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Most important question to ask before trading

  • #61
  • Aug 4, 2013 11:02pm Aug 4, 2013 11:02pm
An acceptable loss is one where you exited according to the rules of your strategy, because if price reaches that point you were wrong and the premise for your trade is no longer valid.
  • #62
  • Aug 4, 2013 11:05pm Aug 4, 2013 11:05pm
Quoting Kanzler
An acceptable loss is one where you exited according to the rules of your strategy, because if price reaches that point you were wrong and the premise for your trade is no longer valid.
Sure, but an actual trading strategy(not a gambler's bet) will make sure to have smaller losses than profits other wise there is no MM edge. We are talking % loss not pip loss here.
  • #63
  • Aug 4, 2013 11:11pm Aug 4, 2013 11:11pm
Quoting fighterdude
{quote} I talking % wise.... as long as your expected profit is 1%, then yes an acceptable loss is 0.99% because if you keep taking trades with an expected profit of 1% and not letting your losses get bigger than that... then you will breakeven at worst. Obviously if you want profit you have to have a better profit to loss % but I'm talking about staying alive here, which seems to be everyone's problem these days. So make sure to do this at the very least and you wont be forced out of the market. I don't think that is vague... but whatever. -fighterdude...
It's vague because I don't think I know of any trader who exits at a proportion percentage of his account size. For sure one should not exceed a lot size of ones account by (say) 2%, but I don't set a TP or an exit in negative, as a percent of account size.

Targets are generally speaking based on pivots, s/r, fibs, round numbers etc etc etc, not based on a percentage. In the even that the trade goes the 'other way', the exit is generally when the trader realises that he made a mistake.....and this could be when his method or system signals an entry in the opposite direction. It could be when the PA has reversed further than the last swing high/low. It could be when the PA has reversed further than a pivot, fib, s/r or such like.

As you say, an exit based on a smaller size than the target should keep a person safe, but also it can lead to losses that are larger than necessary.
Doing what you like is Freedom. Liking what you do is Happiness.
  • #64
  • Aug 4, 2013 11:14pm Aug 4, 2013 11:14pm
Quoting fighterdude
{quote} Sure, but an actual trading strategy(not a gambler's bet) will make sure to have smaller losses than profits other wise there is no MM edge. We are talking % loss not pip loss here.
Not necessarily; if you have a high winning percentage it can offset that. Personally I like to look for opportunities where there is going to be potential for at least one times what I'm risking, but that's not really a money management edge anyway. There isn't really any edge in money management that that you can exploit quickly (although there is one I actually discovered when there is a floor or ceiling in a market). In any case a stop or take profit distance from entry shouldn't be based on anything other than where you're proven wrong and where you expect price to get to; position sizing will take care of managing your risk.
  • #65
  • Aug 4, 2013 11:18pm Aug 4, 2013 11:18pm
Quoting realjumper
{quote} It's vague because I don't think I know of any trader who exits at a proportion percentage of his account size. For sure one should not exceed a lot size of ones account by (say) 2%, but I don't set a TP or an exit in negative, as a percent of account size. Targets are generally speaking based on pivots, s/r, fibs, round numbers etc etc etc, not based on a percentage. In the even that the trade goes the 'other way', the exit is generally when the trader realises that he made a mistake.....and this could be when his method or system signals...
Yea but I was illustrating how to stay alive. Which I think is the most important thing(ergo the response to this thread).

Let me clarify. Example - Your profit target(where ever you set it based upon your analysis) is going to return you 1%, and your stop loss is no more than -0.99%(with its placement based upon your analysis).

OBVIOUSLY if your analysis tells you to get out with a smaller loss then that is what would be intelligent to do....

The original point was that you shouldn't take ANY losses which are bigger than your average profits. If this is done then you WONT DIE(financially speaking). This is called staying in the BLACK, right?

Cheers!

-fighterdude
  • #66
  • Aug 4, 2013 11:32pm Aug 4, 2013 11:32pm
Quoting fighterdude
{quote} Yea but I was illustrating how to stay alive. Which I think is the most important thing(ergo the response to this thread). Let me clarify. Example - Your profit target(where ever you set it based upon your analysis) is going to return you 1%, and your stop loss is no more than -0.99%(with its placement based upon your analysis). OBVIOUSLY if your analysis tells you to get out with a smaller loss then that is what would be intelligent to do.... The original point was that you shouldn't take ANY losses which are bigger than your average profits....
Technically, yes. But it is a poor exit strategy and really it goes without saying.

Kannzler nailed it one sentence here: http://www.forexfactory.com/showthre...24#post6868224
Doing what you like is Freedom. Liking what you do is Happiness.
  • #67
  • Aug 4, 2013 11:37pm Aug 4, 2013 11:37pm
Quoting realjumper
{quote} Technically, yes. But it is a poor exit strategy and really it goes without saying. Kannzler nailed it one sentence here: http://www.forexfactory.com/showthre...24#post6868224

Well you miss the point of my original post then.... it wasn't meant to be a typical exit strategy, but a fail safe strategy... which I think is the MOST important thing. And if it goes without saying then why are there more traders loosing than profiting? Maybe it is because they don't follow this principle?

Ummmm....... OK, Whatever.


Cheers!

