So unlucky bro. I missed my TP by 1 pip, different brokers different quotes but had moved my SL so got 2 pips. Not to worry they all can’t be winners but a break even strategy works well with this methodology. On the plus side got a break on Frankfurt open and went long. All smiles now.
Nice my friend. Very nice.
I ended up taking 4 trades yesterday. One hit its profit target. 2 ended up breaking even and the third already shown, hit its stop. The encouraging thing was the break even and losing trades all went within a whisker of hitting their profit targets.
Today I entered 2 trades, one early on in the Asian session, the other early in the London session. Both hit their profit targets.
Thats me done for the week.
Have a good weekend guys.
Daxter
There’s plenty of information out there about money management and how you go about it is your business. I’ll talk a little bit about the theory of mine, spread and commission in relationship to MM to the best of my knowledge. Maybe others can add their view or correct me if I make any presumptions or miss calculations.
[B][I]The Plan.[/I][/B]
The plan is relatively simple. Place one trade a day risking 2% for a 1 to 1 risk/return and hit a 60% win rate you increase your balance by 2% each week. That’s just over 100% a year return. Do that for many many years.
OK. So we know it doesn’t quite work that way in the real world but it’s a pretty good formula to work from. First part of this plan is risk. I use 2%. That’s aggressive but still conservative. How you assign risk is your business. At 2% over a 4 week cycle if I struck out bad and lost all 20 trades I can only blow 33% of my account and that’s the maximum risk I want to be exposed to in this cycle. If I trade with 5% risk that figure grows to 64% and that’s massive unsustainable drawdown. On the upside 20 wins in a row at 2% represents account growth of 49% up to a massive 165% at 5%. Again they are only figures but they do act as a guide to what risk you are comfortable applying and the price you could pay.
The 1 to 1 return. My standard formula is SL set at 10 pips TP at the same. I need a pretty good reason to deviate from this and there is no better formula to use. When I talk about spread and commission you see why. When first trying out this methodology I suggest you just use these levels and never ever deviate. It will help in the learning process and quickly get the win rate up.
The final piece is that critical 60% win rate. 3 out of 5 trades each week must be winners. This is not that hard a win rate to achieve when you understand the concept that you only have to take one trade each day. So be patience and wait. That right one will show itself if you just let the market trade and watch what it is she’s doing and then act accordingly.
And finally, do it again and again and again. Trading forex is not the get rich scheme marketers would have you believe. In my opinion you are only going to succeed (used loosely) at this game if you plan to do it for at least 10 years. And it will only be in those final years that you start to see the rewards for your effort. The effort you have to put in will be greater than anything you have done before. It’s just not that easy. Oh, it’s also worst than watching grass grow. But we love it.
It’s very important to understand what spread really means to trading this method and how it relates to your win /lose ratio. If it wasn’t for spread, trading would become what I believe they call a zero sums game. Meaning that basically, if you just placed a trade at random your win loss ratio is directly proportional to your risk /return ratio thus if traded over a sample size would return a net value of 0 to your trading account. Examples, if our RR ratio is 1:1 we have a 50% change of winning our trade. If our RR ratio is 1:2 our change of winning is now 33%. If our RR ratio was 2:1 then we have a 67% change of winning the trade. Why is this important, well fundamentally that’s all any trader is trying to do. Filter out those trades that are going to lose thus increasing our win/loss ratio. However like the zeros on a roulette wheel, spread turns the odds in favor of the markets.
Let’s examine how using our parameters of 10 pip SL and TP. At the moment of entry into a trade our SL and TP is set against ask price for a long trade, bid for a short. However to exit the trade we must take to opposing price so paying the spread. Our true SL and TP therefore should be reference against the opposite price thus true TP is 10 pips plus spread and true SL becomes 10 pips - spread. If we have a 1 pip spread then TP is 11 pips and SL 9 pips so our true R:R ratio is 9:11 given us only 45% of winning our trade. As a random event we would eventually blow our account. Now let’s increase our spread to 2 pips. Our true TP and SL become 12 and 8 respectively giving a R:R ratio of 2:3 so reducing our chances of winning down to 40%. The more you have to give away as spread the less likely your trade will win as a random event. We want to give every trade the best chance of winning as a random event so the less we pay in spread the better. When choosing a broker the spread you have to pay becomes critical to ensuring this methodology has every chance of winning. The best spreads are offered through true ECN brokers and with the right broker may even be 0.0 pips. The price you pay however is commission.
In search of the best spreads you might decide to go a true ECN broker and pay commission but this has its own cost involved in trading. Standard industry rate is $3.50 in and $3.50 out per lot traded pro rata. Basically it mean’s that the first 0.7 of a pip (7 points) of any trade goes to the broker. So with a 5 pip SL and take profit our trading cost is 14%. At 10 pips trading now cost 7% and 20 pips is only 3.5%.
So when setting your SL and TP levels it’s important to let each trade maximize its potential. The lower your target the more you pay in trading cost so the higher you win percentage needs to be to pay the same returns.
