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
@danielelton7, thank you… But the key to the thread was SP 500 where there is positive kurtosis. In the Forex & Commodity markets there is no Kurtosis, therefore, I only place trades on the SP 500.
