Hi guys, my first post here so I’ve fired it in to the newbies section.
In January of this year I went on a ‘stock trader’ training course which cost me thousands of pounds, for the past 6 months I’ve been trading in a simulator (FXSol and GFT), I’ve made well over 200 trades, using standard lots and turned a 10k in to a 5k and back over a 10k again in that time.
I was using 100% technicals, but now I bleed in fudementals via financial releases etc. I don’t trade based on them, I still use technicals.
That’s me, now my question.
I went live 2 weeks ago and I’m ‘only’ up 5% on my capital ($2,500).
I’m finding that I get stopped out 50%+ of the time, and then the market moves in the direction I expected. This happens so often it’s hugely frustrating.
My trades use a 10 pip stop, my target is generally 40-50 pips.
Am I making a mistake by trading to such tight stops? Should I increase them to 20 pips? The reason I ask is, by luck or otherwise, using 20 pip stops on my past two trades has made them both profitable (both 40 pips).
Twice the risk against the same return OK? Using such a small stop a false economy? What size stops do you guys use?
Thanks for the replies guys, I trade the EUR/USD and typically setup trades on the hourly, or if I’m scalping and finding levels I’ll use the 5 minute.
10 pips is tight, especially when you pay the spread joing the trade.
As for SL for me, it really depends on my money management and past performance of the strategy I’m using, I use what’s comforable for me, my account, and still true to the rules that I’m trading by.
Ok so I tried a trade on the EUR/USD just 2 hours back with a 20 pip stop, entered long at 1.4370(limit order), exit at 1.4420 for 50 pips.
2.5 risk/reward which is acceptable I guess, your thoughts?
If I had used a 10 pip stop I would have been stopped out!
Have I just answered my own question with that success, I’ll be honest I did a similar short on the Euro Dollar yesterday with a 20 pip stop and it was a success.
Yes you did answer your own question. you have to give your trade enough “wiggle room” to let it develop. You will find the right balance the more you trade.
Ultimately it depends on what sort of trade you’re taking. 10 pips + spread is reasonable when scalping on a 5 min, not so on a daily. To put into perspective some of my trades have stops of 200 pips or even 400 pips. Then again, I used to trade successfully with a stop of about 5 pips, taking about 5 pips out of the market.
Although a 10 pip risk for 40 pip reward makes a nice R:R it is not as simple as that as you are finding out. The better the R:R the worse the win ratio. At the end of the day if you have a 1:1 Risk Reward and a 51% Win/Loss then you will make money, albeit slowly.
What you need to do is some statistical analysis on your trades as you are to some extent doing already - 20 pips is proving better than 10 for your particular setup - to find what is the best Risk and what to aim for as a Reward. As CDawg said - trades need some ‘wiggle room’!
I work in the day, I do use my iPhone to trade during the day when I get chance but generally I trade the low volume overnight periods on the EUR/USD… for now. I trade every single day, at least once, at most three times.
If I’m day trading (day off or working from home) I generally take a four pronged attack as follows:
i. What’s the market sentiment? Bull/Bear.
ii. Define support and resistant levels on Daily, 1 hour and potentially 5m for execution.
iii. Any news releases afoot? Impact? Assess .
iv. What’s the barometer look like (I have 7 charts with all the majors with EMA on a separate screen which is my ‘barometer of the FX world’).
I’m not scared of loosing money so I don’t wait to enter, I enter when I feel I’m confident of the markets direction, this can be on the edge of a trend, a level or slap bang in the middle of a candle. I scalp, 30-40pips, a good scalp turns in to a longer position when I achieve 50+, generally I’m in a trade a few minutes and done for the day or if evening/night trading it’ll be an hour.
I don’t use many tech tools, aside from FIB I don’t like them.
I developed a ‘Fib Retracement Scalp’ for 1 and 5 minute charts using trend lines, I can only trade this during the day [high vol] when I’m not at work.
I’ve recently been playing with RSI but I don’t use it in the conventional way. It works ‘ok’, requires more testing, very good to gauge market sentiment though.
Your system sounds very similar to mine actually and I always trade with at least a 2:1 risk reward ratio. I always set my stop to 20 pips and as soon as I reach 20 pips profit I move my stop to B.E. This means that I get stopped out a lot of the time but it’s a high reward, low risk strategy and it’s working well for me.
That’s good to hear Phil, I aim for 60pips + and then take profit at 40-50 as not to be greedy, unless of course I am certain the market will carry me the full 60 and beyond.
I tried moving my stop to BE but I often got stopped out by a small retracement for the market to then carry on without me, found the same with 25 pip trailing stops.
I’ve moved away from trailing stops, they work if you don’t have time to nurse the trade but they stunt your profits too easily and on the flipside too tight a trail in a ‘normal’ market often gets stopped out too soon.
The problem I see in constant 2:1 is that I have to be 50% right of the time, not easy, hence I look for 2.5-3:1 if possible.
Oh yeah, 2:1 is the minimum - I would just never go below that. Ideally (and a lot more often) I’m getting 3:1 and sometimes more. I have been using a 20 pip trailing stop of late because I don’t like to just sit there watching a trade. It does mean I get stopped out for 5-20 pips but it’s better than break even. Whether it’s a good long term strategy or not time will tell…
I kinda disagree with all the replies that are suggesting you increase your stop/risk. Thats not the only option here. 5% in 2 weeks for any system is good or maybe lucky. Now if you can do that consistently I dont see where you need to increase the stop/risk. By increasing the risk you will also have to increase the reward, by doing this maybe you wont gain your 5%.
NB: Personally I think your risk per trade should be determine by your MM strategy.
I see what you try to tell, but I don’t think it’s correct in this case. With a target of 40-50 pips and 10 pip SL, Bleek had a hughe R/R, but a lot of trades hit the SL and reversed.
Even with a 20p SL and 40p target, R/R 1:2 wich is fine. If the strategy is good, and the succes ratio becomes a lot higher due to this adjustment, he did the right thing.
If he can average 5% consistently every 2 weeks using a 10 pip stop then why change? Personally I wouldnt dream of using a 10 pips stop but thats because of the system I trade. Now its a matter of time before he will able to say which strategy works. Why increase the risk if what you are doing works just to chase a few more winners? In trading always try and minimize the risk.
The only way I’ll truely know is to run a week or two with the wider stop.
I’ll do a few charts based on both strategies with differet win ratios and see how they fair against each other.
I’m in the process of creating a blog so I’ll be keeping everything ‘real’ and public information, I think it’s good practise to be honest and open about everything. I also believe it’ll help me trade, keeping track of my ‘work’ and analysing it in an open forum.
