and adjust risk according to probability. Use (a percentage of) profit as risk capital and reduce leverage/risk when there isn't any, thereby limiting risk, preserving principal, and maximizing return.

Creative money and trade management can be more productive IMO, like you say it's all about the money.
do you know in advance what trades will be profitable ?
The quality of your life is brought about by the quality of your thinking.
  • #622
  • Apr 12, 2010 9:53am Apr 12, 2010 9:53am
Quoting pipmutt
See and I think a different way. Exploit trades which are profitable by increasing exposure, and conversely reduce exposure when they're not. Trade every opportunity and adjust risk according to probability. Use (a percentage) of profit as risk capital and reduce leverage/risk when there isn't any, thereby preserving principal.

Creative money and trade management can be more productive IMO, like you say it's all about the money.
the problem with asymmetrical leverage is not the strategy employed with money management, it's the way the lot size stepping affects the strategy. If you calc 1% on a trade and it calcs out to require a 0.014 lotsize then you likely round down to a lotsize of 0.01, and then the next trade might calc out to require 0.018 lots and so you probably round-up... in both cases you haven't nailed a 1% risk and the first trade you actually risked less and in the second you risked more. if you have a huge account 1% will calc out to be something like maybe 10.05 lots... which you can nail on the head. in this case 1% is 1% and you aren't fluctuating widely.

let's say you calc your risk to require 0.005 lots... well in this case you are screwed and have to go with 0.01 lots (well with my broker that's the lowest lotsize), and so you are actually risking twice what you wanted to.

implications are that the lower your account size the less accurate you can be with setting a risk percent on a trade and every loss then lowers your account further and sets the accuracy even worse to the point where you no longer have the option of being anywhere close to the risk percentage you wish to use.
Congratulations ScalaFX for coming out of the closet!
  • #623
  • Apr 12, 2010 9:53am Apr 12, 2010 9:53am
Quoting Porkpie
We are actually going into the Structure of the Markets.
If you have time, read this link carefully.

http://www.ny.frb.org/education/addpub/usfxm/
Cheers. Have compiled this into a single pdf.
Attached File(s)
File Type: zip FX_US.zip   3.5 MB | 1,007 downloads
  • #624
  • Apr 12, 2010 9:57am Apr 12, 2010 9:57am
Quoting eurotrash
Cheers. Have compiled this into a single pdf.
nice one. thanks for doing that
The quality of your life is brought about by the quality of your thinking.
  • #625
  • Apr 12, 2010 9:57am Apr 12, 2010 9:57am
Quoting hornet
do you know in advance what trades will be profitable ?
No obviously not, but I don't much care (although I would prefer they all were!)

This is my theory about why the majority of traders fail, they spend too much time and effort looking for something which tells them where price is heading but not enough time learning how to exploit a trade when it heads in a favorable direction.
  • #626
  • Apr 12, 2010 9:58am Apr 12, 2010 9:58am
Quoting pipmutt
See and I think a different way. Exploit trades which are profitable by increasing exposure, and conversely reduce exposure when they're not. Trade every opportunity and adjust risk according to probability. Use (a percentage of) profit as risk capital and reduce leverage/risk when there isn't any, thereby limiting risk, preserving principal, and maximizing return.

Creative money and trade management can be more productive IMO, like you say it's all about the money.
I'd have to agree with both of you. Firstly I grade risk higher the further the entry is away from swing point that created the new direction. So for me pyramiding means getting in on consecutive set-ups from the original entry whilst reducing trade size. As Hornet as pointed out he does not enter after two signals from the new swing point. I'd get in but with reduced lot size.
  • #627
  • Apr 12, 2010 10:01am Apr 12, 2010 10:01am
Quoting nubcake
the problem with asymmetrical leverage is not the strategy employed with money management, it's the way the lot size stepping affects the strategy....
Yep, I get your point, I guess that's the benefit of brokers like Oanda who offer flexible trade sizing, it's possible to trade with very accurate risk management regardless of account size.
  • #628
  • Apr 12, 2010 10:02am Apr 12, 2010 10:02am
Quoting pipmutt
Nope, and I don't much care (although I would obviously prefer they all were!)
nor do I but, how can you choose in advance on what trades you want to risk more or less ? since i don't know, i look for my trade and play it the same way every single time.

