Hi,
if i have a trading system that only trade 1 time per day and my target is only 10 - 20 pips. which money management should i use?
if my target profits is 10 pips and my Stop loss is base on last candle low/high(it can be 20-60 or higher/lower), how many lots should i use?
if i use fix lots like 0.1 lots (mini acc) , the profits will be $1, but if it hit the stop loss then it will be 20-60 / $2-$6. the ROI will be risk : profits = 2/6 : 1
if i adjust my lots base on 1% of acc which is $4, then stop loss of 20-60 and the lots will be 0.2 - 0.06, which the profits will be $2-$0.6 the ROI will be risk : profits = 4 : 2/0.5 == 2 : 1/0.25
if my trading system have winning rate of 60%-75% or 80%, which money management should i use?
and i also thinking of if i loss a trade yesterday, should i double or add more to the lots for the next trade to cover back the loss?
That is not a very good risk to reward ratio.Trying to get 10 to 20 pips on a previous candle of 20 to 60 pips stop loss is best 1/1 proposition.Let me ask you this back testing are forward testing what is your pct of profitable trades on different size candles?If your going to use the previous candle size what works best.I dont think there is a diffinitive answer with moving stop loss without more data.
thanks for reply.
i understand the position size.
and about the risk and reward ratios, if the risk is higher then reward and the winning rate is low, it will loss more money then gain profits correct?
You can control your risk but the market dictates the possibility and extent of reward. It is impossible to say what the reward will be when you enter a trade.
I wouldn’t say it’s impossible to say what the reward will be on a trade by trade basis. It’s just that it isn’t always written in stone and can’t be certain like your SL.
Using ichimoku and S&R, almost all of my TP’s are extremely close if not on the TP line I set.
I know what you are saying though. Just because your method has a risk/reward of 1:2 doesn’t mean that exact reward can always be nailed.
That’s part of trading though, you have to know when to take earlier smaller profits or just part of a TP before complete reversal.
Here is what usually happens with my daily/weekly trades to give you an example in context.
I use ichimoku to determine possible TP and SL. I’ll only take a trade if it’s 1:1 or greater, it has to be at least reasonably close, not exact.
Once the trade is set I will never move my SL. I’ve learned from experience, that if you move your stop loss it’s only because you can’t accept the loss and are beginning to get irrational and hoping for a reversal in your favor. The stop losses on daily ichimoku set ups pretty much tell that if they are hit, you were wrong about the direction and it’s a good place to get out. If you move the stop loss you end up losing more.
TP is different. I’ve found that since I’m working off of support and resistance, the TP points are pretty spot on…BUT, they can touch them or fall a few pips short and reverse. So, this isn’t a hard number. I won’t robotically just let price hit TP or not.
I’ll either lock in break even at x postive pips and let it go where it goes, and or lock in pips at pivot points. In any case I always lock in +100 pips. If I am around the trade when it is nearing the TP I will lock it in just a little short and put the TP much further hoping to get aditional gain.
That is another part of money managment that is not talked about. That is minimizing loss and maximizing gains. I actively manage my open trades. I believe traders that do this have an edge over traders that enter with a TP & SL and just wait for either to be hit.
The only reason to ever move a SL, IMO, is that after you place it you see that it is dangerously close to the wrong side of S&R and or pivots that price is likely to bounce off of and go in your direction anyway. But, this difference shouldn’t be huge. You shouldn’t be moving it in reaction to PA.
If you mean do I have a say a fixed 100 pip sl for every trade, no. I use the ichi plotted S&R & pivots for SL.
I don’t recalculate the position size because I don’t use risk x of your account and divide that among the Sl. I use levels. I trade 1 dollar per pip for every K in my account.
I don’t go up or down a level until I’ve won or lost 1K. So, if my account was say 20k I’d trade at $20 dollars a pip. I’ve found for me personally, this equates to a smoother rising equity curve as losses are usually made up by the next trade as I havn’t readjusted down. (unless I broke a level down, which hasn’t happened yet)
So, at any level I’d have to lose 1000 pips to actually lose my account.
The most I do is three trades at one time, the largest stop I’ve had is 200 pips, but most of them are closer to 100 and rarely get hit with my win/loss ratio.
At $1 per pip per $1000 in your account, a 100 pip stop loss would result in a $100 or 10% loss. One can infer you are risking 10% of your account per trade. The question that begs to be asked is, how many times in a row have you lost 10% of your account?
My losses, thankfully are pretty spread out and my win/loss ratio is very high. Average is 8 wins for 10 trades. So, I make up losses very quickly. Thats another reason I trade level increments for lot size and not % based. It would take me more time to make up the loss because my lot size would be considerably less just after one or two losses in a row.
Some of my wins are quite a bit larger than my initial tp as well, as I will lock that in and just let the trade go for the rest of the week or even further if I get really lucky.
I’m also very careful at entry time. I’m always more concerened with potential loss than gain. I usually lock a trade in at BE, when it’s +20-50 depending on the pair. So, most of the time I eliminate most of the risk from my trades. My thinking is if it goes that far and then reverses it isn’t going to work out, so I just lock it in. Sure, it works againts me sometimes, but I don’t lose anything either.
Calculating lot size this way isn’t recommended unless you already have a method in place, an edge, where your trading history has shown you have solid and defineable win/loss ratio.
I don’t always let trades go all the way to my SL. I trade daily candles. So, it’s often easy to see before SL when a trade just isn’t going to happen your way and just get out.
