I’m still a novice, but so far enjoy swing/position trading very much. I look forward to reading what you have to share. Thanks!
I think a few things need to be summarized here:
- This thread is barely 5 days old but SEEMS much longer because of the many and various tangents taken by many posters
- MG SAID he would be out of town and not posting any “meat” until he gets back today (seems easy to understand)
- Trying to glean methodology previews and peeks only lengthen this thread unnecessarily
- Trading off the Daily charts takes patience and is not for those traders who crave the action of trading off the 15M or 30M or 1H charts, so if a trader can’t show patience in this thread, I fear for their success with this method of a much slower pace.
All of the above notwithstanding, MG, you must appreciate that there is a brightly wrapped present sitting in front of us that we can’t peek inside yet…kids at Christmas!
I don’t mind the tangents. This thread doesn’t need to be limited to my musings. I’m going to take mrchilled’s advice and put links on the original post to help those skip through to posts that are directly relevant.
Not Fair! I say make them suffer…how exactly are future readers going to learn how to be patient??
Even if they read thru all the nonsense to get to the MEAT, they’ll still get thru it faster than we are…so I vote NO LINK…if they deem it a crappy thread, they’ll skip over it & read something other thread, proving their impatience, hence their inability to trade this methodology! 
LOL…awesome!
You’re going to need to change your perspective on risk management. Drastically. When I tell people that I closed out a trade for over 900 pips, their eyes start counting the dollar signs. However, a pip is just a unit of measurement for price movement. It does not tell the story of how much money was pocketed in the process.
How much does 900 pips mean to you right now? What effect would that have on your account? Odds are if you’re chasing down 10 and 20 pips here and there, 900 would feel like a windfall. But for me, while it is a healthy gain in my account, I’m not turning 10’s of dollars into millions of dollars in a short amount of time.
Roughly 1000 pips is about 10% of my account. Therefore 100 pips would be about 1 percent and 10 pips would be .1%. This is extremely important to understand as it puts an entirely different perspective on risk then what you have may be accustomed to.
You’ve heard it all before when it comes to risk management. Do no trade more than 2% per trade and be sure to keep your risk reward at a minimum of 1:2. However, how does that translate when you have 25 open trades all at once. Would not that be quite some risk all at once if you lost trades at once?
Currently I risk in each trade, 1 unit for each dollar I have in my available equity. So if I have $100,000 in my available equity I would be risking 100,000 units. We know that to be, one standard lot. If I have $329,403.35 in my account, then I will enter a trade with 329,403 units. If you’re starting out with a small account, and only have 10 bucks to trade, then you would be entering each trade with 10 units. Now for most of you, your broker is not conducive to receiving such a variable number. That’s primarily why I trade with Oanda. They allow me that flexibility. I could open a trade with 1 unit, or I could open a trade with 98,483 units.
But this doesn’t solely determine the amount of risk per trade, now does it? That just tells you the amount I use to enter the trade. Generally a stop loss would be used for someone to calculate how much they are using, and likewise they would enter in a TP of at least twice that number to standardize their risk profile. For me, when I enter into a trade, I refrain from entering either an initial stop loss or take profit. And that’s your cue to fall out of your chair.
Price movement has to be respected. It is extremely volatile, and when you try to contain it, you’ll find the angst of unnecessarily triggering losses. You’ll never hear me complain that I’m being stop hunted. Ever. Furthermore, I trade price action. I don’t use instruments to guess which direction price is going to move. I simply move in the direction of price. While that sounds so simple, it really isn’t. I as well am no fortune teller, and though I enter into the overall direction of price, price still does what it does and trades do turn against me.
If I see a trade that’s not going the way I want it to, I will allow it the room it needs and place a stop loss at a level I would feel would be a blatant area where I know price disagrees with my assessment. I also use it to take profit.
That’s right, I never ever set a take profit target. There would be no way I would be able to let a trend run it’s course if I were to sit there and pull out of a trade after an arbitrary amount of pips. When a trend comes to an end, it shows in price action. And that’s when I will enter a stop loss, locking in some pips and giving price an opportunity to continue on the path I want it to go.
As a result, I will almost never exit a trade at top or the bottom of a trend. Rather, I will generally leave some pips on the table and exit the trend at what I believe to be the conclusion of the trend. For me, the loss of pips by this method has actually been an increase of profitability. Which option would you prefer? To take pips on a EURJPY run at 200 pips, or where the overall move was 1200 pips, but you ended up with 900 pips leaving 300 on the table?
At this point, you should probably still be concerned about my risk/reward. I assure you, it beats 1:2. Let me share my stats for this calendar year with you.
Thus far 56 trades have been recorded banking 3434.4 pips. My average win is 239.7 pips while my average loss is 93.26 pips. My best trade thus far this year awarded me 986.1 pips, while my worst trade was 212.4 pips lost. On average I hold trades for 12 days and I’m expected to bank 61.3 pips per trade as it currently stands. So as you can see, despite me not using a stop loss or a profit target, I’m able to beat out your traditional risk reward. And if you look at the extremes I was able to have a risk reward of 1:5. Not bad at all.
But mastergunner99, you say, what happens if price just goes nuts and moves against you and you get a margin call? Surely you need to put in a stop loss. If it makes you feel better, you do it. I’ve yet to see any day across all pairs where price moved 1000 pips each against me on over half of my trades.
If you want to really put in a stop loss, then toss one in at my worst trade ever for the year. For my average loss isn’t even 100 pips and that should give you some peace of mind, I suppose. Nonetheless, I’m still going in as I generally do.
At this point, I’m sure you have questions. Fire away.
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Great start MG - thank you. Looking forward to hearing more and hearing about how you analyze pairs to make entry decisions.
Say you are short a pair. And you let it run like normal. It finally hits your SL and banks you pips. Do you then enter long straight away or reassess?
On entries do you just look at the direction and price action and jump in? Or wait for retracement?
I always reassess. While I’m in the market all the time, I’m not in each trade all the time.
I enter when it looks good.
Perhaps my next post will start diving into the specifics of price action.
Does everyone feel they have a good idea of my methodology of risk management?
Please continue. Having so many trades fallen from 200 pip profit, back down to 100, it can be very frustrating. So as easy as what you’re saying sounds, I understand that it takes much discipline.
Your approach of giving the trade a lot of space to work appeals to me. There are so many ways a SL can be hit even when the position is in the correct direction.
However, in my case whenever I increase my SL too much my risk/reward goes down. I suppose this is working for you because you are consistently able to avoid short term trends and take only the big ones.
Correct, it goes down because you are not letting your profits run. Fear of loss causes traders to grab profits quick and keep them in losing trades longer.
Are you gonna make an archive of your posts for review? I mean your main theme, not your response.
Yeah, tomorrow I’m going to place the links on the first post of this thread.
Looking forward to the 'Methodology’
Thank You
Loving this so far, waiting for the next part MG. I’m a lurker but I finally made an account a couple days ago because of this thread.
Do you have a limit of the amount of risk you put on the table with all positions combined?
Yes MasterG ,good sense most trades are stoped out by marketmaker spikes hunting stop losses ,so if youve got the courage to do this it could work, well done again.
Just one more question…do you limit your exposure to highly correlating pairs? For example if I see a very similar setup on both GBPUSD and EURUSD I will tend to just take one of them to avoid doubling up my risk.
Not sure if this is considered part of risk management or entry criteria.
That’s what I look at 28 pairs. That’s pretty much my limit.