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  • #701
  • Feb 14, 2016 11:52pm Feb 14, 2016 11:52pm
Quoting jmn5611
{quote} I use 0.5% personally per trade. But this can add up quickly. Great comments!
Thanks jmn! We get some good stuff on here.
  • #702
  • Feb 15, 2016 2:43am Feb 15, 2016 2:43am
Quoting skyway
1% risk on 10pips sl, 5% risk on 50pips sl, 10% risk on 100pips sl, 30% risk on 300pips sl. When do we choose which to apply? or is it a standard rigid setting? Are they the same or they are not? Are these metrics maintained across all assets and under all market conditions?
Why raise the risk? on a 1% risk with a 100 account, you can only afford to trade a micro account with 0.1 lots with a SL of 10 pips which will obviously give you a 1% loss. and you can only do if you are trading off of a pretty small time frame, certainly no more than 1 minute, though 10 pips would be too tight on that. If you are entering trades on say a 5 min TF, then I'd say anything less than a 30 pip SL, is going to be too tight. Sticking by this 1% rule, you have to have an account of 3000 for a 1 lot trade, or 6000 for a 2 lot trade and so on.

This I believe is where many people screw up, they are way too over leveraged...10% risk, 3 losing trades in a row, and that's 30% of your account gone. How's that going to make you feel going in to the 4th trade?

When I started trading, I was pretty much broke, so I had no alternative but to start on the smallest time frames, using the smallest stop loss that I could get away with, and I could only trade the micro accounts which I did for a long time in my spare time. The 1% rule enabled me to gradually over time build an account. Unlike many posters on ff who maintain that you have to blow a few accounts before you can be successful, I dispute this, I don't think you should blow even one account if your money management is sound. I certainly never did, I had pretty bad draw downs, but I never completely blew an account.
  • #703
  • Edited 3:43am Feb 15, 2016 2:53am | Edited 3:43am
Quoting cat
We can all do the maths guys.
Perhaps, but let me, for those of us who are still learning, provide a brief summary and links to some relevant resources.

First, as Sun Tzu said:

Quote
Every battle is won before its ever fought.

In other words, you need a winning strategy. Until you have that, do more research, or trade demo or with minimal risk.

Once you are confident in your method, and have a track record to evaluate, the natural question is "how should I maximise the growth of my account?"

A summary of the maths of that can be found here: http://www.futuresmag.com/2009/03/31...ing-your-trade

Then there the other side - downside risk. If you want to stably grow your account, while withdrawing your weekly/monthly paycheque, you don't want too much drawdown. Now that we have the upside covered, how do we measure and control the downside?

A summary of the maths of that can be found here: http://www.futuresmag.com/2009/07/31...sk-ruin?page=1

At the end of the day it's a question of how much drawdown you can tolerate without suffering stress, and starting to do stupid things, in which case you can throw all the maths out the window.

And I guess that it's this last thing that makes position sizing such a personal and psychological matter, ending up being a gut level decision more than anything else.
  • #704
  • Feb 15, 2016 3:05am Feb 15, 2016 3:05am
Quoting medici
{quote} Perhaps, but let me, for those of us who are still learning, provide a brief summary and links to some relevant resources. First, as Sun Tzu said: {quote} In other words, you need a winning strategy. Until you have that, do more research, or trade demo or with minimal risk. Once you are confident in your method, and have a track record to evaluate, the natural question is "how should I maximise the growth of my account?" A summary of the maths of that can be found here: http://www.futuresmag.com/2009/03/31...ing-your-trade...
Great links medici, I think these are just what was needed at this stage of the discussion. Very important stuff!
  • #705
  • Feb 15, 2016 3:07am Feb 15, 2016 3:07am
Quoting cat
{quote} Great links medici, I think these are just what was needed at this stage of the discussion. Very important stuff!
Thank you. Glad you like it
  • #706
  • Feb 15, 2016 3:32am Feb 15, 2016 3:32am
Here are six things to consider when taking a trade. Of course, no one is going to be able to run through a check list like this prior to pulling the trigger, as a pilot does for example before taking off, but these considerations should all be hard-wired into your trading brain well before you put on a trade, therefore it is not a matter of thinking at the time of taking the trade, it is a matter of doing based on this criteria -

These are mine, so feel free to add anything.

