Last Week's Debacle
Elijah,
I remain very enthused about your equity building trading! Yep...I suffered through last week's 700 pip slide, as well. I did not blow out my account, but I did suffer about a 25% loss of equity. (Regardless, one day's trades, do not a trader make, to paraphrase an old addage.) I had as many as 70 trades that were filled, and at one point, I had 12 danglers threatening my account and my sanity.
However, I escaped total annihilation by partially incorporating some of the features of the following tweaks. I am curious what you think of the following tweaks to your system in order to avoid oblivion in the future:
1) Decide just how much you are willing to risk per trade, and set a catastrophic Stop Loss...say, 1000 pips, for example.
2) Enter enough room in spacing the trades to cover both TP and dealer spread + a coupla extra pips to ensure that only one trade can be filled and profited at a time before the next subsequent trade is triggered. The number of danglers should be greatly reduced, thus less threat to equity.
3) Scale in the TP and scale out the SL going up the trading ladder. For example, if we view the pending trades starting from bottom up, the trade closest to current price is the lowest rung on the ladder. This trade would make us the most profit in an upward move, and the least loss on a market move down (compared to the other trades above this level). Conversely, the pending trade at the top of the ladder has the greatest potential for loss and the least potential for profit. I believe we need to weigh the trades accordingly. We could put say a 100 pip TP and no SL on the trade closest to current price or the lowest rung on the ladder. The next pending trade up the ladder would have say an 80 pip TP and 300 pip SL. The next trade up would be something like 60TP and 250 SL. Optionally, we could construct the grid with ever-decreasing smaller investment amounts, the farther the pending trades stretch away from the current price. This scenario would be repeated each rung up the ladder resulting in ever-decreasing TP and ever-increasing SL (and maybe ever-decreasing investment amounts).
Please provide your thoughts regarding these modifications. Be brutal if you need be.
Lastly, does thinking along these lines qualify me as a certified lunatic?
Bob in Wisconsin
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