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

  • #41
  • Apr 23, 2016 6:52am Apr 23, 2016 6:52am
This week all losses from last week were recovered and a small profit of 20% was made .

So recovering 34% drawdown,even with a slow moving choppy market , is not a big deal as long as trading plan is respected.

http://www.myfxbook.com/members/sam1...llenge/1581023
  • #42
  • Apr 23, 2016 7:39am Apr 23, 2016 7:39am
The greed factor is one thing but our mind is a reasoning mind so maybe one of the reason we can give our mind is to provide a reason to ourselves why we should not be greedy.

The best reason we must keep telling ourselves daily is survival. Literally say it to yourself vocally maybe so it soak deep into your subconscious.

Ok Here is how it works we usually dont have to jump from one fear of loss to greed in terms of our emotional situation if we use appropriate trade management to recover losses by either closing out losses that indicate our idea was wrong or using a double up tactic if we are right to recover 100 pips.

But this assumes we are using very low lots to start a trade say .20 or .10 then we recover by doubling up 3 times so this would be first .20, .40, then .80 if necessary.

This system would only work while the currency is ranging. So once again high risk.

The best approach is just to accept the loss early as it is clear indication that our trade is out of the range we thought of before we entered it. The key is not to be too scared with out pip stop or take the trade too early.

So I guess in short there are so many ways to trade in the wrong direction further the market makers are moving the markets for various reasons many of which we really only realize afterwards.

In the end the key to winning is to understand more of the basics and apply them as the original author said its the trading size that is key....no more than 5%.
  • #43
  • Apr 23, 2016 7:53am Apr 23, 2016 7:53am
Quoting fxnow
{quote}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 .!!!
There's two different equations for consideration here. One, is "how many losses at 7% loss can I withstand?" And you are right (sort of) in that if you lost 8 in a row, that would be a loss of 56% of your account (7% x 8 = 56%, assuming the 7% is based on your ORIGINAL balance, and not the RESULTING balance after each loss, but anyway)

The question I'm then asking is, what is the probability of actually having 8 losses in a row? This can be calculated and it's related to your win/loss ratio. Let's assume you lost 99% of the time. Over 100 trades, the chances of getting a losing streak (losses in a row) of 8 would be pretty high, right? If you only lost 1% of the time, then the chances of having an 8-in-a-row losing streak, over 100 trades, would be very, very unlikely, ya?

So I'm saying, with a losing rate of 76%, then over 100 trades you have a 79% chance of having that losing streak of 8 in a row. The more times you trade, the higher that probability gets. So your win / loss percentages might look fine, but if there's a high chance of having that losing streak (because of the frequency of times you lose a trade), then you might have what feels like a winning strategy but is statistically... eventually... is going to hand to you that losing streak that makes it all fall down.

My concern was that you were implying that it's unlikely to happen and that you hope it would never happen. Here's how you can calculate in MT4:

Inserted Code
​
double dTotProb[];
double losing_streak_percent;
​
int streak = 10; // what losing streak are we wanting the probability for?
int series = 100; // over how many trades are we calculating?
int lose_percent = 50; // what your losing percent?
double dProb = lose_percent / 100;
                    
ArrayResize(dTotProb, series+1);
dTotProb[streak] = MathPow(dProb, streak);
double last_bit;
                    
for (int t = streak + 1; t <= series; t++) {
    if (t - streak < streak) {
        last_bit = 1;
    } else {
        last_bit = 1 - dTotProb[t - streak];
    };
                    
    dTotProb[t] = dTotProb[t - 1] + MathPow(dProb, streak) * (1 - dProb) * last_bit;
    losing_streak_percent = (dTotProb[t] * 100);
};
The price will go up, and down, not necessarily in that order.
  • #44
  • Apr 23, 2016 8:42am Apr 23, 2016 8:42am
When trading there is no need to focus on loss.

Your are trading to make profit.

The main reason for losing streaks is change in market condition resulting in trending or ranging and the change was not observed. This simply means that understanding the trends in all the time frame is necessary mainly monthly weekly and daily timeframes. This is the only way to avoid this kind of loss streak (I forget you are talking about the bot right .

So if a trade is taken correctly on a monthly chart then its hardly possible to go through those streaks. Or better yet if the monthly chart was observed then you would know for sure which is the best direction to take the trade in and therefore take trades only in that direction in that part of the month.