 

  1. Is this an opportunity you have anticipated in advance, or it is it a spontaneous reaction to price movement?
  2. Do you have a clear signal for entering the trade based upon a tried and tested method?
  3. Is your trade going to be in the direction of the prevailing trend if there is one, or is it going against it. If the latter, do you have a sound, objective reason for taking the trade?
  4. If the trade goes against you, will you be angry at yourself, or will you be satisfied that your entry criteria was met?
  5. Do you know where you will exit the trade, and if not, are you satisfied that the win/loss ratio is firmly in your favour?
  6. Is your entry point within your risk tolerance zone - ie, if you enter here, is your stop loss sufficiently wide? ( particularly important for those who tend to jump into the market after it has already broken out.)

  • #707
  • Feb 15, 2016 3:33am Feb 15, 2016 3:33am
The point I was trying to get across which is often overlooked is contained in medici's link -

"The bane of stops is they can force you out of a position that initially goes against you but ends up moving in your direction. That's why most experts suggest using stops that fluctuate with market volatility.
"I don't believe in fixed money management stops," Pruitt says. Overly constrictive stops, such as those many have employed in the volatile S&P 500 in recent years, will "deteriorate" systems, he says.
A better way is to use wider stops as volatility increases."
  • #708
  • Feb 15, 2016 3:54am Feb 15, 2016 3:54am
Quoting medici
{quote} I believe these deeper reasons have to do with our sense of purpose or mission. Are we trading just to make money, or do we have a purpose beyond that?
Medici, as always extremely insightful. Thank you for a great post.

As you know your book recommendations keep piling up but I'm learning more and more everyday and the key is not to only read but to reflect and try to internalise those learnings over time.

I've re-read Robert Johnson's book "He" for a second time. I found the use of myths difficult to interpret hence the second reading but I really enjoyed it, simple in a way but very meaningful and profound.

By the way I did a quick google on NLP: The New Technology of Achievement, and found a PDF version first page of google results.
  • #709
  • Feb 15, 2016 4:16am Feb 15, 2016 4:16am
Quoting medici
{quote} Perhaps, but let me, for those of us who are still learning, provide a brief summary and links to some relevant resources. First, as Sun Tzu said: First, as Sun Tzu said:
Quote
Every battle is won before its ever fought.
In forex trading, where you place your stops at what risk you choose will determine a battle won or loss before it is fought.
  • #710
  • Feb 15, 2016 4:30am Feb 15, 2016 4:30am
Quoting skyway
The point I was trying to get across which is often overlooked is contained in medici's link - "The bane of stops is they can force you out of a position that initially goes against you but ends up moving in your direction. That's why most experts suggest using stops that fluctuate with market volatility. "I don't believe in fixed money management stops," Pruitt says. Overly constrictive stops, such as those many have employed in the volatile S&P 500 in recent years, will "deteriorate" systems, he says. A better way is to use wider stops as volatility...
this certainly applies on those big move days or on days following a big news release where the price range widens considerably so that even on a time frames as small as ten seconds you need to double your stop distance and so increase your risk tolerance in proportion to the amount you hope to gain. Most of the time however, the markets are not like this and can be traded using your normal risk tolerance, which for me, if I am entering a trade on my 5 sec time frame, will be from 10 to 15 pips for the Dax, slightly larger for GBP/JPY due to the larger spread, and never less than 15 pips for the Dow. as long as it puts my stop clear of the Bollinger bands. For a pair like eur/usd, I can get away with a stop loss of less than 10 pips.
  • #711
  • Edited 5:04am Feb 15, 2016 5:00am | Edited 5:04am
Quoting medici
{quote} I believe it is essential to have a purpose that goes beyond not just what you do, but beyond yourself.
Most of last week I traded, and for me it's usually late into the night. We have had perfectly clear skies and mild evenings. Usually around 11pm I'll walk outside into my backyard to get some fresh air and sit for a while.

