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Lotsize Question for Experienced Traders

  • #1
  • First Post: Jan 16, 2012 6:38am Jan 16, 2012 6:38am
Hi Folks.

I am developing a strategy (kinda anti martingale) but I don't know if it would help me get an edge. I'll explain to you:

My SL will be fixed in 25 pips and my TP will be fixed in 50 pips.

Because I'm a short term trader I've learnt that when you put a very tight SL, the probabilities of being stopped out too many times are high, so it wouldn't help keeping the same lot size...so what I'm planning to do is keep the fixed SL but then decrease the lot size...it will decrease (the value of) winnings but at the same time it will decrease (the value of) losses...

What do you think of this strategy ? Does it really give me any "edge" at all ?

Any comments will be welcome.

Cheers,

MrJinks.
  • #2
  • Jan 16, 2012 12:25pm Jan 16, 2012 12:25pm
Quoting mrjinks
Hi Folks.

I am developing a strategy (kinda anti martingale) but I don't know if it would help me get an edge. I'll explain to you:

My SL will be fixed in 25 pips and my TP will be fixed in 50 pips.

Because I'm a short term trader I've learnt that when you put a very tight SL, the probabilities of being stopped out too many times are high, so it wouldn't help keeping the same lot size...so what I'm planning to do is keep the fixed SL but then decrease the lot size...it will decrease (the value of) winnings but at the same time it will decrease...
Money management doesn't give an edge. No matter how you choose your lot-sizes, if your strat is bad, you will fail.
  • #3
  • Jan 16, 2012 12:44pm Jan 16, 2012 12:44pm
Quoting Custos
Money management doesn't give an edge. No matter how you choose your lot-sizes, if your strat is bad, you will fail.

depends on wht you consider to be bad.....I have strategies that produce around 37-40% winners and they are very successful still
  • #4
  • Jan 16, 2012 12:59pm Jan 16, 2012 12:59pm
Quoting mfoste1
depends on wht you consider to be bad.....I have strategies that produce around 37-40% winners and they are very successful still
when did I imply that a low win-loss ratio is bad?
  • #5
  • Jan 16, 2012 1:13pm Jan 16, 2012 1:13pm
My suggestion is:-

Risk no more than 0.5 to 1% per trade... Regardless.
PREPARATION is PARAMOUNT for PEAK PERFORMANCE....
  • #6
  • Jan 16, 2012 1:19pm Jan 16, 2012 1:19pm
Quoting Custos
Money management doesn't give an edge. No matter how you choose your lot-sizes, if your strat is bad, you will fail.
This is correct. Money management is separate to risk management. If your entries are bad you're toast no matter what MM you use. I suggest setting your TP and SL according to what makes sense on a chart; not just a set figure like 50 TP & 25 SL. Then just calculate the position size according to how much you want to risk. This tool should be helpful with that: http://www.earnforex.com/position-size-calculator
  • #7
  • Jan 16, 2012 1:20pm Jan 16, 2012 1:20pm
Quoting mrjinks
...so what I'm planning to do is keep the fixed SL but then decrease the lot size...it will decrease (the value of) winnings but at the same time it will decrease (the value of) losses...
With this, you are simply trying to avoid losses (in a modified way).

Quoting mrjinks
Does it really give me any "edge" at all ?
No.




Take your basic framework 25 pip SL and 50 pip TP and concentrate on your entries.
Keep position size small enough so you can have perhaps up to five positions on the same account across different currency pairs.

Trade five pairs (majors or other actives), you already know your exit and you already know your Profit Target.
You only have to concentrate on your entries and finding other entries.
Everything else is taken care of.

Practice, practice, practice, hopefully profit.

If the drawdown is too much, or the win % is discouraging, then change the framework to 25 pip SL and 25 pip TP.

Practice, practice, practice, hopefully profit.
  • #8
  • Jan 16, 2012 1:26pm Jan 16, 2012 1:26pm
Quoting mrjinks
Hi Folks.

I am developing a strategy (kinda anti martingale) but I don't know if it would help me get an edge. I'll explain to you:

My SL will be fixed in 25 pips and my TP will be fixed in 50 pips.

Because I'm a short term trader I've learnt that when you put a very tight SL, the probabilities of being stopped out too many times are high, so it wouldn't help keeping the same lot size...so what I'm planning to do is keep the fixed SL but then decrease the lot size...it will decrease (the value of) winnings but at the same time it will decrease...
money management is really simple and people go about fucking it up all the time.. the best method is betting 1% or less of your total bankroll.. and doing that with a system that has a 51/49 odds or better with 1/1 risk to reward.. (or maybe a little higher lower not sure once factoring the spread costs in)

think about it

if your making profitable decisions then you'll make money with a consistent bet..

I got a few computer programs I wrote and all fancy methods of pyramiding and what nots really balance out the same or usually worst than a consistant wagering method

because the consistant small trades with a profitable system allow you the best odds (that I found atleast) in overcoming losing streaks and letting you reach the point where law of large numbers will work in your favor
  • #9
  • Jan 16, 2012 1:41pm Jan 16, 2012 1:41pm
Quoting newyear498
money management is really simple and people go about fucking it up all the time.. the best method is betting 1% or less of your total bankroll.. and doing that with a system that has a 51/49 odds or better with 1/1 risk to reward.. (or maybe a little higher lower not sure once factoring the spread costs in)

think about it

if your making profitable decisions then you'll make money with a consistent bet..

I got a few computer programs I wrote and all fancy methods of pyramiding and what nots really balance out the same or usually worst than...
The optimal maximally aggressive risk when someone has a 51/49 advanatage is 2%. http://www.albionresearch.com/kelly/

Nothing wrong with risking less of course, but 2% is considered the tipping/balance point. Whatever you use, it would be wise to stick to that percentage once you've recieved a loss within that set of trades. It's best to only alter risk once you've reached a higher profit level or goal, for example, when account is doubled. I also believe it is best to start off at the highest risk (2% recommended) when account is small and reduce it upon reaching those goals/levels. In other words be more aggressive when you have less to lose and vice versa.

With all that said... you still need to have good entries. Otherwise you will eventually drain your account no matter how much you risk per trade.
  • #10
  • Last Post: Jan 16, 2012 5:04pm Jan 16, 2012 5:04pm
if you wanna do something like that lets say simple strategy just a idea.

tou take everyday the open price gmt.

then lets say price closes above it 1h bar you go long price below it you go short.
Your stop is 25 pips.
Or second 1h bar of london open
But you risk reward is 3 or 4 with some smart trailingstop method or fixed.
You try to get the most out of the trade lets say the range of the eur/usd is 160 you try to get atleast 120 out of it some days they will be way more.
120 already gives you 5 times so good r:r.

Then on overal you dont have to have a realy good winrate now you can finetune such stratgey like for example i only look for shorts if price is below dailly 21 ema.
Dont trade on bank holidays only tuesday till thursday things like that.

But applying this kind of things can help you devolop a edge now i dont know if this 1 works but testing stuff will find out but make it mechnical if you like it that way with fixed sl.

Now with martingale you can double up if you wrong on the next 1 but i wouldt advice that but you could get more right in that if you avoid range days, How you avoid those 1 thing is checking the calander dont trade low news days or bank holidays that stuff

Now for martingale what you asked you can double the lotsize but wouldnt recomend that if you have small capitall martingale can be verry dangerous if you dont know what you doing.
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