I like what you did here. This is the kind of help that makes me want to share the system. You may be right with some of this info here. Profiting 10% per trade + compounding can be a bit dangerous. It's not necessarily the best way to trade this system.
The safest way to trade this system would be to use 1-2% profit per trade with a 100 pip SL.
I calculated about 200 trades and out of 200, 8 of them were 100 pip SL's.
This still ads up to about 1080 profited pips using 1% profit per trade over the last 9 months.
If 2% was used this number...
Glad you liked the explanation. Let me extend on it a little further..
It actually doesn't really matter if you risk 100% or 10% of your account per trade; the risk reward ratio stays the same.
When you risk 100% per 9-day cycle, you will gain a long term average of about 30% per cycle (previously calculated).
When you only risk 10% you will gain an average of 30% on this 10%. This means that you now only gain an average of 3% per cycle on your full account. You now have the 37% chance to blow 10% of your account and not the full 100% every time.
But basically.. it doesnt really matter what the percentages are, it matters what the actual $-number per 9-day cycle is that you can stand to loose.
If you have a small account (1000$), you can loose 1000$ if you take 100% risk. If you have a 10k account, you can loose 10%*10k= the same 1000 when you take only 10% risk.
However, the important thing is to lower the 37% number by increasing your win rate. If you have a 98% win rate you only have a 16.6% chance of blowing you account every nine days (or loose 10% of your account, it doesnt really matter as I just explained..).
37% loss rate per 9 days (average long term gain of about 30% per 9 trading days):
1 consecutive loss = 37%
2 consecutive losses = 13.69%
3 consecutive losses = 5.06%
4 consecutive losses = 1.87% (You have almost 2% chance of losing four 9-day cycles in a row!)
16.6% loss rate per 9 days (average long term gain of about 72.6% every 9 trading days!!):
1 consecutive loss = 16.6%
2 consecutive losses = 2.75%
3 consecutive losses = 0.45%
4 consecutive losses = 0.076% (You have only a 8/10000 chance of losing four 9-day cycles in a row)
With the second system I would take my chances risking 4 times my investment while gaining a long term average of 72.6% per 9 days on this investment! The 4 consecutive losses will eventually occur so you have to be sure that you can take the drawdown. Even 5 or 6 consecutive losses are a long term possibility..
With the first system the risk of consecutive losses is just to big, so you can only invest/risk a relatively small amount per 9-day cycle.
As you can see, even a 1% difference in win rate would be an enormous improvement for the whole system (possibility to safely use a higher amount risked + higher average return on this risked amount).
Btw, you would need more than a 100 trade sample size to conclude your 98% win rate
Can't you code the strategy into an EA and backtest further? If you want I can do this for you.
I would also say that it is beneficial to share your system so that we can improve it together, but it's entirely up to you off course
EDIT: to be clear.. the numbers in this post assume that you withdraw all profits every 9 days.
EDIT2: The numbers assume a 107% profit every 9-day cycle, while in reality there would be a 135% profit every cycle. This means that the real numbers are even better.
