Post of the Day - Page 16

Thomas Long · #**226** (**permalink**) 06-11-2009, 08:26 AM

Quote:

Originally Posted by JForex

Hi,

I am facing a problem with position sizes.

My winning trades have over 200 pips at times, and losing trades only lose a few pips like 30 pips. Still, my losing trades lose equal or more money than my winning trades due to position size.

I risk 3% of my equity on all trades. If thats $300, and my stop is 30 pips, the position size is 1 lot. If this trade loses, I lose $300. Now some trades have wider stops. With the same $300 Risk, the position size is smaller, lets say 0.2. Now this 0.2 lot trade wins 200 pips and makes $400, but is almost a waste because only 30 pips have lost $300.

Does anyone else have similar problems? How do you guys handle this?

Is it wrong to allocate equal dollar risk to all trades?

We should be thinking in terms of equal dollar risk on all trades. I think in terms of percentage. I risk no more than 5% of my account balance at any one time, so if I lose a trade, I lose 5% on that trade. I also use a 1:2 risk:reward ratio on all my trades. Since I risk 5%, I look to gain 10% on each trade. So my overall results are based on my win percentage and my ability to stay in the trade until the profit target is hit. I will also move my stop to breakeven when/if the market moves halfway to my target to keep a potential winning trade from turning into a losing trade. But this consistent approach to money management remains the same no matter how much I have in my account or how many pips I risk on the trade. It is the consistent approach to trading and money management that can lead to consistent results. But using this approach, if you lose $300 on a trade, you should be in a position to profit $2000 when you are right. Think in these terms remain disciplined in your approach and good things can start to happen.

Richard Krivo · #**227** (**permalink**) 06-11-2009, 06:59 PM

Student’s Question:

I attended a Range Trading webinar and after it was over, a question came to mind:

are there any candlesticks or candlestick patterns that could be beneficial when Range Trading?

Thanks

Power Course Instructor’s Response:

Take a look at the chart below for a visual on this…

One of the keys here will be the longer wicked candles (and longer wicks in general) as they signal the potential for a change of direction of the pair. The engulfing candles can help and certainly the Morning Star and Evening Star patterns.

abro · #**228** (**permalink**) 06-13-2009, 09:27 AM

i must say here i have seen alot usefull stuff ,those ccurrency pair forums are just for passing time . now i am feeling what i have learned , and when i came here i saw everything that i have learned is posted here in a nice manner by daily fx power course instructors . i must say i am impressed by all these explainations !

NICE WORK , YOU ALL .

abro · #**229** (**permalink**) 06-14-2009, 04:21 AM

Quote:

Originally Posted by Thomas Long

We should be thinking in terms of equal dollar risk on all trades. I think in terms of percentage. I risk no more than 5% of my account balance at any one time, so if I lose a trade, I lose 5% on that trade. I also use a 1:2 risk:reward ratio on all my trades. Since I risk 5%, I look to gain 10% on each trade. So my overall results are based on my win percentage and my ability to stay in the trade until the profit target is hit. I will also move my stop to breakeven when/if the market moves halfway to my target to keep a potential winning trade from turning into a losing trade. But this consistent approach to money management remains the same no matter how much I have in my account or how many pips I risk on the trade. It is the consistent approach to trading and money management that can lead to consistent results. But using this approach, if you lose $300 on a trade, you should be in a position to profit $2000 when you are right. Think in these terms remain disciplined in your approach and good things can start to happen.

yes i think , that he should use a default lot size accoridng to the capital of his account . so that he doesnt gets confused ,, and thomas long if you make 10 % of your account capital in 1 trade then why do you say 100 % profit a month is unrealistic .

Thomas Long · #**230** (**permalink**) 06-15-2009, 07:17 AM

Quote:

Originally Posted by abro

i must say here i have seen alot usefull stuff ,those ccurrency pair forums are just for passing time . now i am feeling what i have learned , and when i came here i saw everything that i have learned is posted here in a nice manner by daily fx power course instructors . i must say i am impressed by all these explainations !

NICE WORK , YOU ALL .

Thanks and glad you found some value. These posts are taken from the various power courses we offer at FXCM.

Thomas Long · #**231** (**permalink**) 06-15-2009, 07:22 AM

Quote:

Originally Posted by abro

yes i think , that he should use a default lot size accoridng to the capital of his account . so that he doesnt gets confused ,, and thomas long if you make 10 % of your account capital in 1 trade then why do you say 100 % profit a month is unrealistic .

Sure, but confusion suggests a lack of knowledge. We teach traders how to think for themselves rather than what to do.

