christinaa, i appreciate your interest in learning more about forex and this method. based on your question, i can see that you need more understanding of how outcomes are calculated in forex and the relationship between account size and trade size. it is always important for us to complete the prerequisites at the beginning of our forex journey. the babypips school is ideal for gathering that basic information. regarding this matter, these two links would be especially helpful:
http://www.babypips.com/school/pips-and-pipettes.html
http://www.babypips.com/school/lots-leverage-and-profit-and-loss.html
to elaborate a bit further, whether the account was depleted or not would depend on the size of the account and the size of our trades. had we been reckless enough to trade full lots with a $1,000 account, then, yes, a drawdown over $700 would have disabled our trading. this particular brief test, however, started with a $10,000 account trading one full lot, so a -700 drawdown represents about 7%. had we begun with $1,000, it would have been infinitely more prudent to trade at a much smaller lot size. for comparison, had we started with $1,000 and traded .01 lot, the drawdown would still be about 7%, but in actual u.s. dollars would be $70.
there appears to be some concensus in the trading community about risking no more than 2% of your account on any single trade. let’s be conservative for illustration and decide we are willing to risk 1% of our account on any one trade. if you wanted to implement that idea and had a $1,000 account, you would want to risk no more than $10 on any one trade. suppose, then, you wanted to trade e/j using the tt method within that risk parameter. since you will be taking three positions on the trade, you should divide the $10 you are willing to put at risk by 3 and allocate about $3.30 per position. using the quarters to establish stop losses, your average loss is going to be -37 pips. in this pair, a pip traded at .01 lot is worth about 1.2 cents. a -37 pip loss, then, would translate to about 45 cents at .01. trading at .07 lot per position would mean .07 X -37 X 1.2 = $3.11 per position at risk.
this is a conservative risk approach and one that might be highly recommended, especially for beginners. surviving a drawdown with part of your account intact gives you continued opportunity. blowing the account means you have to ante up again. the advantage of risking a percentage of your account balance is that you are trading less and less if a drawdown continues and more and more if the system succeeds. if you are starting with $1,000 and risking 1%, your first trade risks $10. if it loses, you now have an account balance of $990 and you can risk 1% again, but this time your risk is $9.90. on the other hand, if your first trade succeeds and you come away with an account balance of $1,010, you are now permitted to risk $10.10.