Quoting pipmutt
This is my theory about why the majority of traders fail, they spend too much time and effort looking for something which tells them where price is heading but not enough time on what to do with a trade when it heads in a favorable direction.
before you enter a trade you should already have decided what your moves will be in case certain things happen. like when to take profit, when to move to BE to preserve capital, when to start trailing. these are all things that should be predefined.
The quality of your life is brought about by the quality of your thinking.
  • #629
  • Apr 12, 2010 10:06am Apr 12, 2010 10:06am
Quoting Porkpie
As Hornet as pointed out he does not enter after two signals from the new swing point. I'd get in but with reduced lot size.
yes, i agree on this point but from experience i have found that the 3rd swing (based on my rules) goes to target in just about 50% of cases. so i rather stay out completely. but that's just me
The quality of your life is brought about by the quality of your thinking.
  • #630
  • Apr 12, 2010 10:15am Apr 12, 2010 10:15am
Quoting hornet
nor do I but, how can you choose in advance on what trades you want to risk more or less ? since i don't know, i look for my trade and play it the same way every single time.


before you enter a trade you should already have decided what your moves will be in case certain things happen. like when to take profit, when to move to BE to preserve capital, when to start trailing. these are all things that should be predefined.
hornet, with the greatest of respect because I believe you're a profitable trader, you're thinking in black and white rather than color. Fixed x% risk, entry, stop, target, plan the trade, trade the plan....but absolutely no flexibility to allow you to react to what the market is actually doing and exploit it.

I'm not knocking what you're doing, it's working for you and making you money, I'm just saying it's worth considering the possibility that there are perhaps more productive approaches when it comes to managing a trade.

  • #631
  • Edited 10:36am Apr 12, 2010 10:23am | Edited 10:36am
Quoting hornet
yes, i agree on this point but from experience i have found that the 3rd swing (based on my rules) goes to target in just about 50% of cases. so i rather stay out completely. but that's just me
I think this is key. Knowing what the odds are from forward and back testing. If over a period of time you end up taking 50% more higher risk Pipmutt trades your profits are going to be lower than taking your higher probability Hornet trades over the long term. If you then have a string of bad losses (cuz they happen), you are more likely to weather the storm with a higher percentage of lower risk Hornet trades. Adaptability and flexibility may be more colourful but when it comes to longer term profitability, then why bother with higher risk set-ups. Its not about knowing whether a trade is going to work out or not, its having an idea of the probability of such trades making a profit over the longer term.

I can't imagine many traders bother to work out the odds of lower risk trades and then adjust their risk accordingly for each currency pair especially when there are several pairs to choose from for a quota of high probability trades. Why not make your money work harder for you.

The key would be to find a way of stacking the odds in your favour if using lower risk set-ups, such as waiting for an entry confirmation or entering only at monthly lows/highs and such like.
  • #632
  • Apr 12, 2010 10:25am Apr 12, 2010 10:25am
Hello Hornet! Good trades.

So here is an example of a trade I took. What do you think of it? Does it fullfill your criteria?

