To hit the same profit overall? Honestly I don’t believe so. In fact, my data says the exact opposite for the simple fact that a big winner just doesn’t come along that frequently.
Actually what this does is get you in and out quicker which as far as i’m concerned is a good thing. Real world in my live account I only have so much margin buying power to work with. And if i’m in a trade and another setup comes along I have to sit on the sidelines and watch it go by because I can’t afford to put on both trades. By getting me in and out more quickly I can take more entries, over more markets, and make more pips. Today alone I was able to take 4 different trades, all which were winners because I was able to be more nimble with my entries and exits. Am I getting every ounce of a move out there? No. But I am getting a nice meaty chunk in the middle and moving on to the next setup.
Here’s the other thing. Ease of management. With this new take profit strategy once I get to 38% I put an OCO (Order Cancel Order) in with a limit order for the 23.6% target, and a stop loss at my entry. Then I can completly leave and i’m either stopped out at break even or I take my target profit. Thats the kind of management that I can let ride while I sleep!
Let me know if you have more questions. Like I said, you can do it the old way and you’ll be fine! I just feel that this will yield more profits, and my backtesting supports such a conclusion. I wouldn’t come in here and tell you something that I don’t feel the logic and numbers can’t backup. Go find one currency and take the last 5 setups on it. Record the outcomes of the trades using the “hold for gold” management, and then using the “23.6% take profit” management. The results should tell the story and compliment my argument.
Well give a 15min, and 30min a try and see how you like those. Those are pretty close to what a 233t and 512t could be compared to. 60min is good as well. I like the 4 hour as well, but obviously less setups occur because it takes 4 hours for each bar to form.
Eh my 233 (10-15 min) trades probably average around 10-30 pips, 512 tick (30-60 min about) is probably 20-70 pips, and 4 hour setups are probably 50-120 pips.
This all of course falls back to the size of the grid you are playing. I could take massive swings measured out on the 233t, but the way I play it is the smaller swings I play on the small chart, bigger swings are more suited to bigger time frames, and so on.
Yea, i’ve looked at the results across all time frames, and even the 4 hour setups yeilded better profits, though it must be said that of any time frame the longer term it is, the more profitable the swings are on average, and the more you are rewarded for holding longer.
I just find its easier to stay consistent with my approach… And now for the novel of the day:
[B]Adding Size: The nightmare that is going to unlock your dreams![/B]
But think about this… Do i really care that I miss out on the extra 40 pips or something from a full -38.2% move? No. Because I can make that up just as easily (and almost certainly more quickly) on another setup. And if you’re worried about the profitability think about this.
My goal is to just add size where I can pull 20 pips out of the market each day and gross 7 or 8 figures a year. Why kill yourself emotional, mentally, and with time commitments of trying to get every pip possible out of every move. Size is the answer that pro’s use.
I’m fairly confident that I could do six figures a year trading 1 standard lot, and certainly with 2. Think about it. You want to make 100 grand this year. Now figure that uncle sam (or whoever your PM is in London ) is gonna take roughly 33% of your profits. That means I need to actually make 133k to net 100k after taxes.
There are roughly 20 trading days a month, which means I need to average a profit of 554.00 a day to make that much money. Ok, so there is the goal. What is the easiest way to achieve it?
Trading 1 mini lot I need to make 554 pips a day. Thats hard. But lets add size.
1 Mini = 554 Pips
2 Mini = 277 Pips
4 Mini = 139 Pips (Maybe on a good day?)
8 Mini = 69 Pips (Doable - but not every day)
1 Std = 55 Pips (Attainable)
2 Std = 27 Pips (Ummm… HELL YEA!!!)
Why kill myself trying to get every pip out there? I’d rather just add size and call it a day after my 27 pips knowing i was gonna be bringing in after tax profits of 100k. And thats before I write off my commissions, internet usage, apartment/house, trading seminars (i.e. vacations) off as tax write offs.
The truth of the matter is these markets can handle more size that you can throw at them. But most people don’t think about it this way, they think they need to accrue massive pips each day to be successful. Why not just get a couple in the bag with big size and make tons more money. I know you’re not there yet (i’m not either) but thats where i’m going and it should be on your list of things to do as well. My friend is trading 100 lots with nil slippage and I can tell you he doesn’t really have any care for money anymore… Hes got his system down pat and trades enough size that it is like having his own personal ATM in his office. He doesn’t even worry about daily quotas. He stops trading for the month once hes up 300 pips. (He says he doesn’t want to get greedy - and honestly, how much money can you burn a month?). And then he goes on vacation for the rest of the month.
