ok… on the positive side of things, you are calculating draw down and other things which is good.
and limiting exposure time, which is good
now let’s look at some math (if i have understood this correctly)
you have said[quote=“5000marios, post:3, topic:126843”]
I have noticed that my EA has usually 10-12 trades at max. Let’s say it has 15 open positions, for one currency. If I use a margin of 2.6 per position, this means I will have used a margin of $39, for these 15 positions
Meaning… you are saying if you have 15 Concurrent trades open
and the NOMINAL MARGIN for each is $2.60
you are saying that you will use no more margin than $39
now i have a few questions about this…
- this statement conflicts with the first one
- let’s look at both scenario’s
if you are using a MAX, NOMINAL MARGIN of $150, this is around 50% of your account if you are starting with $350 (i’m approximating. obviously)
Now. if it’s $39 and you are starting with $350, you are risking approx 10% of your entire account.
but if you look at it correctly, it’s actually a bit more than 10%
Meaning… You can only lose 10times before you blow your account out
- How does this make sense ?
You first said that 15 trades will cost you a MARGIN of $39
but… 4 Trades will cost you a Margin of $150
i don’t get the calculation here
Now. clearly you said this
so… you are basically basing your strategy around the concept that YOUR HABIT IS… that you don’t lose more than $20
well. ASSUMING THAT IS CORRECT, You are fine
but… hehe… in my experience, you are going to experience a very very RUDE SHOCK
No. Not at all, it’s totally fine
and AS A NEWBIE
how do you know that your experiments don’t have flaws ?
because Flaws will cost you money
Also, why do you need to have so many concurrent trades running ?
and for this…
and what makes you think that that will not happen.
again, you seem to be relying on this Draw Down figure of $20
Mate, HAVE A BACK UP PLAN
ask yourself, WHAT IF … the Trading gods decide to throw a lighting bolt in Yo Ass hehe and you lose $300
WHAT WILL YOU DO THEN ?
Professional Traders (and… i am not one of them) Plan for different scenario’s.
Me personally, i trade profitably , and have been doing so for a few years,
a few things that tipped me from having little to no control or taking guesses to going to a point of control and the difference between guessing and CONSISTANT PROFIT was a few things
Understanding how Leverage works
Understanding how order flow works
Understanding NOMINAL MARGIN
Understanding MARGIN LEVEL %
Understanding that Risk is more than Just Risk to Reward Ratio and that it incorporates things like. Exposure time, Starting Capital , Lot Size, Nominated Risk per trade, Having a goal, Knowing when to stop trading for the day, Having a Stop loss and knowing where to put it, Having patience.
Testing and trusting my indicators and understanding what they are doing and how they are calculated
Calculating what will happen in all 3 possible scenario’s, being…
What if the Market goes UP
what if the Market goes DOWN
what if the Market CONTINUES RANGING
but i think a biggie was
Understanding that 1% risk of your Account Balance vs 1% Risk of your Account Balance - Nominal Margin IS A COMPLETELY DIFFERENT THING
and Assessing all 3 possible scenario’s,
you can never assume that you won’t be wrong ,
My rule of thumb is GET INTO A SITUATION WHERE I CAN PUT MY STOP LOSS IN PROFIT , (Relative to my entry point) ASAP.
once the stop loss is in profit, I HAVE 0% RISK, Absolutely None.
this is what you want to get to.
anything other than this, IS A RISK and is therefore a possible loss or complete loss if you dont’ have stop losses.
now… if your tests are showing you you can pull this off… mate, all the best to you.
but, i think you’ll blow out your account
based on Account balance = $350 vs you believe that risking $150 is ok… IT’S NOT
and even based on the fact that you are ok with risking 10% of your account Balance
and that you believe you won’t suffer a loss of more than $20
Just to do some quick math
if you are trading 0.01 Lots, aka 10cents per pip
Now if you are trading EURUSD (and i know how that moves at times)
for you to suffer a loss of $1 (let’s ignore spread for now) EURUSD would need to move 10 pips
THAT’S EASY for EURUSD
it’s not uncommon to move 50 Pips which would be $5
now… you multiply that by 15 concurrent trades going in the wrong direction and you have a loss of $75
add to this your margin (Assume $39)
you are now over $100 in the hole
THIS IS 1/3 OF YOUR TOTAL ACCOUNT
Meaning… if you stuff up like this ONLY 3 TIMES… Your account is gone.
You do not want to be in this position… Trust me
now that’s if EURUSD was to move 50 pips, which is very common
what if it moved 150 pips, which is very do-able, or even 100 pips or 90 pips. very Do-able.
Mate, you’ll be margin called and likely at 40% margin level or lower
now the answer is this
"Martin i would have stop losses in place"
and my response would be
“Ok mate, how far away are the stops from the Entry Points” so we can calculate them
now THIS IS WHAT I WOULD EXPECT OF YOU
i don’t care if you have 100 concurrent trades, BUT…
the total amount you are risking in Stop losses MUST NOT EXCEED 3% of your Account Balance - Nominal Margin
1% or less would be better
so if you account for your Account balance, then deduct the total NOMINAL MARGINS you will use,
the figure that remains MUST NOT EXCEED 3%
to do some rough calculations
if you have $350 account balance
and your Nominal Margin for all 15 trades is $50 for example
you have $300 to trade with
now 1% of that would be $3 or $9 if you are assuming 3%
now if you want to have 15 concurrent trades you need to divide that $3 or $9 by 15
which leaves you with 20 cents or 60 cents respectively PER TRADE
you then need to calculate your stop loss
so if you have 0 pips stop loss, your Lot size would be 0.02 or 0.06 respectively
but if you had a 10 pip stop loss , well then you are trading at 2 cents per pip or 6 cents per pip
BUT YOU CAN’T DO THAT… can you ?
so your other solution is
REDUCE THE AMOUNT OF CONCURRENT TRADES and that way you can increase the lot size per trade
but the TOTAL RISK for all the trades must never exceed whatever risk you are willing to take.
i think you are putting too much trust in this $20 DD thing
i say, TO PROVE IT
test it on demo and try and prove me wrong
then do it my way and see what happens and form some sort of system based on the results of those tests.