I just wanted to suggest that $1k into $100k over five years is actually doable - with of course immaculate trading decisions and a proven track record of ‘success’.
Your biggest (unlimited risk) is that you hold a trade open indefinitely until it comes back around to turn a minimal profit. I certainly couldn’t stomach that - but I understand your logic by using very small position sizes relative to your account balance. Essentially, using 1:1 leverage. It’s not a new concept, many have gone down the same thought process and given it a try. Let us know how you get on
I will keep you guys informed if you are interested.
I’m ONLY doing this on SP500. My thinking is that commodities and FX don’t really have a positive kurtosis (eventually always goes up), whereas the SP500 does. I know that there are periods of time when the SP500 goes down, and sometimes extended periods of time. However, ultimately, it goes back up and surpasses.
That’s why I would never try this strategy on an FX pair or commodity.
I figure for $1000, I really can’t go wrong. The worst that happens is I lose $1000. Best case scenario, I’ll have a good return in 5 years.
While not for the faint hearted Al Brooks has published his approach to trading raw price action in a 3 volume set covering trends, ranges and reversals respectively. Each volume is about 500 pages, extremely technical and not cheap. The consensus seems to be that his approach requires much determination, time and effort to grasp (let alone master) “but it’s worth it”. A search of the Interwebz will turn up free intros, videos, etc.
Tim Morge has published a lot of info about recognizing SR levels and interpreting their significance in the context of median line trading. He offers (expensive) courses but has made most if not all of the core material (30-40 webinars, articles, PDF files) available for free on a few websites he owns or sponsors but also on the Interactive Brokers website under archived webinars. Again, a search will turn these up.
From a technical perspective lately I’ve been using modifications of the MT4 “TLB OC v02.mq4” indicator for its method of picking SR levels. While the indicator is intended for use with the three-line-break approach to breakout trading (i.e., SR level failure) it’s one way to incorporate SR levels as a metric in a bot (EA) as an aid to placing entries, stops and targets whatever the algorithm. I use TLB SR levels together with a couple of divergence indicators for MACD and Stochastics derived from a public domain RSI divergence indicator when trading manually.
In general the length of time it will take to become consistently profitable depends on your gifts, your work ethic and what barriers you have to overcome psychologically. There is no substitute for experience. When I started out I was completely naive (e.g., no clue what a system was) and profited from a foundations course purchased from a more or less reputable vendor. In my case, in the 15 years it took me to become a so-so trader I studied trading psychology and every concept, indicator, method, system, platform and language I stumbled across, including every fad in artificial intelligence, while battling a host of counter-productive personality traits–hopefully your journey will be shorter and less arduous
All trades need a stop loss, you cannot trade sensibly without one as you effectively have no risk management.
Profitability is dependent on two factors win rate and reward to risk ratio RRR.
However the most profitable combination of reward to risk for a particular trading strategy may be for example a 30% win rate and a 4:1 RRR. However that is based on a Robot taking trades, when you factor in a human psychology you find that a win rate under 30% which means the probability of drawdown periods, losing days and weeks is higher. Then it will cause the trader to trade differently and not follow the trading plan/ strategy and thus the system does not work. So I believe that a win rate of over 50% is a necessity and my signal actually runs around 70% as humans like to win.
So that being said naturally the stop losses must be bigger and RRR (between 1:1 and 2:1) lower, but the trader is happier trading and more consistent.
Now this is based on trading strategies where trades are held for hours to days, for swing style trading the RRR can be higher.
So before you even think about where to place stops you need to establish your trading style and psychology and attitude to risk etc. Once you have established your target win rate and RRR you then can use this to then know where you will be placing your stops.
Example If I am a day trader and I have found an entry on the 30min chart for USD/JPY I know I operate a RRR around 1-1.5:1 and i have a target in view which is 50pips away and is an untested key moving average and ties in with a low from yesterday. From this I know I have anywhere between 1 to 50pips for 1:1 and 1 to 33pips for 1.5:1 for my stop. Then that is the point where you decide where to put your stop and use previous highs, support and resistance and key moving averages to prevent your stop being triggered while also ensuring your RRR is maintained.
TheForexCoach: I don’t agree with your message. It almost sounds like you are getting ready to start selling some kind of coaching service. And, very interesting that you have been on the forum for 1 day and have made two long posts about RRR.
You can’t say that I have effectively no risk management. If I’m only buying 0.02 and 0.03 lots for a trade, the “size” is the risk management. Rather than trying to PREDICT when/where the market is going to go, I just buy and hold until I am correct.
It’s also important to know that I’m ONLY investing in the SP500 using this strategy. The reason is that there is no kurtosis with Commodity or Forex instruments. However, with SP500 there is a natural upward drift over time. So, as long as my leverage is small enough to withstand the drawdowns without stopping out, then there shouldn’t be a problem.
That said, I know there is no guarantees, but I’m willing to risk $1000 to see if I can make this strategy work. But remember, over 5 years, my backtest resulted in 240-ish trades. Whereas what you are suggesting you would probably pass that in 6 months. So, while I’m using futures/CFD’s, I’m not looking to “trade” as much as fine opportune times to INVEST.
Just because someone joins a forum under the name “TheForexCoach” and very promptly happens to mention that his signal service has a 70% win rate, you think he’s here to promote something?
jthornton I am not criticizing you so please don’t fell that i am, i am just stating my opinion.
Yes I am passionate about risk management as that seems to be where most new traders go wrong, and although i do not doubt it is possible to trade a single market wit little risk and leverage that way. Fundamentally it is a bad habit. And my concern is that you or others may start using it on other markets, bigger position sizes/ leverage etc. As soon as this happens you are sitting of lots of open positions and can not trade as your account is at margin limit. Why not just trade with stops and RRR.
