Help a Brotha Pippa out!!
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  1. #1
    Join Date
    Dec 2006
    Posts
    4

    Default Help a Brotha Pippa out!!

    OK, First let me say HELLO to all. I stumbled upon this site quite by accident and lemme tell ya, that was fate!! By far the most informative Forex website I have seen in 2 years of trying to understand this beast we call the Forex. Graduated from the school of Pipsology and I never realized how much I DIDN'T know. Well, I feel I am well on my way to becoming a successful trader. Now comes the part where I tell you my goals and strategies, ask a few pivitol questions and shamelessly beg for guidance. First, my goal:

    I really don't have an unrealistic goal, I want to be able to work from home, making a good 50-60k USD annual salary from trading thereby giving me more time with my family, which is ultimately more inportant than anything else. I have a trading strategy that I will share later for criticism. I would like get my real account up to about 50-75K and trade off of that. I would like to be able to quit my day job in 12-18 months, probably unrealistic. Luckily, I work a shift that allows me to trade the US and London markets freely so no problem there.

    Now the questions: Does anyone have an opinion, good or bad, on the Global Forex Trading broiker. I personally love thier platform and charting package. Customer service has been ok so far, but we will see what happens after I fund the account. Dont worry, no real trading for at least 2 months...promise.
    I really need some guidance on money management in trading...for example:

    1. How much of my total capital should I have out on different trades at one time...should i even be placeing more than 1 trade at a time.
    2. Related to question 1 would be how much leverage should I use, I personally think that 100:1 is a good limit and fairly comfortable for me and how many lots should I buy/sell?
    3. also related to question 1 and 2 what lot sixes should I be entering? I was thinking about setting up my accout with 100:1 leverage and 10k lot sizes, what do yall think?
    4. this is probably the question that burns me the most...drawdown limits...how do they work, what is a decent percentage, ( i know i have to be comfortble with it but i would like an example if possible), how does it come into play when forming a win loss ratio. I think this is probably the most important question I have.

    Well, that is alot, lets see if that will keep yall busy for a while at least, lol.
    I know I left out alot of information so, I am an open book, ask away and I will tell all. Thank In advance for all thesuper help I know I'm gonna get.

    Pipper MacPippin

  2. #2
    Join Date
    Dec 2006
    Posts
    184
    Quote Originally Posted by mac1220 View Post
    OK, First let me say HELLO to all. I stumbled upon this site quite by accident and lemme tell ya, that was fate!! By far the most informative Forex website I have seen in 2 years of trying to understand this beast we call the Forex. Graduated from the school of Pipsology and I never realized how much I DIDN'T know. Well, I feel I am well on my way to becoming a successful trader. Now comes the part where I tell you my goals and strategies, ask a few pivitol questions and shamelessly beg for guidance. First, my goal:

    I really don't have an unrealistic goal, I want to be able to work from home, making a good 50-60k USD annual salary from trading thereby giving me more time with my family, which is ultimately more inportant than anything else. I have a trading strategy that I will share later for criticism. I would like get my real account up to about 50-75K and trade off of that. I would like to be able to quit my day job in 12-18 months, probably unrealistic. Luckily, I work a shift that allows me to trade the US and London markets freely so no problem there.

    Now the questions: Does anyone have an opinion, good or bad, on the Global Forex Trading broiker. I personally love thier platform and charting package. Customer service has been ok so far, but we will see what happens after I fund the account. Dont worry, no real trading for at least 2 months...promise.
    I really need some guidance on money management in trading...for example:

    1. How much of my total capital should I have out on different trades at one time...should i even be placeing more than 1 trade at a time.
    2. Related to question 1 would be how much leverage should I use, I personally think that 100:1 is a good limit and fairly comfortable for me and how many lots should I buy/sell?
    3. also related to question 1 and 2 what lot sixes should I be entering? I was thinking about setting up my accout with 100:1 leverage and 10k lot sizes, what do yall think?
    4. this is probably the question that burns me the most...drawdown limits...how do they work, what is a decent percentage, ( i know i have to be comfortble with it but i would like an example if possible), how does it come into play when forming a win loss ratio. I think this is probably the most important question I have.

    Well, that is alot, lets see if that will keep yall busy for a while at least, lol.
    I know I left out alot of information so, I am an open book, ask away and I will tell all. Thank In advance for all thesuper help I know I'm gonna get.