I have really never seen anyone who can consistently find enough quality setups in one month to be able to double their money. If you win half of your trades, you need to find one trade a day to earn 100% a month. I would never say that this is not possible, but it is very unlikely.

Ben Laws · #**232** (**permalink**) 06-15-2009, 10:52 AM

Hi guys - any comments appreciated on this one: (excerpt from my trade diary).

I am totally new to forex trading or trading of this nature in general and have opened up a demo account.

The whole aim of me doing this is to make some gains here and there - for me it is not the 2nd income that everyone seems to want!- I realise the fact that I will also take some losses in the course of doing this so if in my newbie status as a forex trade I break even in a couple of months I will still be satisfied that at least I gave it a shot.

Great webinars and advice by the way, not sure I understood everything all the time etc but I think I'm getting the feel for it now.....

Anyways - the diary:

USD / CAD – 06/15/2009 - 4 hour chart

Having identified a resistance of 1.12469 and a support of 1.09740 I was awaiting the trend to close above resistance before going short on the pair. About 4 hours late (due to general normal life stuff going on), I noticed the 06/15/2009 04:00 candle had closed well above resistance at 1.1337. At this point I entered my trade, 50k going short at 1.13025 at approx 08:26 06/15/2009.

If my trade was to trend back down to support that would have meant a 328.5 pip profit but (uneducated guess) I thought it a good idea to place my limit at 1.10025. This is because if the trade just fell short of support it would be highly disappointing to know I missed out, especially if it were to then break out of resistance and never venture near my support ever again. By that same token I don’t want to be watching the trade and therefore emotionally forcing myself to take a reasonable profit (thinking 75 pips is gonna be the best Im gonna get) when the methodical profit available as per the plan is a) better and b) less nail-biting. Anyway a 1.10025 limit equals a 300 pip gain.

I don’t want to lose too much on this trade but I would also hate to be closed out by general market movements, having always settled with 50 pip stops and been frustrated by them as a 50 pip swing either way can take just twenty minutes! I opted for a 100 stop above my opening position thus 1.14025.

2 things are in my mind now;

• Should I change my limit to a 200 pip gain?
• Will I sell parts of the trade at 100 and 200 pips?

I will however adjust the stop to breakeven at 100 pips (or thereabouts) and let it trail in case of reversal.

Thomas Long · #**233** (**permalink**) 06-15-2009, 02:20 PM

Quote:

Originally Posted by Ben Laws

Hi guys - any comments appreciated on this one: (excerpt from my trade diary).

I am totally new to forex trading or trading of this nature in general and have opened up a demo account.

The whole aim of me doing this is to make some gains here and there - for me it is not the 2nd income that everyone seems to want!- I realise the fact that I will also take some losses in the course of doing this so if in my newbie status as a forex trade I break even in a couple of months I will still be satisfied that at least I gave it a shot.

Great webinars and advice by the way, not sure I understood everything all the time etc but I think I'm getting the feel for it now.....

Anyways - the diary:

USD / CAD – 06/15/2009 - 4 hour chart

Having identified a resistance of 1.12469 and a support of 1.09740 I was awaiting the trend to close above resistance before going short on the pair. About 4 hours late (due to general normal life stuff going on), I noticed the 06/15/2009 04:00 candle had closed well above resistance at 1.1337. At this point I entered my trade, 50k going short at 1.13025 at approx 08:26 06/15/2009.

If my trade was to trend back down to support that would have meant a 328.5 pip profit but (uneducated guess) I thought it a good idea to place my limit at 1.10025. This is because if the trade just fell short of support it would be highly disappointing to know I missed out, especially if it were to then break out of resistance and never venture near my support ever again. By that same token I don’t want to be watching the trade and therefore emotionally forcing myself to take a reasonable profit (thinking 75 pips is gonna be the best Im gonna get) when the methodical profit available as per the plan is a) better and b) less nail-biting. Anyway a 1.10025 limit equals a 300 pip gain.

I don’t want to lose too much on this trade but I would also hate to be closed out by general market movements, having always settled with 50 pip stops and been frustrated by them as a 50 pip swing either way can take just twenty minutes! I opted for a 100 stop above my opening position thus 1.14025.

2 things are in my mind now;

• Should I change my limit to a 200 pip gain?
• Will I sell parts of the trade at 100 and 200 pips?

I will however adjust the stop to breakeven at 100 pips (or thereabouts) and let it trail in case of reversal.