It seems like a pipe dream to a lot of us now, but there ARE people who live this way. And it IS possible. Will it happen overnight? Nope. Emotionally it would take me a year or two to be able to accept a 60-70k loss on one trade, but when you’re used to is, its no different than a 60-70 buck loss on one of our trades right now.
And in case you were wondering 20 pips a day with 100 lots is a cool 4.8 million a year. Yea. Start thinking about this stuff now, because it is the ONLY way you are ever going to make a living at this. Its hard to put bread on the table trading mini lots, but that is where we are at right now. Lets try and push ourselves past it and out into the big world of ridiculous sums of cash.
Yes yes yes! You can’t add size without the account balance appropriate for it or without the emotional aptitude to handle those kinds of losses and gains. I am in no way suggesting you go out and over leverage yourself on your account. My rule of thumb is 500.00 per mini contract. As your account size grows, add on another contract, and so on. But at the same time, you can’t trade 1 mini lot for the rest of your life and expect to make a nice income.
Playing big size isn’t something you do when you start out… you stay small until you are earning 100% returns on your account. If you can double your account size, then you are good enough to add on another contract, double it again and add another contract. Start small and work you’re way up. Its also the easiest way to start training yourself to handle the additional risk and reward of bigger losses and gains in a controlled manner.
I posted this up for two reasons.
1: That traders don’t fall into the “I need massive pips to make a living” trap because it just isn’t true and 90% of traders think that making more and more pips will make them better returns. The truth of the matter is it is probably putting them in more trades that they don’t need to be in, ie more risk that they don’t need to take.
2: That we need to understand where we are going if we intend to make a living at it. We need to have this in our objectives if we are ever going to attempt to get there. By understanding the overall goal of adding size to the equation we can better prepare ourself now for that evolution to our trading.
I quite agree that one needs goals, money management, and a time frame to reach those goals just like operating any business.
I’m just trying to wrap my mind around the leverage, lot size and pip value and, if I understand correctly, this is how I just calculated my way to over a millions in 6 years starting with $5000. Feel free to correct me if I misunderstand how it works.
Assuming I can attain 55 pips/day to start and 1 pip = $1
[U]Year 1[/U] - 1 mini lot
55 x 240 days / year = $13200 + $5,000 initial margin = 18200
[U]Year 2[/U] - 1 mini lot
another $13200 + 18200 from last year = $31,400
[U]Year 3 [/U]- 2 mini lots (could do 3 but being conservative)
55 x 2 lots = 110 pips
110 x 240 = $26,400 + 31,400 from last year = $57,800
[U]Year 4 [/U]- 2 mini lots again (could do 5, but still conservative)
another $26,400 + $57800 last year = $84,200
[U]Year 5[/U] - still 2 lots
another $26,400 + $84,200 = $110,600
[U]Year 6[/U] - now using 1 standard lot (100K) so now if I only do 20 pips /day I should make $4,800,000?
You’re math is correct, but the logic is a bit unrealistic. And not in a bad way, I just think if you spent an entire year making 55 pips a day and only traded 1 mini lot you would be certifiably insane. Lets assume you open up a 500.00 account with EFX and use their standard 100:1 leverage. That means that on most markets you can buy 3-5 lots with your 500.00. I’m NOT saying that is wise - it isn’t, but you can use that much. With your 5000.00 account that means you COULD purchase 3-5 STANDARD lots. Thats A LOT.
If you KNOW what you’re doing, there is no reason to realistically trade 1 mini lot an entire year. You’re just wasting your time and not getting compensated for it. I mean, I do consider myself to generally know what i’m doing and i’m trading two mini lots on an account that is currently just above 1 grand. I doubled it from 500.00 last month trading 1 lot. I made a 100% return, another 500.00 so i’ve added another contract. My risk is exactly proportionate to my account size as it was last month so whats the harm? So if i do another 100% this month that means that next months i’ll add on another 2 mini lots for a total of 4 mini lots (2k / 500.00 per lot = 4 lots)… and so on and so forth. I should be well over 2-3 std lots by the end of the year conservatively.
What i’m trying to say is yea, you’re math, logic, that is all correct, but if you can do 55 pips a day - well you don’t need to be playing your sizing that conservative. I mean look at year 4, you’re now generating 110.00 a day on a 57,000 account! Thats a .002% return daily! I mean look at your first year you were making 55.00 a day on a 5,000 account which is a 1% return - not huge, but proportionately a [B]5X’s bigger return on your capital than year 4.[/B]
I’m all for playing it conservatively, but your scenario is TOO safe, and the risk isn’t proportionate throughout. Realistically, the results should be MUCH higher.
But talk is cheap folks! Its one thing for me to say this, its another thing to do it. I intend to do it. And you all have a front row seat to my success or failure in this very thread. So sit down, kick back, and lets make some money!
