1% Money Management is a myth, fib is a myth and so on..

Very good post, totally agree with all of it, just wondering what the basis of your analysis to catch a 1000 pip move will be?

For sure, any large move will have retracement, and the problem with markets during late 2011 was that there were many short trends, then reversals, perhaps 2012 will see longer term trends building.

You're right there's always going to be retracements. I try to stick with daily, weekly and monthly candle analysis to determine a 1000 point + move. Once I have a trade established I just set it to break even and let it try to do 1000 points. I might scale out a position or 2 just to lock in some profit at reversal points aka support or resistance but otherwise I'm trying to hold onto it as long as I can.

If I have 90% of my successful trades doing 5:1 Reward to risk and 10% doing 50:1 then I'm pretty happy. Those kinds of rewards to risk ratios can be translated as 100:20 and 1000:20. Are such trades possible.... DEFINITELY. What's the average of 90% 5:1 RR and 10% 50:1.... about 9.5:1. What kind of success rate do I need? Anything above 9.5%....

I trade at support and resistance on these time frames and try to drill down to 4 hour and 5 min charts for entry.

To be honest I stink as a trader and my entries need a whole lot more work. There are people here that are incredibly good at it but I'm not. I wish they could help me but I'm not as active in this forum as I'd like to be. As a result I need to exploit the conceptual framework I've pieced together and performed statistical analysis on.

I need to always have a bigger picture in the back of my mind because that's ultimately the idea that will keep me oriented. For instance.... what is the average monthly range for the eur/usd? around 100 pips. The weekly is 200 pips. How many trading days in a week? 6 days but how many of them are contributing to the weekly range? We can very loosely infer that it would be 3 days..... so in my books the other 3 days that aren't creating weekly range don't need to be traded.... but that's just my opinion. (don't take this completely literally, it's just an idea of how stats can be used to understand the speed of price changes and the conceivable ceiling in reward to risk).

Just open up any chart and see what the yearly range is. Look at quarterly ranges and even monthly but don't go any lower otherwise it's hard to think and stay oriented.

The continuum is a total mind trick because if you trade the daily successfully you'll think about trading the 4hour and then the 1hr and then the 30mins and next thing you know you're judgment is clouded with too much info. I'm sure much more sophisticated traders can do this but I can't at this point.

My new years resolution is to try to hit a success rate above 30% and to improve my reward to risk ratio of 10:1. Hopefully the market will be giving.

Check out the equity millipede thread. It's my favourite and I've been around here for quite some time. It really pieced together a bunch of concepts that I truly believed in but I couldn't quite understand how to take advantage of them until Graeme posted that thread.

I'm lucky that my mind was ready to be receptive to such ideas because I finally formulated a viable understanding that can be used to create profit not just in this market but almost any other.

The weakness of my methodology is.... if price ends up trading in a range that will not enable me to create more than a 4:1 reward to risk ratio. I can easily withstand 100 consecutive losers so inevitably it would take quite some time before the market takes all my money and it would have to be in a very tight range relative to its historic averages during that time......

It's not quite full proof.... no but is it better than gambling at a casino.

Hey i'm still hungry to learn so I appreciate all the great things that the 10+ voucher guys have said. It takes a whole lot of dedication to write 300 or 1000 or 2000 or 5000 posts and I truly believe that such people love the markets and have a wealth of knowledge.

I think the OP is missing the point about what MM is meant to be. It's just drawing the line on what is personally acceptable to risk on each trade.

hanover has it right when he said it was about taking responsibility. When the sums of money at risk are more meaningful, having no risk control is just foolish, given that the majority are trading on leverage.

In regards to risk:reward and probability of winning trades, I've found that it's inversely related. If you keep risk the same and try to increase your reward, the probability of winning goes down. If you decrease your reward, but keep the risk the same the probability of winning goes up.

One reality you will have to accept is that trading is like gambling. If you can't see that, you shouldn't really be trading. You can do everthing under the sun to make you feel confident on putting on a trade, but if it is just a gamble, is it really worth the effort?

Thanks for your input , they are always interesting.
please keep em coming, this is a rather interesting subject.
MM is a science

Quote: Hence I disagree with the original poster's statement that "1% MM is a myth". Despite the fact that fixed frac creates the recovery 'problem' he describes (e.g. it takes 25% growth to recover from 20% drawdown), something in the ballpark of 1% risk per trade is very good MM, for the reasons that I've given.

David

Great explanation! I wish i could of explained it just as well.

Basically in some situations adding money risk is decreasing trade risk. and trade risk is your bottom line. There is though a fine line between the two.

I would just add that your risk should be relevant to an extent on the time frame you trade. 2% risk on the daily chart with just a few trades a day can be quite robust even with a slight edge. If you go trade a five minute chart with 2% risk per trade and make 50 trades a day good luck.

Also even with only 2% risk a perfectly good strategy can still see large draw downs. It's the end of the rainbow that you should be focused on.

I know this thread is old, but i completely agree.
fibs r bullsh*t
candlestick setups looks like my d1ck
risk reward ratios r fckers
all those patterns looks like my ex' lingerie

all that matter in fore for me at least, is to follow the trend and trade the pullbacks. for optimal trade entry use the lower timeframe and find liquidity areas (stoploss hunting area) to place ur orders there.