That is a lot of information to keep me thinking. The position size calculator I use is just calculating the pos. size from the SL It calculates also RR from the TP. Van Tharp describes a pos sizing system based on ATR and he also shows that it is more profitable then a fixed position size or a percentage based one.
Nero do you refer to the bollinger-bands? They are based on standard deviation Do you use something like that to calculate position size?
Lexys Your example is extreme but I got the picture To stay on the average of 4 pips you can not have to many losses of 60 pips But statistical you can have 5 in a row at the start or even double that and over a large number of trades still have an average of 4 pips
In your example the PF is calculated from pips This gives no information about the profit in dollars as pip value is different for every trade by position sizing Do you agree?
I didnât know that (but should have): I use ATR in calculating position-sizes, myself (not on a daily basis, but I have a look at the end of each month, or whatever) and Tharp was probably where I got the idea from, and then forgot that Iâd done so. You get to know/learn/understand, for the instruments you trade, what the ATRâs are like during their RTH.
Yes - sorry. I just made up an extreme one on the spur of the moment to try to illustrate the underlying concept.
A PF of less than 1 means your total gains are [I]smaller[/I] than your total losses ⌠did you mean this? Happy to chat if I can, but Iâm no âteacherâ. :8:
I take an average of about 8 trades per day, probably. In principle, Iâm willing to look at and think about any methods with a PF reliably above 1.5: just a kind of ârule of thumbâ Iâve grown used to, over the years, for my own trading.
Yes that is what I mean I am not making money with trading and I am looking for what is wrong. I have issues whit all the points you mentioned in the previous post.
You are a good teacher. I have been reading a lot of your post and they make all sense. There is a lot of from Van Tharp in it. I should have reading that book 5 years ago in the first place.
I am still use stop loss to manage from risk because get wrong in my analysis, although sometime this is like as dilemma because sometime after stop loss hit by movement of price but eventually still move back to early track and sometime reached target.
no, i use the bollinger bands to find natural resistances and where to expect âturbulencesâ.
i use the simple Standard Deviation calculation âSTDEVâ which your charting tool should have. it shows the average movement of the price within a preset time period (normal charting tool preset is 10 candle-bars) you can set it to 100 50 10 whatever you like and use on all charts no matter daily or weekly or 4-hours.
for example, the average daily move (no matter if up or down) on the dow jones is 122 points. so if you start a new position based on the daily chart then you can calculate 250 points as stop loss (which is 2 entire days against your trade and therefore 2 complete sessions) and when that happens usually your trading idea has died. on the same calculation when you plan your TP you can plan 4-5-6-7-8-9 complete daily average sessions in your trades direction. 500, 625, 750, 875 etc etc
now you can use your risk management strategy (in most peoples cases 1% per trade) and you calculate how much you loose on 250 that is is exactly 1% of your account (example âŹ5000) so the position size you enter is âŹ20 per PIP/Point (250 x 20 =5000)
your TP with a 1:2 ratio would be 10000 (500 points) 1:3 ratio=15000 (750 points), 1:4 ratio=20000 (1000 points)
but in my case, i am not a friend of TP limits. i see them as contraproductive simply because: when youre trade is already good on the way then why get out of it on a preset âpointâ where you limit your profits? prices always give signs, they give signs when they will go down they give signs when they will turn around so i always take my profit when i see a clear sign that my direction is ânot the right directionâ anymore.
There are more than one ways to blow your account. You will learn all of them while blowing several accounts, but donât worry, that is a part of the trading education process and only right way where you can learn from. There is no short cut.
Thanks Nero, I forgot about this indicator and yes it is in my tools. How you describe it is a bit similar to the SL placement Van Tharp describes. He use 3 times the ATR of a 10 days period
I like to use tops and bottoms for SL and TP
TP is one of my problems
For example:
GBPJPY closed on BE after it was in profit for +87 pips
USDjpy closed with +22 pips and was in profit +102 pips
GBPUSD was at +37 pip My TP was at +39 Pips Now it is negative
GBPNZD is +160 pip and I still dont want to close it
GBPCAD was at +90pip went back to BE and now at +45pip
Conclusion: If you dont TP you blow your account also
Turbo in your example of the DOW Jones How do you decide in what direction you go to trade? Do you use some kind of trigger to enter?
You Risk calculation is clear. The example of the 1% is a fixed percentage. But what if you make this variable depending on the risk of the trade? Hi risk trade 0.5%R Low risk trade 5%R for example and depending on the statistics of the trading history?