There it is:

Attached Image (click to enlarge)
Click to Enlarge Name: USDJPYM15 Hornet.png Size: 26 KB
  • #633
  • Apr 12, 2010 10:26am Apr 12, 2010 10:26am
Quoting pipmutt
hornet, with the greatest of respect because I believe you're a profitable trader, you're thinking in black and white rather than color. Fixed x% risk, entry, stop, target, plan the trade, trade the plan....but absolutely no flexibility to allow you to react to what the market is actually doing and exploit it.

all that matters is the P&L at the end of the year. since i have explained my setup, you must have noticed that, working on 30mins, i want to be out quick. i indeed react to what the market does, and that is what gives me entries. also, i know that closing all at 1:1 works out more or less the same as trailing half in the event of the occasional big runner....trailing is good just for my pride.

you know better than me that any market can turn fast on its head. if we were talking about bigger timeframes or different strategies i would agree with you but on small TF and this method i like it this way because it is a way that makes me money.
The quality of your life is brought about by the quality of your thinking.
  • #634
  • Apr 12, 2010 10:28am Apr 12, 2010 10:28am
Quoting Flo
Hello Hornet! Good trades.

So here is an example of a trade I took. What do you think of it? Does it fullfill your criteria?

There it is:

Attachment
yes it does, and good one indeed
The quality of your life is brought about by the quality of your thinking.
  • #635
  • Apr 12, 2010 10:36am Apr 12, 2010 10:36am
Quoting Porkpie
If over a period of time you end up taking 50% more higher risk Pipmutt trades your profits are going to be lower than taking your higher probability Hornet trades over the long term.
That's the point, they're not higher risk.

The concept is an extremely simple one. When you're right then exploit the trade to the max, and when you're wrong limit your loss.
  • #636
  • Apr 12, 2010 10:40am Apr 12, 2010 10:40am
Quoting hornet
all that matters is the P&L at the end of the year.
Oh come on, there's more to it than simple pnl, you know that yourself.
  • #637
  • Apr 12, 2010 10:43am Apr 12, 2010 10:43am
[quote=pipmutt;3630994The concept is an extremely simple one. When you're right then exploit the trade to the max, and when you're wrong limit your loss.[/quote]

Arbitrarily or technically? (answer by PM if you like, or not at all )
  • #638
  • Edited 11:03am Apr 12, 2010 10:47am | Edited 11:03am
Quoting pipmutt
That's the point, they're not higher risk.

The concept is an extremely simple one. When you're right then exploit the trade to the max, and when you're wrong limit your loss.
But my point was ok you adjust your risk so the risk ends up being the same as the high prob trades BUT you are using capital (a % of account) you could be using for higher probability trades at full lot size (rather than the half lot size for the 50% higher risk trades). Its not just the money you are using to trade its your time also. Spend it wisely my mother kept telling me after she gave me a couple of pence for some penny chews (yesterday lol), and there was no way I was going to buy the beautifully crafted chocolate mice when I could buy ultra large gob stoppers. Bigger sugar hit for a longer time than the chocolate mice. (geez Domino will be pulling his hair out over this crap).

But then if you don't have a choice...why be out of a potential winner even at half mast trades...I suppose its all about weighing up whats on your plate at any given time.
  • #639
  • Apr 12, 2010 10:59am Apr 12, 2010 10:59am
Quoting AstonDan
Arbitrarily or technically? (answer by PM if you like, or not at all )
Not trying to be cryptic but I would say strategically.

I don't have the monopoly on this stuff, in fact it was a few of Soros's comments which got me thinking about this stuff in the first place. There must be hundreds of different ways to capitalize, it just take a bit more thinking about than your average approach in my opinion.

Talking of Soros did anyone see him being interviewed on Bloomberg the other day? He seemed a bit confused, stumbling over words and such, very noticable in a man who's usually so coherent.
  • #640
  • Apr 12, 2010 11:02am Apr 12, 2010 11:02am
Quoting pipmutt
Not trying to be cryptic but I would say strategically.

I don't have the monopoly on this stuff, in fact it was a few of Soros's comments which got me thinking about this stuff in the first place. There must be hundreds of different ways to capitalize, it just take a bit more thinking about than your average approach in my opinion.
No worries. Something for me to think about.

I didn't see that but i did watch the Tudor Jones 'Trader' documentary again. Very interesting IMO (even if he is rather irritating!)
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