I saw a 30 pip spread last night so I placed my orders and set my platform to close out after 20 pips of profit. GBP/USD had a huge move which closed the gap and then carried it further to cross over. The pair moved over 50 pips in a minute, and I guess I wasn't able to be closed out until +40 pips rather than the 20 I was initially shooting for. Not going to complain about that.
Here's my account results for the last week from trading this method. As it stands I would be able to handle a 1000 pip deviation before being margin called and losing my little $100 account.
It's worth noting that I am only playing with about 1% of my total trading equity in this little experiment. I need a lot more time with it under my belt (as in several months) before I consider putting any significant amounts of money on the line. I would urge anybody else who decides to pick up this system to follow a similar path.
I've entered another trade long EUR/USD, short GBP/USD. There is a 70 pip spread (the largest I have seen thus far) and I am going for 60 pips net profit.
There seems to be a "balancing act" with the risk in this system. Too high and you will blow out on a normal spread. Too low and you will hit a black swan before gaining enough profit to offset the black swan.
Some questions which have still not been fully answered yet in this thread:
- Is it even worthwhile to use stop losses with this type of trading? As we can never know when the black swan will occur, stopping our losses would imply that we knew the black swan was occurring then and there.
- What is the ideal risk?
- Does averaging down do more harm than good? I would hazard a "yes" as it seemed all of the previous posters (who we can assume failed with this method) were averaging down.