Do you think about dividing your position, with one or more TP levels on the way up/down, and letting the last lot/mini-lot run further with higher risk, after locking in some degree of profit from the overall trade? (I do this on [I]all[/I] trades.)
I appreciate that youâre asking Turbo and not me :8: but I hope nobody will mind my interjecting, here, that itâs possible (and perhaps even advisable?) to treat that, for position-sizing purposes, as âsimultaneously trading two different systemsâ: a higher-risk one and a lower-risk one.
dont know Tharp, never read anything of him but sounds reasonable.
yes of course at some point you have to take profit. but i dont know which time frames you are trading. in my case i only trade daily and 4 hours, everything below that is simply not worth the effort. so for me it has to be a few hundret points/pips before i take any profits. today was bit annoying was on plus of 2000 pips on gold and scaling in a few more times was above 4000 pips plus and in the end it turned and pushed 2 of my profitable scaled in trades into negative. in this case i setted a predefined point of stop loss (stopped out at minor profit of âŹ3100) which was the engulfing of a 4 hours candle before the New York session. by now im short on gold hoping for a nice downfall of 3-4000 pips. but it is a risky trade as it âin the middle of nowhereâ hitting no support/resistance line like shooting a flying duck.#
baisicly when there are special formations or movements then âmy ideaâ of where the price is going simply died out. and when it does that i go out. usually i target a profit ratio of infinity, i never take any profits unless i see that âmy ideaâ died out and is not valid anymore. or i take my profit at resistance points where im very sure the price will turn. usually around those resistance points which i determine myself (the market determines them i only find them) the price fluctuates and turns around or goes above it, if i go out and it crosses this support/resistance then i always find a good point to enter again into the same direction (usually a retest of the line) and thertefore not loose any points in the process.
i have my system, its a bit long to describe, you can find examples in those 2 threads here:
thats a hard one, but if you want the truth it completely depends on you and your risk aversion. i am trading more then 1% risk of my account balance but i choose my trades very carefully, in best cases i have 2-3 trades a week. just trading tight will get you to miss to many good profits and hurt your account to much. so the calculation of the stop loss pretty much stays the same, just that you loose more/win more on trades.
my only risk is the inital commitement to the first position. after that i am scaling in massively and while i scale in i hold my stop loss continiously on Break even. that way it is easily possible to have a R/R of 1:15 or 1:20. but scaling in is dangerous and has to be practised quite spome time untill you can scale in and be confident about what your doing and not loose your nerves and close all trades on minor retracements etc.
and that way i really dont mind having 5-10 loosing trades in a row simply because i know that the one winner earns me enough to offset the 10 loosers before that. and to be honest i have a âpredicted the moveâ ratio of beeing right of 75%, just not all moves are strong enough that i earn on them, sometimes taking a brake even âlossâ is better then gambling and âstubbornly thinkingâ that youre right and the market should do as you want it to.
Do you mean that you are scaling out of your trade? The opposite of what Turbo is doing in the next post?
Donât be :8:
I appreciate your input very much, the question was original to you any way
It was just an example and suppose it is the same system.
I know 2 or 3 methods of position sizing.
1: Fixed lot size: You trade 1 lot for every trade. No matter if your SL is 50 pips or 100 pips
2: A percentage: After you know where your SL is you calculate your position size from how much % of your account are willing to risk. This is the most common used I think.
3: A system based on ATR: You are maybe using this and I donât understand how to use this in forex.
What I do understand is that position size in this system is depending on the volatility of the market
How is this effecting trading results? Who is using this?
I think this is your trade. The price action on the 4h chart looks good for you making nice lower highs and LL Sorry that you leave so much money on the table
Mainly price action. I went trough them quickly and will go back to it later.
Do you mean that you can start with a 5% risk (for example) and after scaling in you move SL to BE and having a free trade. This for all positions that you scaled in But if SL is hit you have nothing. Does that happen a lot in your system?
Not using a TP (or Infinitely) but trailing your SL is also a way of taking profit
I will try to scale in on a demo trade and see what it does with the numbers Just have to find a trade that makes a big enough move
It is interesting to see that you and Lexys have a total different way of trading and I can learn from both of you. I have to work on my trade exit that is clear for me now.
you can d0 it with 5% if you are willing to risk. but you can aswell do it with 1%.
the way i do it is always fixed. in april and may since they are slow months i risk 2-4000⏠per trade. i choose cnadlestick formations (example the end of a shooting star tail) combined with trend lines as stop loss. If the stop loss then is 80 points i calculate how many contracts i must buy to have a stop loss of 2-4000 (depending on my confidency of the direction adn trade idea).
