a basic trading rule may be the cause of our trading losses | Page 2 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Do you believe tight stop-losses cause losses in the long run? 76 replies

Do you believe fixed stop-losses cause losses in the long run? 16 replies

Just basic question on trading successes 10 replies

Making Money and the Most Basic of All Basic Strategies 42 replies

Basic Trading Concepts Tutorial 0 replies

Attachments: a basic trading rule may be the cause of our trading losses
Exit Attachments

a basic trading rule may be the cause of our trading losses

  • #21
  • Apr 16, 2016 2:35am Apr 16, 2016 2:35am
Quoting impostor
mostly, i stake 3% to 5% risk on any trade i take. everytime i take my profit, it will be 10%-40% of my original equity. sometimes, i will risk 10% from my original equity and take my profit around 50%-100% from my original equity.
Good for you ,your SL must be very small.
what's your average monthly profits ,is it more than 50%?and for how long you could achieve that?
  • #22
  • Apr 16, 2016 2:36am Apr 16, 2016 2:36am
Quoting fxnow
{quote} I agree with you,but the point is to increase the risk as much as possible.
Risk should be increased is true but that will only depend on confidence in the trading strategy. And this confidence can only be increased by positive real trade statistics.
Without good trading results and confidence one should not increase risk.
When the going gets tough , the tough get going
  • #23
  • Apr 16, 2016 2:39am Apr 16, 2016 2:39am
Quoting lasty
{quote} Firstly money management is not set in stone so get that out of your head. Money management depends on the market conditions, ccy pairs, liquidity, time frame... You should be flexible the way you trade.. leverage up when market is quiet leverage down when market is volatile or skittish .
I agree with you, for example entering all your entry at one time lead to unnecessarily losses for me this week .
  • #24
  • Apr 16, 2016 3:02am Apr 16, 2016 3:02am
Risk majorly depends on the nature of investments being played with irrespective of trade strategy or success.
If the investment is pocket change then you can apply huge risk on each trade , ie anything between 1% to 20% on one single trade.
if it is savings then you need to be cautious and careful with your risk, ie, ideally less than 1% on any single trade
if it is free market money got from profits then you can play the game as you wish.
When the going gets tough , the tough get going
  • #25
  • Apr 16, 2016 3:12am Apr 16, 2016 3:12am
Quoting jen101
{quote} Are you compounding your trades? If so, then 8 consecutive losses is far more than 56%. If you have lost 30% of your account and risking 7% per trade, that means if your next trade is a win, on a 1:1, you will only get back 7% of 70%. That's why it will take you longer to recoup than to lose. Have you also thought about win, lose, win, lose combination? You will lose more than win. Think about it, spreads aside so actually the picture is worse; on a 1:1 again: win 7%, lose (7% x 107%) and you're already below your original 100%. I don't...
Every trade the 7% is calculated of the 300$,i don't decrease it when the account decrease,always 7% of 100%.
My drawdown reached 34% last week (below 200$) after many losing trades ,but i could take the account back to about 290$ with only 3 wining trades ,the third reversed on me and i closed on 275$ which means 8% drawdown.
I ended the week with 14% loss ,so recovering is not that big problem . I don't believe increasing the edge is helpful without increasing your R:R.
In my opinion high R:R is much important than edge.of course that's just my opinion.
I guess you are using 1:1 R:R ,may i ask how high is your edge?and could that achieve good monthly profits ?
I have no clue about Lorenz curve ,but i 'll try to read about it soon.
  • #26
  • Apr 16, 2016 3:17am Apr 16, 2016 3:17am
I used to have a $200 account i wanted to make money fast and i try to make $200 a day so id risk to much and lose in the end so i started again with a $1000 account then $2000 this has changed my trading style also im not so worried about making money fast as i have plenty of time so im relaxed i now have just over $3000 and this a lot better so now it depends im happy to make 5% a day although some days i only make 1% i think the more money you have the easier it is to trade and the less stressed you are about making huge percentages in the last few months ive started making a profit my first goal is to have a $5000 account then $10000 and then so on so it doesnt really matter how long some days im inpatient somedays im not
  • #27
  • Apr 16, 2016 3:22am Apr 16, 2016 3:22am
Be careful not to think, "8 losses in a row will happen so rarely!"...