I look up at the sky full of stars. And it hits me, every time, I get dumbfounded as to how insignificant our planet even our solar system is in the universe, not only in size but time. And then I think of us on this planet and laugh at how caught up we get in our microscopic world. I mean we are but dust, what can we really achieve in this amazing universe?

I've been thinking about my true purpose from the first time we communicated and I still don't have the answer. I can easily say that my purpose is to raise my kids to the best of my ability, to be a great husband, uncle etc etc...but I think that should be by default any way and it is for me. I think that's just part of being a good person.

In general though, I can only come up with one answer as to what having a purpose beyond oneself is and that is to help others. Ultimately I think that's probably the greatest good we can do as humans.
  • #712
  • Feb 15, 2016 5:47am Feb 15, 2016 5:47am
Quoting Sakk
{quote} Most of last week I traded, and for me it's usually late into the night. We have had perfectly clear skies and mild evenings. Usually around 11pm I'll walk outside into my backyard to get some fresh air and sit for a while. I look up at the sky full of stars. And it hits me, every time, I get dumbfounded as to how insignificant our planet even our solar system is in the universe, not only in size but time. And then I think of us on this planet and laugh at how caught up we get in our microscopic world. I mean we are but dust, what can we...
Good post, I appreciate it.
Promoting love and unity, and the improvement of human kind knowledge sharing our personal knowledge with one another is the reason of our life in this world.

About SL the only true matter is knowing where to put them as well as knowing where to entry and to exit; most of times SL are triggered for they are where they shouldn't be
  • #713
  • Edited 9:48am Feb 15, 2016 9:10am | Edited 9:48am
One of the worst mistake traders make, and I too made it when I was at the begining, is to chose a low TF because SL are smaller.
The first concern should be to understand how market works, then build a method and refining it until is solid and proven; while building your method your concern should be to create something that fits your psychology and your mind attitudes.
During your method building process, you have to give the same importance to all the elements: rules for entries as well as for exits as well as for SL, because they all are important.
Who says that exits are not that important, or that entries are not that important, or that SL are not that important, or that money management is the most important, is lying to you and to him/herself: the truth is that he/she has not been able to build a complete method and is just trying to compensate somehow its gaps.
Once you have your method you can think to adapt your balance to the amount of money your method requires to be traded: you have to adapt to market; don't ever try to make market to adapt to your needs, because it won't ever happen neither in your dreams.
Even though you have a few money, you can begin with micro accounts with which the minimum lot size is 10 cents per pip: although you would find that a high TF is better for your trading, like the 4h or the daily, you just need to load an account with 500$ to begin.
If your entries are correct, i.e. on EU/USD 4h TF your stops are no more than 30 pips, so with 0.01 micro lots your risk is 3$.
And is not a big sum of money, it is the cost of a smart phone that I'm sure is owned also from those who try to make trading with a 100$ account: so it is a matter of choises: is it more important to spend your money to buy the latest model of smart phone or is it more important to be smarter than your phone and use that money to begin your new activity?
Let's think for a while for which real reason traders open micro accounts with 100-200$ only? The truth is that they want to begin trading even if in their innerself they know that do not have any idea of what they are doing; why they do not trade demo? because their motivation is getting rich quick, without efforts; they chase the money but do not take trading work as seriously as they should, and this is the reason they fail.
Today trading is accessible for everybody, those who can spend the money to buy a lap top they then have also enough money to invest in their trading activity: the problem is that most of the times they do not want to invest because, deep inside of them, know they are not taking trading seriously, they are not willing to learn, just groped luck.
So they are hurry to make money and jump on trading real money as soon as they find an excuse to do it, then they lose and look for stupid excuses like they cannot be disciplined on a demo.
As Cat well said at the begining, market is a hard and not forgiving beast, so traders must be hard as well with their education, and serious.
  • #714
  • Feb 15, 2016 12:33pm Feb 15, 2016 12:33pm
[quote=strongtrader;8754998]One of the worst mistake traders make, and I too made it when I was at the begining, is to chose a low TF because SL are smaller....