So after the first commitement i wait for the next 4 hours candle to finish, if it moved into my direction even only a bit i increase my contract count by 50% (first scaling in) and reduce the stop loss so it stays again -4000. after the next 4-hours candle is again in my direction i again increase by 50% of first commitement. after the second scale in i reduce stop loss again so it is -4000 (at that point im already in profits and usually more then the 4000 stop loss). and thats it. then i wait a 24 hours period and if the trade is still in plus i put my stop los to 0. on the 2nd or 3rd day (depending how fast things are developing) i scale in 3 times more (again 50% of initiall first commitement) and move stop loss
accordingly to be at +/- 0. then after that i do scale in only when i see opportunities and those are only breakouts (no retracements).
so the inital risk stays constantly at 4000 throughout the first day or two and after that moves to 0. when the trade continued further i dont use stop losses anymore. it is still at place at 0 but it has become only a âemergency stopâ if something happens while im asleep or somewhere which is out of plans and shakes the market by several % within a hour or two (and that happens very rarely).
Here: at this trade the initial risk was âŹ2000, with scaling in 5 more times it ended in a 14 times gain. i posted this 2 weeks ago on forum so its no secret or something.
so if my âTP planâ would have been 1:4 RR and i take profit at 4 times risk? whats it getting me? 8000?
so i must be right 25%of my trades to be on 0? how i do it its enough to be right 10% of trades to be at 0. all you need is patience if you want the truth.
you dont really need many trades. 3-4 wining trades a month and youre ok and the best thing about it you dont have nervocity like with scalping or whatever people try to do. its a slow game and boring, you sit and watch numbers grow, sometimes you adjust something sometimes you buy more contracts etc etc.
here on this oil trade the initail risk was 3000 if i remember correctly. it continued further a few more days but i dont have a picture of it anymore or at least cant find it.
se scaled in 2 times, before taking this picture the stop loss was moved to +8000 or so simp,ly because i was not very sure of the direction anymore.
everyone has his own approach and lexys approach is very professional. mine works for me. i didnt find it in any book, i only through years found out what fits me and what makes me keep my nerves after im in plus (as that is when people get truly nervous, when they have a profit they dont want that paperprofit to become a 0 or minus and that is what makes people go out of trades too early and in the end makes them blow their account)
and one thing i found out long ago. really good trades dont happen daily, the occure rather rare and onceyou found a good direction then ride it till it dies under your ass. taking profit on a predefined âTP-pointâ only makes you miss the big moves. and trust me, you dont want to miss the big moves.
imagine the following. you have a TP of 400 points. the price reaches your TP within 2 days, you go out and then⌠what then? u go into the counter position and try to fish a turn? but you cant fish the turn simply because the price continues and moves another 1500 points down. while you after having a profit of 400 pips had 2 new trades where you thought the price will reverse and you lost 200 points on those 2 trades combined. then you turn to another pair/index/stock and what then? you look for new trades and new signals? get faked out once more or make some mini profits while on the first trade the full action is goling on and the big money is being presented to you. whats the point? you missed 1500 points to loose 200 points and to concentrate on other pairs/indexes/stocks?
rather wait for a signal that hints you to go out then to go out at a fixed point and then stay there clueless about what you should do next.
and the best thing. once you are in a season where trends develop themselves (not ****ty april and may and june) and you catched a trade which developed itself after a week or two all you need to do is sit tight and do nothing. you go vacation, holidays whatever, have time with kids etc etc simply because a random ânervocityâ move from some random news, that is goint to be forgotten the next day anyways, dont scare you, you laugh at them and even see them as good opportunity to increase your commitement and buy new contracts.
Very nice advices. I also recommend newbies to adhere money management rules and never retreat of them as its like a trigger for further losses, hard to stop myself from revenge or overtrading. Iâm with Hotforex as well and find that their execution together with my strict MM allows me to earn consistently without much drawdowns.
It is only upon the trader himself to decide when is the best time for him to do his trading and how he can get more profits from his trading. This is why using a Money management approach works and gives him more income in the long run
Yes keep strict with money management and risk management is very important for trader, it will at least making account longer life, margin call occur usually trader greedy in trading with use high risk taker with desired to making huge profit at short time
I think money management is important and besides this, traders should also consider psychological management as well as it contributes 70 - 85 % winning in forex and the rest 15 - 30% contribution came with money management factor.
Majority of traders lack the use of proper money management. So if you want to save yourself from blowing up your account, you will definitely be needing a good money management plan.
My PF is < 1