Your losing percentage is 76%.

Over 100 trades, the risk of getting a losing streak of 8 trades in a row is 96%

Even over 50 trades, the risk of 8 losses in a row is 79%
The price will go up, and down, not necessarily in that order.
  • #28
  • Apr 16, 2016 3:34am Apr 16, 2016 3:34am
Quoting Stubborn
{quote} Risk should be increased is true but that will only depend on confidence in the trading strategy. And this confidence can only be increased by positive real trade statistics. Without good trading results and confidence one should not increase risk.
I agree with you on your both today's comments 100%,actually i have already mentioned your points in my thread statements .
This rule of taking a minimum of 5% risk is for traders,who are investing thousands or ten thousands $ (below 100k $ )and with profitable strategies ,and those traders are divided in 2 categories |:

1- profitable traders risking 1% and making an average 10% monthly profits ,and this rule could help them increase their profits.

2- traders with profitable strategies but who due to emotional psychological gambling personality struggling with their money management like me ,maybe this rule of embracing high risk in our trading plan would help us have more control on our trading activity and help transform us to profitable traders.
  • #29
  • Apr 16, 2016 3:50am Apr 16, 2016 3:50am
Quoting mozart4646
I used to have a $200 account i wanted to make money fast and i try to make $200 a day so id risk to much and lose in the end so i started again with a $1000 account then $2000 this has changed my trading style also im not so worried about making money fast as i have plenty of time so im relaxed i now have just over $3000 and this a lot better so now it depends im happy to make 5% a day although some days i only make 1% i think the more money you have the easier it is to trade and the less stressed you are about making huge percentages in the last...
In my opinion a Forex trader must look for high fast profits ,otherwise i think trading stocks or many other investments would be better .
So if you are achieving more than 50% /month(5% daily average profit) ,you are doing great ,and you don't need to apply this the 5% risk rule.

May i ask you how long have you been trading your last account profitably ?I ask because i think calculating your profits per day or weeks usually ends with blowing the account before the end of a year.
In my opinion profitability should be calculated minimum by a month .that's just my opinion,and I know that is not the subject of the thread.

I hope you 'll achieve all your goals soon .
  • #30
  • Apr 16, 2016 3:54am Apr 16, 2016 3:54am
Quoting ForexFart
Be careful not to think, "8 losses in a row will happen so rarely!"... Your losing percentage is 76%. Over 100 trades, the risk of getting a losing streak of 8 trades in a row is 96% Even over 50 trades, the risk of 8 losses in a row is 79%
Let's hope that it will be rarely ,and i hope never .
and the losing percentage of the 8 losses would be 56% ,not 76 ,i guess 7x8 =56% ,right?
  • #31
  • Apr 16, 2016 4:41am Apr 16, 2016 4:41am
Quoting fxnow
{quote} In my opinion a Forex trader must look for high fast profits
Unless you're some savant super trader, then logically you will have profitable times and times that are not so profitable.

When you're going through a rough patch and you can't turn a profit to save your life.. Can you/your account handle risking 5-7% per trade? If you risk 1% per trade and take 5 losses in a row and your account is down 5%, you can keep trading roughly the same lot size. If you risk that 7% per trade and lose 35%, your lot size will be smaller which will take longer to recover your capital.

Every occupation has tools, cash is your tool in trading. Without it, it doesn't matter how great you are as a trader.



In my opinion a forex trader needs to figure out what type of trader they are so that they can build on their strengths and learn to identify and cope with their weakness.

1. Range trader - Good at trading ranging/choppy markets. Usually tries to pick tops/bottoms high win rate is important. Needs to stay away from trending markets.