The strategy is poor if you can not use it to have a stop + RRR and a good win rate so change the strategy. How did you back test it for 5 years, because I assume it was software and a very simple strategy ie a MACD cross or something?
The SP500 is a perfect example of why your theory is bad, as you may have entered a short period in hundreds of places since July 2009 and they would all still be in drawdown? If you get the overall trend direction correct then it will work ie you were only placing long positions from 2009. And maybe only placing shorts now thinking this is the top of the market (which i believe it is).
I agree risk has to be managed and RRR is one way to do it, but IMO for a new trader that concept comes only with more experience. The method used by a lot of proprietary trading houses specifies an RRR but they’re screening for natural talent. Not an option for most no-talent would-be traders, apparently about 95% of newbies.
The first step for an unsupervised new trader is to commit to paper trading for the foreseeable future. If the new trader can’t do this–succumbs to trading real money from the outset-- it probably means s/he has a thrill seeking personality trait that will have to be overcome to become consistently profitable with real money.
The second step is to decide how much s/he can afford to lose per trade in terms of paper account size–a fraction of account size, let’s say 0.2 percent to start out to allow us 500 losing trades in a row. In any case We approach the amount we choose to lose as new traders assymptotically by first betting too much according to the active strategy (and learning), then too little to wage (and getting bored), and so on. To help make the paper experience more meaningful paper account size should equal how much real money we have that we can afford to lose. The takeaway number is how many trades it takes us to lose our investment (more exactly, for account balance to drop below required margin).
Iterate on the following:
Once we’re no longer learning and completely bored it’s time to lose real money–an account no larger than we can afford to lose in real life.
Once we’ve blown up the real money account go back to paper.
I’ve run these principles past 2 of my 4 kids who chose to trade and all of so far have come away with the following understanding:
there is no quick route to getting rich unless you rob and steal
there is no 2.
there is a place for statistics, but IMO only for bots.
@themadinvestor: You indicated that you were interested in getting an update to how it is going. My account is currently up 38% using the strategy that I mentioned above. Basically keeping the account size small.
To be fair though, my EA would not be up that much. I made a couple of manual trades that made about 15%-ish total. So, my EA is up approximately 20-22% since Jun 5, 2017.
Hello @TheForexCoach… My system is based on the SP500 ONLY. The reason that I use that market is because that market is in a rising state approximately 67% of the time. There is positive drift that happens in that market which means that at SOME POINT the market will recover. It might be 5 days, it might be 5 years, but at SOME POINT the market will recover. So, my theory was that if I can SURVIVE the down period, then that would make it much better.
The reason I don’t use SL, is because as my title states WITHOUT fail every time I have used a SL, it has triggered. That is on a paper account too, so it’s not like there are bots out there looking for my SL.
I cannot put this strategy in any type of FOREX or commodity markets, because there is no positive drift in those markets. There is just ups and downs.
My strategy is based on ONLY LONG positions and closing those positions early. So, I have a signal that is triggered on the 15m chart which I hold for the market increase on ONLY 0.23%. Once the SP500 increases 0.23%, the trade is closed in profit. I have a signal which is triggered on the Daily chart that is held for a market increase of ONLY 4%. So, once the SP500 increases by 4% then the trade is closed.
What I have noticed, is that the trades are about 50/50 in that they go up right away. However, based on my back test (using Tickstory & MT4) the trades are 93% profitable based on the parameters above.
My Risk Management strategy is using VERY SMALL lots. For example, for my $1000 USD account that I opened, I started my 15m chart trading at a size of 0.02 lots and my Daily signal was 0.22 lots. However, the lot sizing I have programmed dynamically based on the size of the account. So, I’m currently up to 0.04 lots on the 15m chart and 0.25 on the Daily chart.
@jthornton That’s pretty impressive. As the @TheForexCoach mentioned though, you may have trouble when moving up in size though, due to margin. I get what you’re saying about the positive drift since the stock market has historically been in a perpetual uptrend, but when you involve the use of margin, should you run into a margin call situation, you will be liquidated with larger size. I think that’s his basic point. The system sounds like it involves a lot of drawdown due to no SL, which does make it risky. Personally, I am not a big fan of systems, as I am a price action trader, but it’s always interesting to observe. Also, I am much more active on forex factory than on babypips, so check me out on there if you get a chance.
@themadinvestor: The sizing is the same percentage of the account.
So, for example, if 0.02 represents 1% of the total margin available, then when my account grows, my sizing will always represent only 1% of the total margin available.
@jthornton Gotcha. Well that will definitely limit the potential damage from one particular position. Okay, well thanks for the update. Keep it coming!
Perfect example of Brokers behaving badly, Price feed from Pepperstone with an 80pip stop hunt before continuing move up. Just enough to clear all tight stops, trailing stops or cause inexperienced traders to close positions…
Now the same exact time period from FXPro with no spike downward, no stop hunt, no liquidity grab prior to the trend upward. Exact same time, with prices differing for 3mins by ~80pips. Optical Illusion? Figment of my imagination?
“Oh, but all LP’s will vary…:”… Bullsheet, specifically in their favor… I doubt we are all viewing the same charts…
I experienced the same. Looks like many ppl put stop losses the same way and of course when it goes in the wrong direction many SL are hit. Which adds to the profit of the opposite site then exit and profits are taken right after that which leads to price drops to the point where you supposed to be profitable.
First of all, trading with sl or without sl depends on your trading style. I personally recommend having Sl in each trade. I think traidng without sl is like diving from a place without a parasuit. Anything can in forex market like bexit.
If you know about support and resistancee level, you can successfully set your tp and sl. Usually in a buy trade your sl should be few pips lower of your support level. Actually, It depends on your trading style