-fighterdude
  • #68
  • Aug 4, 2013 11:42pm Aug 4, 2013 11:42pm
Quoting fighterdude
{quote} Well you miss the point of my original post then.... it wasn't meant to be a typical exit strategy, but a fail safe strategy... which I think is the MOST important thing. Whatever............................ Cheers! -fighterdude
Fair enough then.
Doing what you like is Freedom. Liking what you do is Happiness.
  • #69
  • Aug 5, 2013 12:00am Aug 5, 2013 12:00am
Can you really see the trade through?
  • #70
  • Aug 5, 2013 12:18am Aug 5, 2013 12:18am
"Where's my wife?"
  • #71
  • Aug 5, 2013 12:19am Aug 5, 2013 12:19am
Quoting fighterdude
{quote} Well you miss the point of my original post then.... it wasn't meant to be a typical exit strategy, but a fail safe strategy... which I think is the MOST important thing. And if it goes without saying then why are there more traders loosing than profiting? Maybe it is because they don't follow this principle? Ummmm....... OK, Whatever. Cheers! -fighterdude
Unfortunately there is no "failsafe strategy" in trading, and trying to turn money management into an edge itself is a waste of time at best and totally delusional in its worst forms (martingale for example). The most important thing in trading is being sure you have a real edge where you understand where and why the market has a good chance of turning; without that (low risk entries) you have nothing and you're going to lose and lose and lose until you figure it out. Most traders lose their money because they don't know where the good opportunities are and instead rely on voodoo tools manifested in the form of indicators and money management "tricks" that promise to make them rich. At the same time they have no understanding whatsoever of how the market works at the basic level even if they insist that this isn't the case. Conventional wisdom in trading does say you should select trades where you have a good risk to reward ratio, but as I said earlier that isn't always necessary. Abiding by it certainly won't make you profitable by itself, anyway.
  • #72
  • Aug 5, 2013 12:32am Aug 5, 2013 12:32am
Quoting Kanzler
{quote} Unfortunately there is no "failsafe strategy" in trading, and trying to turn money management into an edge itself is a waste of time at best and totally delusional in its worst forms (martingale for example). The most important thing in trading is being sure you have a real edge where you understand where and why the market has a good chance of turning; without that (low risk entries) you have nothing and you're going to lose and lose and lose until you figure it out. Most traders lose their money because they don't...

A reliable and consistent edge does not exist. The only reality in trading is RISK.
Therefore managing risk IS THE ONLY EDGE.
  • #73
  • Aug 5, 2013 12:32am Aug 5, 2013 12:32am
For me the most important question before trading will be to find out the stop loss and how much volume to to trade.
  • #74
  • Aug 5, 2013 12:37am Aug 5, 2013 12:37am
Quoting Mingary
{quote} A reliable and consistent edge does not exist. The only reality in trading is RISK. Therefore managing risk IS THE ONLY EDGE.
Such a bold statement from such a clueless person. Do not make such assertions because you haven't discovered it yourself.
  • #75
  • Aug 5, 2013 12:45am Aug 5, 2013 12:45am
Quoting sandycarrot
{quote} excuse me,do not mean to underestimate, I have a few questions I have seen the market move 40 pips in sec. ie the Japan Govt moved into the market last year (( means you possessed chance to win 40 pips in sec and you possessed chance to lose 40 pips in sec )) the USA got Saddam Hussein a few years ago there was a 50 to 100 pip move in mins (( means you possessed chance to win 50 to 100 pip in mins and you possessed chance to lose 50 to 100 pip in mins )) and the R:R= 1:1 what's wrong with that ? if you have high probability with your setup...
yes one could have won 40 or 50 pips if you were on the right side of the market .
the issue was the set ups were going the other way the market turned and most people I think would have lost

RRR 1 to 1 to go to 3 to 1 then you only have to win one in 4 trades
  • #76
  • Aug 5, 2013 1:39am Aug 5, 2013 1:39am
Quote
Unfortunately there is no "failsafe strategy" in trading, and trying to turn money management into an edge itself is a waste of time at best and totally delusional in its worst forms (martingale for example). The most important thing in trading is being sure you have a real edge where you understand where and why the market has a good chance of turning; without that (low risk entries) you have nothing and you're going to lose and lose and lose until you figure it out. Most traders lose their money because they don't know where the good opportunities...

Quoting Kanzler
Such a bold statement from such a clueless person. Do not make such assertions because you haven't discovered it yourself.
Dont be such a hypocrite... I could say the same thing to you.... Do not make such assertions because you haven't discovered a MM edge yourself.

My God man..... this is such basic stuff...

Cheers and have fun playin' games.

-fighter
  • #77
  • Aug 5, 2013 1:50am Aug 5, 2013 1:50am
What is the worst case scenario?
Time hides Nothing
  • #78
  • Aug 5, 2013 1:58am Aug 5, 2013 1:58am
Quoting Mingary
{quote} A reliable and consistent edge does not exist. The only reality in trading is RISK. Therefore managing risk IS THE ONLY EDGE.

this a bit silly .... of coarse "edge" exist
patterns are real
understanding trends is real
candle patterns are real

having an understanding RRR is of coarse more of an edge

to win in trading you need both
  • #79
  • Aug 5, 2013 2:08am Aug 5, 2013 2:08am
Quoting TEB63
{quote} this a bit silly .... of coarse "edge" exist patterns are real understanding trends is real candle patterns are real having an understanding RRR is of coarse more of an edge to win in trading you need both
Agree 100% mate.

MM edge ensures your profitability.

Analytical edge determines how profitable you actually are.
  • #80
  • Aug 5, 2013 2:35am Aug 5, 2013 2:35am
Quoting fighterdude
{quote} Agree 100% mate. MM edge ensures your profitability. Analytical edge determines how profitable you actually are.
MM edge ensures your profitability. I agree, except you can never know the outcome..

Analytical edge determines how profitable you actually are. ==> Can't be true.

The problem will always be the same no matter the strategy and how good your edge.
1) Your trade is making money. What do you do?
2) Your trade is losing money. What do you do?
Once you are committed anything else is irrelevant. Of course you will say, my strategy says that I will do this when... or I will do that when ...
Certainty is for building bridges and cars, certainty in trading will make you poor...
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