As an example use the GBPAUD for Mar-Apr 2016.
  • #45
  • Apr 23, 2016 9:32am Apr 23, 2016 9:32am
Quoting DonFF
This is the only way to avoid this kind of loss streak
The only way to avoid a losing STREAK, is to never have losing trades. If your win rate is 99%, at some point (and it can be calculated), you will have a losing streak.
The price will go up, and down, not necessarily in that order.
  • #46
  • Apr 23, 2016 9:47am Apr 23, 2016 9:47am
Even the best of trading positions there is no guarantee of not having a loss.

It is how the loss is taken thats important. If we use a basic manageable trading lot size as a scout its much easier to close out that position with a net gain when its clearer what the market is doing since we cannot always know what it is doing for sure.

So the sooner we lose the emotional rightness of trading then this is how the war is won (losing the smaller battles if need be in order to win the bigger war)
  • #47
  • Apr 23, 2016 9:49am Apr 23, 2016 9:49am
[quote=ForexFart;8889230]{quote} There's two different equations for consideration here. One, is "how many losses at 7% loss can I withstand?" And you are right (sort of) in that if you lost 8 in a row, that would be a loss of 56% of your account (7% x 8 = 56%, assuming the 7% is based on your ORIGINAL balance, and not the RESULTING balance after each loss, but anyway) The question I'm then asking is, what is the probability of actually having 8 losses in a row? This can be calculated and it's related to your win/loss ratio. Let's assume you lost 99% of the time. Over 100 trades, the chances of getting a losing streak (losses in a row) of 8 would be pretty high, right? If you only lost 1% of the time, then the chances of having an 8-in-a-row losing streak, over 100 trades, would be very, very unlikely, ya? So I'm saying, with a losing rate of 76%, then over 100 trades you have a 79% chance of having that losing streak of 8 in a row. The more times you trade, the higher that probability gets. So your win / loss percentages might look fine, but if there's a high chance of having that losing streak (because of the frequency of times you lose a trade), then you might have what feels like a winning strategy but is statistically... eventually... is going to hand to you that losing streak that makes it all fall down. My concern was that you were implying that it's unlikely to happen and that you hope it would never happen. Here's how you can calculate in MT4: ​ double dTotProb[]; double losing_streak_percent; ​ int streak = 10; // what losing streak are we wanting the probability for? int series = 100; // over how many trades are we calculating? int lose_percent = 50; // what your losing percent? double dProb = lose_percent / 100; ArrayResize(dTotProb, series+1); dTotProb[streak] = MathPow(dProb, streak); double last_bit; for (int t = streak + 1; t <= series; t++) { if (t - streak < streak) { last_bit = 1; } else { last_bit = 1 - dTotProb[t - streak]; }; dTotProb[t] = dTotProb[t - 1] + MathPow(dProb, streak) * (1 - dProb) * last_bit; losing_streak_percent = (dTotProb[t] * 100); };[/quot

As i said before backtesting my strategy for 15 months,maximum consecutive losses were 5 ,so that's what is making me think 8 losses are unlikely to happen ,
and as my leverage is 1:200 ,maybe i can handle even 10 consecutive losses ,but i'm not sure.

Also about the losing rate i think we need a longer time to apply what you are saying ,but this account's age is only 12 days ,for example this week general losing rate decreased from 76% to 66%,which means nothing .

i never backtested my losing or winning rate,so i have no clue of my average winning/losing rate.

So to determine the account losing rate we need months or better a year ,so we can calculate the probability of 8 consecutive losses.

Anyway i'm not worried about it at all ,i think the only reason that could blow this account ,would be my greed is awake again and not satisfied with the 7% risk/trade and start disrespecting the trading plan .I " hope" that 'll never happen and it continue sleeping.
  • #48
  • Apr 23, 2016 9:55am Apr 23, 2016 9:55am
Quoting DonFF
Even the best of trading positions there is no guarantee of not having a loss. It is how the loss is taken thats important. If we use a basic manageable trading lot size as a scout its much easier to close out that position with a net gain when its clearer what the market is doing since we cannot always know what it is doing for sure. So the sooner we lose the emotional rightness of trading then this is how the war is won (losing the smaller battles if need be in order to win the bigger war)
I agree with you that we should be adapted to lose many small battles to win a big one .
But i don't agree with increasing the lot size after every loss ,that's very dangerous , i think using high R:R ratio is much better.
  • #49
  • Apr 23, 2016 11:29pm Apr 23, 2016 11:29pm
Quoting fxnow
{quote}As i said before backtesting my strategy for 15 months,maximum consecutive losses were 5 ,so that's what is making me think 8 losses are unlikely to happen
If there's a 1 in 6 chance of rolling a 4 on a dice, but over 12 rolls, the 4 only came up once, you can't say, "well, I rolled it 12 times and the theory says that a 4 should have come up twice, but it only came up once. Therefore I'm pretty confident a 4 won't come up twice in the next 12 rolls". Do say that would be saying, "the statistics are wrong because I just proved it wrong in my 12 rolls". Just because the statistical probability didn't play out in your 12 rolls, it doesn't mean the statistical probability is incorrect / not real / different.

Anyway, best of luck. Time will tell.
The price will go up, and down, not necessarily in that order.
  • #50
  • Apr 24, 2016 12:34am Apr 24, 2016 12:34am
Quoting fxnow
As i said before backtesting my strategy for 15 months,maximum consecutive losses were 5 ,so that's what is making me think 8 losses are unlikely to happen

IMO your analysis is correct and has some value. ForexFart he's not talking about "probabilities" but the "most likely".
  • #51
  • Apr 24, 2016 5:47am Apr 24, 2016 5:47am
Quoting ForexFart
{quote} If there's a 1 in 6 chance of rolling a 4 on a dice, but over 12 rolls, the 4 only came up once, you can't say, "well, I rolled it 12 times and the theory says that a 4 should have come up twice, but it only came up once. Therefore I'm pretty confident a 4 won't come up twice in the next 12 rolls". Do say that would be saying, "the statistics are wrong because I just proved it wrong in my 12 rolls". Just because the statistical probability didn't play out in your 12 rolls, it doesn't mean the statistical probability is incorrect / not real...
I agree with you 100 % about the dice example,that's why i say " i hope not " ,it's possible to have 8 consecutive losses ,but that wouldn't stop me trying this new idea .
I have checked your TE and and i noticed you have open 9 lots ,so hopefully for your account balance that's not very risky with normal market conditions ,but don't you agree with me that if a world force major happen or sudden news (like the Swiss crisis last year ) could lead to huge slippage and you could blow the account with just 200 pips slippage ?That's why i think forex trader should look for fast huge profits to compensate for the 100% loss risk.
statistically that could happen ,would that stop you trading ,obviously not ,why because you hope it'll not affect you.
From your TE ,obviously we have totally different trading style ,so i wish you good luck and yes time 'll tell ,and i hope we both end the year in profits.

Thanks for motivating me,now i'll be more careful and respectful to my plan ,just to prove i'm right .
  • #52
  • Apr 24, 2016 6:21am Apr 24, 2016 6:21am
Everything in forex (in life as well??) is always far more complex that we think. Simple concepts like risk:reward are never that simple in this game and it's crazy how it can't really be explained to someone easily... because there's so many variables to consider when looking at risk:reward. So, about 9 lots on my TE...

 

  1. I've spread my exposure over those 9 lots so every currency would have to spike in the wrong direction to lose it all
  2. I never set stop losses. Instead I hedge. So 9 lots open could actually only be 4.5 lots of exposure depending on what's hedged and what's not
  3. For me, hedging offers far more flexibility than just closing positions with a stop loss. One benefit means Swiss-type events would never close trades... only hedge them (notwithstanding brokers being... brokers and forcing trades closed and other such 'catastrophic stuff'. Other benefits are I'm not vulnerable to stop hunting, I can decide how to exit a trade at a later date by hedging instead of closing, etc... but hedging is a whole topic requiring it's own thread!
  4. I have multiple strategies running at any one time so that further complicates the analysis
  5. The account you see in TE is somewhat of a 'test' account I set up a couple of months ago. It mirrors some trades from my main account but there's a fair bit of strategy testing going on with that account.

The key point... I adjust my strategy depending on market conditions. I couldn't answer you what my risk/reward is, or what my risk per trade is without a long discussion. It varies on every single trade.