Seems pretty reasonable. There are two things working against this trade right now, falling oil prices and a comment over the weekend about the USD still being the reserve currency. How long those two forces remain is anybody's guess, but they are fundamental factors that we cannot quantify. As far as your trade, it seems well thought out while repecting the two keys to trading, which are trading with the trend and the use of a solid money managment approach. We recommend to new traders that they use a simple 1:2 risk:reward ratio. Experienced traders will work a trade in an attempt to get the most out of a trending move, but that is hard to teach. By looking for two times in profits as we are willing to risk, we can be profitable by winning just 40% of our trades. A 1:3 risk:reward ratio is even better. I move my stop to breakeven when the market moves halfway to my target. If I risk 100 pips and look for 200 pips in profit, my stop is move to breakeven if/when the market moves 100 pips. Since I only risk 5% of my account balance at any one time, this move also allows me to take that 5% and look for another trade while still in the first trade. That is how I pyramid my trades. I also like to tell new traders that if they can remain at the breakeven level six months after trading, that I think this means that they are on their way to a profitable trading career. I also tell them that those who treat trading as a get rich quick scheme, usually end up losing. However, those who treat trading as a get rich slow proposition, give themselves a chance with time. Unrealistic expectations are the biggest enemy of the new trader, but you seem to have that checked to a more realistic outlook. I would say that you are on the right path and commend you for keeping a log of your thoughts. This will eventually become the best information you can analyze for improvement. We are our own worst enemy, or rather our own emotions. Stay positive, stay consistent in your approach and your returns will start to be consistent. Then we can make the necessary changes to be consistently profitable. Nicely done.

Ben Laws · #**234** (**permalink**) 06-15-2009, 04:22 PM

Quote:

Originally Posted by Thomas Long

Seems pretty reasonable. There are two things working against this trade right now, falling oil prices and a comment over the weekend about the USD still being the reserve currency. How long those two forces remain is anybody's guess, but they are fundamental factors that we cannot quantify. As far as your trade, it seems well thought out while repecting the two keys to trading, which are trading with the trend and the use of a solid money managment approach. We recommend to new traders that they use a simple 1:2 risk:reward ratio. Experienced traders will work a trade in an attempt to get the most out of a trending move, but that is hard to teach. By looking for two times in profits as we are willing to risk, we can be profitable by winning just 40% of our trades. A 1:3 risk:reward ratio is even better. I move my stop to breakeven when the market moves halfway to my target. If I risk 100 pips and look for 200 pips in profit, my stop is move to breakeven if/when the market moves 100 pips. Since I only risk 5% of my account balance at any one time, this move also allows me to take that 5% and look for another trade while still in the first trade. That is how I pyramid my trades. I also like to tell new traders that if they can remain at the breakeven level six months after trading, that I think this means that they are on their way to a profitable trading career. I also tell them that those who treat trading as a get rich quick scheme, usually end up losing. However, those who treat trading as a get rich slow proposition, give themselves a chance with time. Unrealistic expectations are the biggest enemy of the new trader, but you seem to have that checked to a more realistic outlook. I would say that you are on the right path and commend you for keeping a log of your thoughts. This will eventually become the best information you can analyze for improvement. We are our own worst enemy, or rather our own emotions. Stay positive, stay consistent in your approach and your returns will start to be consistent. Then we can make the necessary changes to be consistently profitable. Nicely done.

Thanks for your comments, as you may have noted - the trade went against me quite bad over the last few hours and it takes an awful lot of self control and patience (and later on experience) to not panic when that happens and is now heading in the direction I wanted!

Having seen it almost reach my stop and being confident in the plan i had engaged I actually opened up another position as it was hitting my stop - taking me up to my 7.5% limit . ( I know the rule of thumb is 5% but i seem to be comfortable with this self imposed limit!).

Now the market is moving with the trade I have earnt more from not panicking and closing the trade and instead am now in a position where the initial trade is now secondary!

I seem to be up on about 40% - 65% of the trades I have demo'd so thanks for the confidence boost!

Ben Laws · #**235** (**permalink**) 06-15-2009, 05:06 PM

Quote:

Originally Posted by Thomas Long

Seems pretty reasonable. There are two things working against this trade right now, falling oil prices and a comment over the weekend about the USD still being the reserve currency. How long those two forces remain is anybody's guess, but they are fundamental factors that we cannot quantify. As far as your trade, it seems well thought out while repecting the two keys to trading, which are trading with the trend and the use of a solid money managment approach. We recommend to new traders that they use a simple 1:2 risk:reward ratio. Experienced traders will work a trade in an attempt to get the most out of a trending move, but that is hard to teach. By looking for two times in profits as we are willing to risk, we can be profitable by winning just 40% of our trades. A 1:3 risk:reward ratio is even better. I move my stop to breakeven when the market moves halfway to my target. If I risk 100 pips and look for 200 pips in profit, my stop is move to breakeven if/when the market moves 100 pips. Since I only risk 5% of my account balance at any one time, this move also allows me to take that 5% and look for another trade while still in the first trade. That is how I pyramid my trades. I also like to tell new traders that if they can remain at the breakeven level six months after trading, that I think this means that they are on their way to a profitable trading career. I also tell them that those who treat trading as a get rich quick scheme, usually end up losing. However, those who treat trading as a get rich slow proposition, give themselves a chance with time. Unrealistic expectations are the biggest enemy of the new trader, but you seem to have that checked to a more realistic outlook. I would say that you are on the right path and commend you for keeping a log of your thoughts. This will eventually become the best information you can analyze for improvement. We are our own worst enemy, or rather our own emotions. Stay positive, stay consistent in your approach and your returns will start to be consistent. Then we can make the necessary changes to be consistently profitable. Nicely done.