I suppose that is the difference between demo and live accounts? or between brokers?
My $5000 demo acct is with North Finance using MT4 and when I make a trade, it only allows me .10 as a volume (aka ratio?) which is the lowest option they offer. If I try .20, I always get a “Not enough money” message. I will have to contact them about how that works.
Glad to hear my math is correct, and even more encouraged that the results could be much higher if I learn the leverage part better and what my platform/broker is capable of.
Thanks for the inspiration! and I look forward to your “mini” novels as well as your journey and insights.
Ok, I understand better now. When I originally setup my demo account, it did ask for the leverage I wanted to use which I obviously didn’t put very high, if at all. :o
I’m either going to start over with a new demo account or try and reset the leverage higher so I can see the difference it makes and psych myself out some more. I’m glad I asked and thankful for your most helpful response
Daedalus - Yes, I agree. However I would add that the key here is based on what you are prepared to lose. Take the largest losing streak in your system and double it (the market can always do far worse in the future than in the past and we need a margin of safety). Lets say the historical worst is 10 losses in a row. If you were to face 20 what % loss of your account would you be comfortable with. For those who trade a 5% risk model they have just been wiped out! This gives you a maximum past which you would not go. Taking your approach Sweet Pip (love that handle) would be ultra conservative but very safe. If you can attain your goals whilst keeping the risks to an absolute minimum then fantastic. Most professionals seem to risk around 0.5% or less which is worth thinking about.
Daedalus - I find your posts some of the best and most constructive on the site
Very very true tony. You bring up excellent points. And thanks for the compliment by the way. My risk tolerance is different from anyone else. I think the answer probably falls somewhere in the middle between sweet pip and myself.
But if I may, just look at this account statement. IT IS NOT MINE… but i am absolutely staggered by the results. The guy literally turned 1k into 125k in one week. Talk about margin leverage usage. I found this over at forex factory and just had to pop this in. Not exactly topical, but i’ve never seen anything like this before.
The amount of trades he took is ridiculous in its own right, but you can’t fault the outcomes. Freaking crazy!
Well the guy did say it was his “wild west” account that he used no money managment on whatsoever and the results were only possible 4 weeks out of the year… After reading most of the 44 page thread I think the guy is legit… but my god… hes either VERY good, or VERY crazy.
I am sat here on Sunday afternoon trying everything I can to avoid doing my overdue tax return when I came across the ‘fibs are lies’ post on this thread. Well that fella certainly has problems and probably wont make it in this business. You have to be curious and have an open mind and above all observe what actually happens with price action if you want to be successful. That is a talent possessed by few. Daedalus has done a fabulous job of not only bringing fibs to the fore but also showing you how to develop and implement a trading plan and tweak it as necessary as you go along
Now are fibs the golden ratio? I dont have the foggiest idea. Can they help you in trading - quite likely. Why - I havent the foggiest idea but if running naked round the neighbourhood gave me a reliable edge in fx I would do it (late at night probably!)
I thought I would demonstrate how you might take an observation and begin to build a trading idea out of it. If you are starting with fibs obviously pay attention to Daedalus, but there are many ways to skin the proverbial cat.
Jimmy Young talks about the power of the 78.6 fib so I thought I would demonstrate this on a random chart and timeframe.
I have taken the H1 GU and since November you would agree we have a nice downtrend. Lets say you simply sold on retracement to the 78.6 fib stop above 100%. As you can see most trades go in your direction
Now introduce Daedalus’ idea of taking profit at a certain level. For simplicity sake I have used all out at the 38.2 rather than a staged exit. As Daedalus rightly says we have lost 2 enormous runs (but could we have stayed with the trend live) but have replaced this with a certain return of over 80% (see final chart for calculation of this). This includes taking trades where we might well have seen that we were in a retracement and indeed a couple worked out OK even against the retrace
Note this is not a trading system. You need to do the sort of development work that Daedalus has done. This includes multiple timeframes (for me key support and resistance levels), sensible money management, tests on different pairs and timeframes etc etc (in fact all the things D talks about).
Next time someone says this is all lies, take a step back and realise that we are trying to make sense of a chaotic environment. We need to be pragmatic and simply ask what works. Since Nov Fibs on this chart would have assisted you to be on the right side of a trade. Will it carry on being useful over the next few months, who knows. Thats part of the continuing questioning and testing to find something thats robust enough to be helpful for long enough. Having followed the 78.6 on the GU for over a year though I can tell you it is not a flash in the pan or restricted to this timeframe. I dont however trade with it like this but will take note of it in my overall analysis
) is gonna take roughly 33% of your profits. That means I need to actually make 133k to net 100k after taxes.
and I look forward to your “mini” novels as well as your journey and insights.