So, I can't respond directly to your question about my current exposure other than to say, I'm comfortable with the accounts position at the moment and that you might be completely right! I rely heavily on statistical analysis to trade, but I'm no expert and maybe I'm missing something... it's a complex game!

The price will go up, and down, not necessarily in that order.
  • #53
  • Apr 24, 2016 11:25am Apr 24, 2016 11:25am
Quoting ForexFart
Everything in forex (in life as well??) is always far more complex that we think. Simple concepts like risk:reward are never that simple in this game and it's crazy how it can't really be explained to someone easily... because there's so many variables to consider when looking at risk:reward. So, about 9 lots on my TE... I've spread my exposure over those 9 lots so every currency would have to spike in the wrong direction to lose it all I never set stop losses. Instead I hedge. So 9 lots open could actually only be 4.5 lots of exposure depending...
Glad to know that you are secured from market surprises by hedging,specially that your account is big.

It's very interesting that we have opposite trading strategies ,i have very low winning rate of 33% while yours is excellent 80% ,and i have risk :reward ratio 1:3 ,while yours is opposite about 3:1 (Avg winning trade 0.2% and avg losing trade -7%) .

So i totally understand your doubts about my low winning rate and to be honest i have my doubts about your low R:R which is against a very basic trading rule that your Risk:Reward should be t least 1:1.5 , so that your winnings should exceed you losses .

Good luck in your test.
  • #54
  • Apr 24, 2016 11:49am Apr 24, 2016 11:49am
Quoting fxnow
{quote} Glad to know that you are secured from market surprises by hedging,specially that your account is big. It's very interesting that we have opposite trading strategies ,i have very low winning rate of 33% while yours is excellent 80% ,and i have risk :reward ratio 1:3 ,while yours is opposite about 3:1 (Avg winning trade 0.2% and avg losing trade -7%) . So i totally understand your doubts about my low winning rate and to be honest i have my doubts about your low R:R which is against a very basic trading rule that your Risk:Reward should be...
I have two strategies whenever i trade forex or futures. Which one would you prefer?
1. 90% winners but with 1:1.5 RR ratio
2. 45% winners but with 1:15 RR ratio.

Personally i like number 1 better.
  • #55
  • Apr 24, 2016 12:07pm Apr 24, 2016 12:07pm
Quoting impostor
{quote} I have two strategies whenever i trade forex or futures. Which one would you prefer? 1. 90% winners but with 1:1.5 RR ratio 2. 45% winners but with 1:15 RR ratio. Personally i like number 1 better.
Of course i prefer number 2 and it's more profitable ,why do you like number 1?!!!!!

In number 1 you risk 10 pips to win 15 ,so you win 9x15 and lose 1x10,so total profit =125 pips

in number 2 you risk 10 pips to win 150 pips you win 4x150 (make it 40% winners) and lose 6 x10 so total + 540 pips .

Seriously you prefer number 1?

Am i missing something ?!!!!!!!
  • #56
  • Apr 27, 2016 3:33am Apr 27, 2016 3:33am
Quoting fxnow
One of the first trading rules we get when we start learning Forex trading is to never risk more than 1% of your account /trade . Maybe that could be true if a trader is using a million dollar capital ,or even a 100k capital ,but as 90% of traders have thousands or ten of thousands capital,i think this rule could be wrong in this case. We spend years to develop a profitable strategy or a trading style ,and after we get them ,unfortunately many of us can't trade them profitably due to psychological emotional restrictions,basically Greed,and traders...

It all comes down to the access of capital and having the right knowledge to execute a proven approach master by the trader. Guess what, if you only execute two successful high- probability setups in a month, that still makes you a profitable trader. The problem most of us run into is executing two setups in a month with a $100 account.
  • #57
  • Apr 27, 2016 6:35am Apr 27, 2016 6:35am
Quoting chartsndream
{quote} It all comes down to the access of capital and having the right knowledge to execute a proven approach master by the trader. Guess what, if you only execute two successful high- probability setups in a month, that still makes you a profitable trader. The problem most of us run into is executing two setups in a month with a $100 account.
Go and off top somewhere else stop turn the thread into junk
  • #58
  • Apr 27, 2016 12:04pm Apr 27, 2016 12:04pm
@ FXNow, I have NOT read fully all replies to this thread, but I DO see the persistence of your struggle to find answers and the right way to see things.