So it’s all a balancing act and one you must understand an match to your own plan when you trade off tick charts. All I am trying to do is give some basics out to get you going. These basic served me well and will introduce you to the potential that specializing and trading in a single pair can bring
What more can one say. The hard work is just practicing. Just like a professional golfer, for every ball he hits in a round he will have hit at least 10 in practice. You must do the same. And unlike any other style of trading you can do exactly that practice. As our MM plan goes we must take only one trade a day however there will be many opportunities throughout the day that we can trade. Take advantage of this and trade. Just do it in a practice account. I spend on average 4 hours a day in my practice account. It’s only a $100 micro account but it serves it purpose just fine. Personally I don’t believe in demo accounts because things happen differently in a demo account and when trading this style you must duplicate live conditions as best as possible. Bad habits learnt practicing will be duplicated on a live trade. And the more you practice the more confidence you can have when placing that one live trade for the day.
So that’s about all I can bring at this stage. As I’ve said, my journey is only at the beginning. by sharing it I hope to show that trading forex is about finding a groove that is an extension of yourself. Forex is a business. And you are a very very small business in the world’s largest business. Cash Exchange. If you try and do what the big boys do then you are going to loss. They are just too good at it. I believe you must specialize and capture the niche market opportunities out there that do exist. Unlike the big boys you are not bound by corporate policies so are free to explore all of these opportunities in whatever form you find. This is just one way I believe many more exist. As I’ve said before, the same price actions that forms a tick chart forms every other timeframes. The rules and strategies that apply above must also apply below.
So to finish off
[IMG]https://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcSe7aNUkTO2IIFChx-OQoCy2W_DCvVZat2fDswXj4aZ_6I9L5E[/IMG]Good points bobbi, however, I am placing my stops a couple of pips below the most recent swing high or swing low and setting my profit targets at the same distance + 1 pip to allow for the cost of the trade. I also have a 5 minute chart open with a 20 ema and hourly levels of S/R plotted, which I cross reference with my tick chart.
I am also looking to take more trades than 1 a day, as I am learning the tick charts and the more trades I take (provided they look viable) the greater the benefit to me.
I took a long breakout trade a couple of hours into the Asian session today, with a 9 pip stop and 10 pip target. Price got with 1.5 pips of my target then hit my stop which I had moved to break even.
Daxter
Definitely feel free to experiment my friend. I can’t stress enough that I’m no guru at this. My journey too has also just began. What I’m trying to demonstrate is that there is great opportunity to be found in specializing in a singular pair and the rules/systems that we use on higher time frames work equally well on the tick chart. Why, because the same price action forms all charts. These are the basics I use and they have serve me well. And they will serve anyone well. Now here comes the but. Price action is a subjective method therefor you must trade what you see and what you see is grounded in your trade experience. What-ever methods and rules you come up with you need to stick to. In order to trade consistently you must be consistent. It is amazing the brains ability to learn and if you are inconsistency in applying your techniques the brain will learn these bad habits and it will reflect in your trading with a poor win rate.
Looking forward to see what you develop and your takes on the market. Hopefully more will join us soon and we can learn from each other.
And the pay of.
OK, so this was in my micro (practice) account. Nothing really exciting about this particular news trade but I still won’t do it live. Its said the markets have already discounted into the price news prior to its release and if you look at the price action the discounting happened pretty early today so the markets new something we didn’t. So this pair has been giving it up all day and I got my trade early. Since then practice.
As I said but practice is the key. The keen eye might see a couple of new indicators A fast and slow Hull MA and its a 34 tick chart. Don’t really like trading indicators anymore, they just clutter up my head space but I had a couple of wins trading the plan so just looking at the chart differently this time.
When i start trading i heard about Price Action. anyone have any suggestions for learning Price Action completely. please post link with reply here. Thanks!
Here we go. The trade for the day. This is a 34 tick chart, again ignore the Hull MA. I have. What I’m interested in is the huge 2 pip box pattern and the short break in favor of my bias. Entry was at 1.27250, 10 pip SL and TP. Now wait and see
Plenty of good threads here at BP to learn PA trading. I see you have already made it to a few, I recommend this one
http://forums.babypips.com/newbie-island/45414-understanding-price-action-chris-capre.html
The purpose of this thread is to demonstrate that the techniques used to trade the higher time frames are just as valid on the tick charts and indeed can offer lucrative returns if exercise with disciplene.
Well that was just a little to easy without sounding smug about it. With that said I think anyone going long today is not listening to the news or trading what the market is doing.
I think this is why I like this style of trading. It gets results straight away. I might have the patience to sit in front of the chart for hours but I don’t have any in regards to a result.
Also I have started posting my images in a different format format. If you right click and open image in new tab you’ll get a much better view at what I am looking at
I like your trading style. One good entry will enough for the day or week may be. I also don’t mind waiting for hours to grab A+ trade.
Thank you perryfx. I like to gamble a bit. The roulette wheel is my main poison. Ever seen a guy just hoover around the wheel for an hour then just walk up, place a mind-blowing huge bet, win and walk away. That’s what I’m trying to duplicate here. Trading tick charts is so much fun but I think misunderstood. Because just like the roulette wheel, stay and play and the house always win. Wait for that one moment but…
The last couple of days have been like taking candy off a kid.
It’s been the gift that keeps on giving. Ride it while we can bro. Looking at the monthly chart, trends like this only come around once ever 2 to 3 years. My bias is going to be bearish for a few more weeks still. Think we’ll be looking at 1.22 easy by November. Things might start getting harder after that