    Pipper MacPippin

    Wow, you have just asked some pretty loaded questions. I'll try and help you out a little.

    First and foremost, i'd like to say that your decisions from here on out will be guided by your beliefs and expectations of what is possible in trading the markets. I must say that your expectaion to trade for a living and earn 50-60K off of an account of 50-75K is shooting for the sky. What you are suggesting is an almost 100% return of of your account. Most professionals can't even achieve that consistently while observing proper risk rules. That being said, it is possible, but you are going to have to take some huge risks...dangerous risks. This goes back to your expectations...if you expect to earn a living in 12-18 months off that size account, then those lofty expectations might lead you to things like risking too much, overtrading and other dangerous tendencies. Don't focus on the money at all in the beginning...risk minimal amounts and focus on the right process. Give yourself at least 2 years to get this whole thing down

    As for GFT broker...i love them. I use them and i decided to use them for their ability to allow traders to control their lot sizes right down to 1000units (0.10/pip). This is great because it allows the smallest of traders to start up with minimal account sizes and still respect proper money management

    How much of your account at risk at any one time? As little as possible in the beginning. Ultimatly, the amount of risk you take on each trade will be governed by how robust your system of choice will be. To learn this you have to back test a chosen set of rules for many many trades, then demo trade it. After all that you'll have an idea of strong/weak your system is and you can make risk decisions. Generally, the rule of thumb is anywhere between 1-3% per trade, but you can go as high as 4 or 5% if your system is really accurate (65-70% accurate, for example), but that may be pushing it. When starting though, stick to 1% or less if possible.

    Generally, you can have more than 1 trade open at a time as long as the two positions are not correlated with one another. For example, if you have 1 short position open in EUR/USD and another in GBP/USD, you have essentially doubled your trade size. These 2 pairs are highly correlated so if one loses chances are the other will lose too

    On to leverage...100:1 leverage is insanely high. That is like saying you are trading 100,000 units of currency on a 1000$ account, where each pip is worth 10$. You'll get taken out in no time flat. Maintain low leverage at all times, 4:1 at most in my opinion. But don't worry yourself too much with leverage calculations. I'm not suggesting it's not important, i'm just saying that if you are risking minimal amounts of your account on a percentage basis, then you will automatically achieve low leverage. Think percent, not leverage

    What lot sizes you enter is all a function of the amount of percent risk you decide to take on a per trade basis and on your account balance. A numerical example might help:

    If you have a 50,000 account balance and you decide to risk no more than 1% per trade, then you have essentially decided that in dollar terms you wish to risk $500 on a trade. Now, assuming your pip value on a pair is 10$/pip and your chosen stop loss is 30 pips, then just plug all that information into the follwoing formula:

    risk in $$/(pip value)(stop loss in pips) =>> 500/(10)(30) = 1.667 contracts

    This means you can trade 1 lot of the pair, where the pair trades at 10$ per pip.

    Next...drawdowns. Just know that the after you get past 30% drawdown, it becomes exponentially more difficult to make back your money. You have to back test your system and really see what kind of drawdowns your system would have had to endure given various percent risks. I personally am not comfortable with anything more than 15% drawdown, so i know i will be most comfortable risking less on a per trade basis. In the end it all depends on your system's backtested statistics. A system that is correct on 38% of trades and has average winners 3 times larger than average losers (typical trend following methodology), then you have a winning system. But it is a system that would see many consecutive losing trades as well, therby increasing drawdown potential. Assuming you were not willing to tolerate more than 15% drawdown, you would probably have to risk 1% or less to keep the drawdown potential limited. On the other hand, if you have a system that is right 65% of the time with average winners slightly higher than losers, then drawdowns could be more limited more easily, even with higher risk.

    At the risk of rambling and confusing you (if i haven't already), the acceptable drawdown is really up to your comfort level, but anything over 30% is probably too much as far as i'm concerned. But you will never be able to fully assess drawdown expectations until you have a fully tested set of rules.

    The best way to assess the impact of drawdown and win/loss ratios is with a spreadhseet. I have a pretty good spreadsheet that you input percent risk, avg win, avg loss, account balance and then it runs simulations over 1000 trades and produces an equity curve and maximum drawdown. The spreadsheet has a few glitches in the formulas though, which i would be happy to walk you through so you get an accurate final result. You just have to manually modify a few of the inputs and PRESTO! This really is the most visual way to answer questions. Just PM me and i'll help you out

    Hope i have helped more than i confused.

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