It worked for me though.
  • #715
  • Feb 15, 2016 1:57pm Feb 15, 2016 1:57pm
Quoting cat
It worked for me though.

And it's worked for me, and others too.
  • #716
  • Feb 15, 2016 2:12pm Feb 15, 2016 2:12pm
Most likely because trading small TF's fit your needs.
You know, in trading everything can work or cannot work; it depends on the trader; but there must be a learning method that newbies could follow to reach at least a solid basic knowledge. Once they are able to understand what they are doing, they will make their choises.
What I would like people to understand is that the mind that brings you to trading is not really the mind that will make you to succeed in trading.
  • #717
  • Feb 15, 2016 5:28pm Feb 15, 2016 5:28pm
For most people I think starting off with 4h or daily is an ideal choice. But once you train your eyes, and develop an understanding on flow of things. I think its safe to move down a bit or more depending on your risk/stress tolerance. For a new trader 30sec chart can be as nerve wracking as getting your tooth pulled out without an anaesthetic.

If you're fortunate enough to have a mentor who trades a method that you think will suit you then I don't see any reason why you shouldn't start off with lower TF. But most people aren't. Strongtrader pretty much summed up why most new traders fail.

You guys are an exception I guess @ Cat & Medici
...
  • #718
  • Edited 11:16pm Feb 15, 2016 10:29pm | Edited 11:16pm
Quoting cat
Here are six things to consider when taking a trade. Of course, no one is going to be able to run through a check list like this prior to pulling the trigger, as a pilot does for example before taking off, but these considerations should all be hard-wired into your trading brain well before you put on a trade, therefore it is not a matter of thinking at the time of taking the trade, it is a matter of doing based on this criteria - These are mine, so feel free to add anything. Is this an opportunity you have anticipated in advance, or it is it...
Something that every trader should think about before the trading day gets going and also while one is trading. Although I'm not vigilant with asking all of this every single time before a setup is about to form. I almost always have some of these questions in my head while I am trading or before I enter a trade.

For someone who's still new and haven't quite put together a workable system that sometimes have a hard time differentiating whether a setup is what he/she's been waiting for or just a random move (a reaction to price movement as you put) Maybe a silly question to ask. But I wonder what your advice would be ?

Unless someone has years of experience in the market sometimes it can be tricky thing to separate one from the other.
...
  • #719
  • Feb 15, 2016 11:14pm Feb 15, 2016 11:14pm
I'm new to the term 2B pattern but after going through some threads here on ff and reading through Adam Grimes free course I realised that I was trading variations of those, mostly long trades on 30min.

It took me a while to get around spotting those on 30sec charts. At first I wasn't convinced that they were viable as that of higher TFs. But now that I have, I'm struggling with short 2B patterns. So I decided to ask for a help.

Here's my attempt. Any thoughts ?

The price had been going up since late Tokyo. Then become a range. A Breakout. And a range. I realised that the rally was exhausted. But we're still in a range. It could go up anytime.
Attached Image (click to enlarge)
Click to Enlarge Name: Screen Shot 2016-02-16 at 3.02.43 PM.png Size: 32 KB
...
  • #720
  • Feb 15, 2016 11:23pm Feb 15, 2016 11:23pm
Quoting Piquant
For most people I think starting off with 4h or daily is an ideal choice. But once you train your eyes, and develop an understanding on flow of things. I think its safe to move down a bit or more depending on your risk/stress tolerance. For a new trader 30sec chart can be as nerve wracking as getting your tooth pulled out without an anaesthetic. If you're fortunate enough to have a mentor who trades a method that you think will suit you then I don't see any reason why you shouldn't start off with lower TF. But most people aren't. Strongtrader pretty...
Well here is the point: the perception of risk.
Once you have developed a good understanding on how market works, you know that the informations you get from a higher TF are more accurate and reliable than those you get from a lower one, and there is a specific reason for that: so is it safer to have very tight SL with very unreliable informations or is it safer a wider SL with reliable informations?
I'll repeat it again: the mind that brings you to trading is not the mind that will make you to succeed.
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