Thanks for your comments. The hardest thing to over come was my own natural impatience. The sooner you can learn that trades take a much longer time to appreciate than fear does to overwhelm your actions the better.

As an example it is very hard to stand by and watch a trade hit to -90 pips then bounce to +15 pips then hang around at -60 for ages when the "self-preservation monster within" wants you to close at that +15 point and say "phew that was close etc". Doing this only encourages similar behaviours to become easier and subsequently you miss out on lots of potential profit!

I mean, you wouldnt buy a house and watch it all afternoon to appreciate in value would you???....Instead we exist as homeowners in the market going about our normal everyday lives, checking our profit or loss infrequently!

Yeah ....... not sitting in front of my laptop staring at marketscope 2.0 was a tough habit to break!

Thanks guys.

CStrickler · #**236** (**permalink**) 06-16-2009, 12:41 PM

I noticed that there are often references to half size positions or half size entry orders in the daily range trade recommendation. I am not quite sure what these are or how to use them. Can you enlighten me?

Thank you.

Thomas Long · #**237** (**permalink**) 06-16-2009, 02:06 PM

Quote:

Originally Posted by CStrickler

I noticed that there are often references to half size positions or half size entry orders in the daily range trade recommendation. I am not quite sure what these are or how to use them. Can you enlighten me?

Thank you.

Some strategies call for opening multiple positions depending on how the market reacts after opening the first position. Otherwise, after if you buy at first support, you buy at another support level and then perhaps buy again at a third support level. The key to this is that you plan on it to begin with and are just not opening new positions as the market moves against you. Otherwise, if you intend on risking 3% of your account, you would open small positions to build up to that. My personal preference is to keep things simple which means I open one position when I enter and close the entire position when I exit. But there is more than one way to be successful in the market and what works for one trader may not work for another trader.

Richard Krivo · #**238** (**permalink**) 06-18-2009, 07:38 PM

Student’s Question:

I have heard that currency pairs are either ranging or trending. How does that look on a chart? Thanks.

Power Course Instructor’s Response:

Good question…

After a currency pair has a trending move, it will generally “bounce around” testing a support level after a down trend or testing a resistance level after an uptrend. If the level in question holds, the price action can then begin a trending move in the opposite direction.

Take a look at the chart below…

Initially we see the downtrend and we notice that it come to a halt at around the 1.1875 support level on this chart. It trades in range of about a 100 pips, tests support again and then begins a bullish trend to the upside.

Richard Krivo · #**239** (**permalink**) 06-23-2009, 09:47 AM

Student's Question:

I’ve made trades where you enter a position when it looks like the MACD is going to intersect but it doesn't and it goes even further in the direction in which it was going, ultimately hurting my account pretty bad, any suggestions?

Power Course Instructor’s Response:

Sure…

First and foremost we only want to take trades in the direction of the trend on the Daily chart...that is the first filter. Don't let the MACD (or any other indicator for that matter) decide the direction of the trade...let the trend do that. Then use the MACD to fine tune the entry in that direction.

Also, it is advisable not to take a trade when it looks like something might happen...wait until it does happen.

A good axiom to trade by is..."nothing happens until happens".

Richard Krivo · #**240** (**permalink**) 06-23-2009, 10:29 PM

Student’s Question:

On the charts I notice that trendlines can have various types of “slopes” associated with them. What kind of information can be gained by looking at the slope…if any. Thanks.

Power Course Instructor’s Response:

You are correct…the slopes can provide insight. Take a look at the chart below…

As you might suspect, anything that goes up (or down) quite dramatically can reverse itself in much the same rapid manner. Notice the steepest slope on the chart below. Rising as quickly as it does, it will not be able to sustain itself over the longer term and will decline, on average, more quickly than either of the other two.

Ideally, as with many things, a slow steady building process is the key to longer gains and, potentially, those that are more likely to be sustained over time.