What I do NOT see is any serious and successful trader replying to you, and so I will - tomorrow. For now, I am tired - read as not so sober at this moment.

The ONE thing you have correct is that traders MUST increase their % at risk if they want to profit, but it needs to be thought about in a different way.

Your 7% risk is still way too small, but it is a start in the right direction. 1-2% account risk is a NONSENSE promoted by all brokers so that traders will make many trades before they blow up an account which equals much more money for the brokers. Compare this to one large % risk trade to blow your account; such that brokers get almost nothing from you.

And this then leads to the REAL question. WHY would anyone enter a trade unless they were 95-99% SURE that trade was going to win?

FORGET 1-2% account risk. Forget even 7% account risk. NO ONE got rich from picking up pennies. 1-2% account risk is mathematical BULLSHIT. Someone who can fund a million dollar account won't care about $50,000 a month income from trading at 1-2% account risk.

FORGET R:R concepts. NEVER enter a trade until you have that exact moment in time that your trade WILL WIN. And PROVE your commitment to this winning trade by using an EA to set a BE+1 (Break Even+1 pip) at say 5 pips profit. R:R is BULLSHIT. If you see your trade turning against you, get the fuck out of it and snatch those few pips profit!

FORGET consecutive losing trade concepts! Every trade is unique, and every trade stands ALONE. Years ago, when I was between $50,000,000 and $88,000,000, I STILL blew my account 3-5 times a year. But I was only blowing $200,000 at a time because of MONEY management. Long before my FIRST million, I never traded larger than 500 lots.

The mission you are on is to find that trading system that gives you at LEAST 90% success rate for every trade. At LEAST 90% - or why the fuck would you open that trade?

FORGET concepts of "account risk" - that is totally fatalistic. Think in terms of % profit per pip.

NOTE: My words above relate to those committed to full time trading. 1-2% account risk people have a day job; and they are like hobby-farmers with 1 cow in the back yard - compared to a cattle rancher with 5-20,000 head of cattle. As hobby traders, they must use large time frames and tiny account risk because they are never at their charts.

Most of the usual trolls are already in my ignore list; more are welcome to join them.

Quoting fxnow
One of the first trading rules we get when we start learning Forex trading is to never risk more than 1% of your account /trade . Maybe that could be true if a trader is using a million dollar capital ,or even a 100k capital ,but as 90% of traders have thousands or ten of thousands capital,i think this rule could be wrong in this case. We spend years to develop a profitable strategy or a trading style ,and after we get them ,unfortunately many of us can't trade them profitably due to psychological emotional restrictions,basically Greed,and traders...
  • #59
  • Apr 27, 2016 12:30pm Apr 27, 2016 12:30pm
Quoting dancingphil
@ FXNow, I have NOT read fully all replies to this thread, but I DO see the persistence of your struggle to find answers and the right way to see things. What I do NOT see is any serious and successful trader replying to you, and so I will - tomorrow. For now, I am tired - read as not so sober at this moment. The ONE thing you have correct is that traders MUST increase their % at risk if they want to profit, but it needs to be thought about in a different way. Your 7% risk is still way too small, but it is a start in the right direction. 1-2% account...
Well, this is absolutely correct ...
Stop placing crap trades and take bigger risks ... forex propaganda will brainwash you into thinking that you have to lose in order to win and that sound money management will always save you from the losing streaks..

But then Mr. DancingPhil as usual decided to write this gem of total poppycock: "Years ago, when I was between $50,000,000 and $88,000,000, .. "
  • #60
  • Apr 27, 2016 12:34pm Apr 27, 2016 12:34pm
​Run don't walk from the dancingphil.

Anyone with $50,000,000 is unlikely to waste their time taking unnecessary risks trading FOREX. Why? Because with that kind of cash you don't need to take ridiculous risks to make money. A mere 2% of 50 million is 1 million. 4% is 2 million. You get where I'm going with this. Someone who even admits to blowing multimillion dollar accounts is not someone to take any advice from unless you're gambling.

I'm on this idiot's ignore list and I'm proud of it. I wouldn't want slime like this paying attention to me.
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