2. Trend trader - Trades trending markets, usually break out traders/traders who buy/sell pull backs. High risk to reward is important. Needs to stay away from choppy markets.
  • #32
  • Apr 16, 2016 5:12am Apr 16, 2016 5:12am
Quoting fxnow
{quote} Let's hope that it will be rarely ,and i hope never . and the losing percentage of the 8 losses would be 56% ,not 76 ,i guess 7x8 =56% ,right?
There is no "hope"; it's simple statistical probability. Your myFXBook profile says you lose 76% of the time. Given that win / loss ratio, it's a statistical certainty that in the course of 50 trades, you have a 79% chance of having a losing streak of 8 losing trades in a row.
The price will go up, and down, not necessarily in that order.
  • #33
  • Apr 16, 2016 11:48am Apr 16, 2016 11:48am
40 pip = lot size (3%) account size...
One pair ... except Eur. Usd.
Trade fearless not careless...
  • #34
  • Apr 16, 2016 6:05pm Apr 16, 2016 6:05pm
I think risk management and emotions play the biggest part in trading instead of TA or FA
  • #35
  • Apr 17, 2016 2:18am Apr 17, 2016 2:18am
Quoting albern
{quote} Unless you're some savant super trader, then logically you will have profitable times and times that are not so profitable. When you're going through a rough patch and you can't turn a profit to save your life.. Can you/your account handle risking 5-7% per trade? If you risk 1% per trade and take 5 losses in a row and your account is down 5%, you can keep trading roughly the same lot size. If you risk that 7% per trade and lose 35%, your lot size will be smaller which will take longer to recover your capital. Every occupation has tools,...
I'm still a losing trader struggling with MM ,but working hard to be a super profitable trader.

I have written here many times that i always risk 7% from 300$ ,21$ .i don't decrease it when my account decrease ,and my drawdown reached 34% in 4 days and i could recover most of it with only 3 trades .So obviously recovering isn't a big issue.

If we prove that this high risk rule is working,it can be used with any trading style,trend or range.
  • #36
  • Apr 17, 2016 2:24am Apr 17, 2016 2:24am
You can run this simulator to find out. http://www.radioactivetrading.com/trade_sim.asp#resAnch

And here more about some MM methods: http://www.trendfollowing.com/pdfs/money_management.pdf
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #37
  • Apr 17, 2016 2:31am Apr 17, 2016 2:31am
[quote=ForexFart;8876527]{quote} There is no "hope"; it's simple statistical probability. Your myFXBook profile says you lose 76% of the time. Given that win / loss ratio, it's a statistical certainty that in the course of 50 trades, you have a 79% chance of having a losing streak of 8 losing trades in a row.[/quot

Of course there is "hope".!!!!
Obviously you are confused between losing rate,which is 76% (24% winning rate) and consecutive losses .
consecutive losses are more related to the drawdown which is 34% .
you wrote "you have a 79% chance of having a losing streak of 8 losing trades in a row"
I don't know how you mathematically calculated that .!!!
So i would reply "statistically i have 79% chance of turning the 300$ to 30000$" .
I don't know how i calculated that
  • #38
  • Apr 17, 2016 2:33am Apr 17, 2016 2:33am
Quoting omgms1
I think risk management and emotions play the biggest part in trading instead of TA or FA
100% correct.
  • #39
  • Apr 17, 2016 2:34am Apr 17, 2016 2:34am
Quoting Ramadas
You can run this simulator to find out. http://www.radioactivetrading.com/trade_sim.asp#resAnch And here more about some MM methods: http://www.trendfollowing.com/pdfs/money_management.pdf
Thank you Ramadas .
  • #40
  • Apr 17, 2016 3:04am Apr 17, 2016 3:04am
Quoting fxnow
{quote} I'm still a losing trader struggling with MM ,but working hard to be a super profitable trader. I have written here many times that i always risk 7% from 300$ ,21$ .i don't decrease it when my account decrease ,and my drawdown reached 34% in 4 days and i could recover most of it with only 3 trades .So obviously recovering isn't a big issue. If we prove that this high risk rule is working,it can be used with any trading style,trend or range.
Nice simple explanation.......
0 traders viewing now