Just had another idea come to my head after checking my demo.
Say you do trades on 4hr and Daily to monthly.
Say you lose one trade on monthly (probably big loss because higher timeframe).
But then do most of your other trades on
lower timeframes, how are you then meant to cover this one loss?
Again just confusing myself but maybe what I’m saying is logical.
Thanks in advance for any help, I appreciate it.
It can be very difficult to recover individual, big, high-timeframe losses by trading on a lower time-frame, exactly as you say.
You need to know that the trades you’re making in each timeframe, separately, have an overall edge (positive net expectation).
In the case of indicator-based systems, it’s true that a system that has an edge in a lower time-frame will also normally have an edge in a higher time-frame, but one has to take trading frequency into account. Opportunities are fewer and further between on higher time-frames, as entries arise less often.
If you’re trading both time-frames regularly, that isn’t necessarily a problem, but if you’re trading on the higher time-frame only very occasionally, a bad run on that time-frame may take almost for ever to recover from.
Another solution to this problem is to treat the whole thing as “two separate systems”, dividing your risk capital between the two on whatever basis is statistically appropriate (having verified, independently, first, that each has its “edge”).
[I][U]Position-sizing[/U][/I] will doubtless need to be different, for the two time-frames, of course, because the risk-exposure will be higher on the longer time-frame.
True many people do both , short term and long term, its logical to sizing the long term position as well. All this always comes down to defining your long term trading plan.