Hi Graviton
Just finished getting up to date with Tymens thread and thought I’d pop over here and check this out.
I am trading a mirco account and having problems with timing the entries, so hope to learn something here.
Hi Renala,
Take a look at the book: FOREX SURFING, by robert borowsky. He describes a method using higher highs, higher lows (uptrend) and lower highs and lower lows (downtrend).
RenaLa, I don’t know of a single method that works all the time so I use several methods. Sometimes plotting fibo levels reveals price is bouncing off a fib level. Sometimes price bounces off a remembered high or low from the past. Monthly highs and lows are the strongest and weekly highs and lows will form supports and resistances also. Sometimes price follows a trendline or channel up or down. Sometimes price bounces off the 100SMA or 200SMA. Sometimes price bounces off big round numbers like 1.2000
Greg over at FXDD goes through all these levels several times a day in his videos at:
Sometimes I see price bouncing off a a point over and over and I can’t for the life of me see why it has picked that number to bounce off of. While I consider all these points as I trade, I do not base my trading off them. My entries are based on retracement trend line breaks or valid CBL’s and these support and resistance levels are secondary. I also watch carefully the formation of higher lows or lower highs across several timeframes as I trade.
My exits are based off taking profit from a peak profit point after I have generated a good risk reward ratio. I don’t try to pick the absolute all time peak profit point since there is no way to know when or where that will occur. I just pick a peak profit point on a timeframe I’m watching after a good risk reward for that trade has been generated and take profits there. Sometimes I do get the absolute best exit and sometimes I exit and see the price move to a better profit point after I exit, but that doesn’t matter as long as I exited on a peak profit for my trading duration with a good risk reward ratio. As you practice all this you get better at it and your numbers improve and it slowly gets easier.
It depends on your win loss ratio. This is a key indicator of your trading performance and you should track it weekly and monthly and seek to improve it. If your win loss ratio is 33.3%, any trade better than a 1:2 risk reward ratio is good as it will produce profits over the long haul, 1:3 would be very good and 1:4 would be excellent. If your win loss ratio is less, you need to only take higher r/r trades to be profitable over the long haul. If your win loss ratio is higher, you can take lower r/r ratio trades and still be profitable. Even though I have a good win loss ratio, I do not take trades with less than a 1:1.5 r/r ratio as I don’t consider them to be worth my time and tying up my margin. If you don’t calculate your win loss ratios and r/r ratios, you are flying blind and will probably lose. You can improve profitability by either improving win loss ratio by taking higher quality trades, or by improving r/r ratio by taking only those trades where you calculate you have a better chance at making a better return.
I constantly work on both these ratios, looking for little things I can do to improve w/l or r/r ratios. Of course, I can improve those ratios by taking far fewer trades, so I also have to watch the big picture of increase in trading account balance. I can have great ratios, but take so few trades that account balance grows more slowly that it would if I took more trades with slightly lower ratios. So that balance must be optimized. Does that make sense?
I´ve been calculating my ratios for the last 5 weeks an this are the results:
week 1
win/loss = 0.20
risk/reward= 0.78
week 2
win/loss = 0.33
risk/reward = 8.4 (yeah i know very bad week :o)
week 3
win/loss= 0.83
risk/reward = 1.14
week 4
win/loss = 1.00
risk/reward = 1.18
week 5:
win/loss = 0.83
risk/reward = 0.50
I´ve been improving little by little. And this week is going to be the best week so far. As you can see right know i´m with a win/loss ratio around 45%-50%. With that ratio, what would be a good risk/reward ratio if i open a trade? 1:2 would be okay?
Looking at week 5 I see a win/loss=0.83, or 83% is that right? Explain how I’m looking at that wrong?
The way to calculate break even = W/L X Reward/Risk. So if you are getting a 0.45 W/L you need a 1/0.45 = reward/risk to break even, or a reward/risk of 2.22 to break even, or risk reward of 1 : 2.22
You will want to shoot a little higher to really make anything, like a minimum of 1:3
A W/L of 45% is OK and I would work on improving risk reward first. Does that make sense?
OK. The way I calculate win/loss is if out of 13 trades you have 4 wins and 9 losses the win loss would be 4/9= 0.4444 or 44.44%
I believe that’s the way it’s usually done. I’m still confused as to how you are doing it, but if you have 45% wins, that’s pretty good and if you get your risk reward ratio to 1:3 or better on average, you should be making steady bank. Note that there are two ways to do that. If you get better entries you can reduce your stop loss amounts to reduce risk and improve your ratio. That’s really the easier thing to do because you are in complete control of it. The other thing is to take only trades that look like they offer a better reward. That depends on what the market gives in the end and it’s more difficult to manage. But either works the same, reducing risk or increasing reward. Happy trading.
[B]Oops! I made a sleepy headed mistake on this calculation. NB caught it and corrected it later.[/B]
Yes graviton, you have answered all my qns clearly!
I’ve check the records for the past couple of weeks, and especially this week.
I have quite good pair selection and the trade most of the times went my way. However for it to eventually go my way, i would need to re enter couple of times.
I had 4 trades this week, if i had re entered on all 4 according i would have made profits. However the emotional part held me back and i didnt pull the trigger again. Resulting in losses instead due to the retracements.
I suppose my mindset needs to be tuned for the fact that re entry is normal.
I am used to the mentality that once i enter the trade, i either make it or break it. With you new teaching now i need to fine tuned again.
I’ll let you know how’s it going, i tell myself the maximum i will lose on a pair is 2% of mm. And i will keep re entering as long as the opportunity arise as long as my 2% is not met.
From my understanding, when you let a pair retrace would you exit at a max of 0.5% since you use a 1% mm? So meaning you will let it retrace you out to the maximum of 2 times before you call it quits for the pair?
By the way, base solely on cbl entry on 1HR AND 4HR TF and trading with the trend, i find myself having 6-8 trades a week only.
But i do understand more trades does not mean more profits, im just saying know, it seems pretty little.
Hey, perharps you could add more off these evaluations to get a good idea how you’re doing. I got it all from the book max adverse excursion.
win ratio = No of wins over total number of trades
payoff ratio = average winning trade divide by average losing trade
commission ratio= total comm paid divide total gross profit
largest winning trade
largest losing trade
average winning trade
average losing trade
largest number of consecutive losses
average number of consecutive losses
largest trading account percent of drawdown
average trading account percent of drawdown
If you’re good in excel you could record it down on a daily basis, weekly and monthly followed by yearly.
You can either wait for a retracement and hope to get back in whilst the trend is still running (confirm by using multiple timeframes and a CBL)
OR,
Accept you have missed it and move on to another pair (my usual approach) ;).
Thanks Hachiko. I normally move on, but this was a very good trend so I was trying to get an entry. I used fib retracement to try to get in but was a bit unsure so ended not getting in.:rolleyes:
