Leverage and Trade Size

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trueblueTEX
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Postby trueblueTEX » Fri Nov 05, 2010 11:43 am

MightyOne wrote:
trueblueTEX wrote:FB??


The only thing that you need to know about Facebook is that you shouldn't sign up ;)


Yeah, I seriously did not know what he meant. I don't use facebook. My kids and wife do, but I have no intention of doing so.

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Humble
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Postby Humble » Sat Nov 06, 2010 2:04 am

trueblueTEX wrote:OK, there was another expression I was aware of. If it was the other one, I was gonna ask for her phone number. ;-)


And silly me was thinking female buddy!
Is price closing higher or lower than something? Simple yet powerful question. ..MO

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ajaymein
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Postby ajaymein » Sat Nov 06, 2010 4:56 am

Humble wrote:
trueblueTEX wrote:OK, there was another expression I was aware of. If it was the other one, I was gonna ask for her phone number. ;-)


And silly me was thinking female buddy!

Hahaha...at least your mind isnt in the gutter :lol:

xtremeforex
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Postby xtremeforex » Wed Nov 17, 2010 1:51 am

Lets stay back on topic guys!! This is a very good topic.

I agree "5% of my margin" doesn't really make any sense because values of margin are dynamic and will move up and down with the market when the trade is entered.

I prefer the concept of true-leverage by looking at my overall account balance versus the current position size. This gives me a better idea (with regards to my strategy) how much money I am controlling overall and how much distance I have from a margin-call. I find that as I trade, the lower I keep my true-leverage the more success I have by minimizing the risk from leverage.

I also believe people don't understand that RISK is determined by the size of your trade based on your total account and not your stop-loss. Stop-loss gives us the impression it controls risk but it really is only damage-control AFTER it has happened.

ZsApprentice
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Postby ZsApprentice » Thu Nov 18, 2010 6:24 pm

Xtreme,

Care to explain that?

For example..

Let's say that you have a $50k account size, and you want a 1% risk on a trade, and each pip (not point) is $10.

In that case, $500 is your risk amount, and 50 pips is your S/L level.

Am I missing something?

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xtremeforex
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Postby xtremeforex » Thu Nov 18, 2010 7:21 pm

Z,

Exactly!!!!! :)

But of course, we know 50 pips is a crappy SL-level that has a very high probability of getting hit because it falls within virtually every hourly, daily and monthly ranges.

Reduce the $10/pip to something lower, giving you a larger SL value and thus making the probability of hitting that SL lower, while maintaining the same risk amount of $500.

So, if it was like $1/pip, 500/1 = 500 pips. Now we're talking. You need some big ass thing to happen (like Ireland, Greece) to fall that much. If you really want to play it safe, go for 0.75 cent/pip, 500/0.75 = 666 pips and you can say to yourself "I can survive Greece, I can survive Ireland."

Personally! I wouldn't even start with the 1% per trade on the 50,000. I would start even lower for each trade amount, this way I got the flexibility of entering multiple trades, because you know me I'm impatient and I want to see robot doing some damn work. I didn't spend days coding her so she can just sit around.

I know what you're thinking, profit is going to be smaller at 0.75/pip. Yup, unfortunately that is the kind of size you can afford! Only way around that is growing your balance so you earn/deserve the right
to trade larger.

Just because you can trade LOTS doesn't mean you should!!!!

ZsApprentice
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Postby ZsApprentice » Thu Nov 18, 2010 7:36 pm

Xtreme,

I get your point.. but when you are trading "by hand" and are "human" and not a machine, those super micro lots need to be traded on very short timeframes in order for your trade frequency high enough to make it worth while.. right?

For example, if I take 5-6 trades a week.. that's a lot generally for me. But I trade mainly on the M30 chart, H1 sometimes..


To get the account growth necessary when you are grabbing a few dollars per trade, I would need at least several hundred trades a day to make decent account growth.

That is very unreasonable for "a human" to do consistently, day after day

Agree?

Therefore, trading by hand doesn't necessarily fit into your "model," agree?

xtremeforex
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Postby xtremeforex » Thu Nov 18, 2010 7:43 pm

EXACTLY again! Wow you must be reading my mind. :)

To give you perspective, I usually have 100+ trades per day.

Now you know why I went robo-style!....

ZsApprentice
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Postby ZsApprentice » Thu Nov 18, 2010 7:50 pm

I know I could make A LOT more money in the markets with my method if I switched to the M5 or even the M1 timeframes..

But, those are dang near impossible for me to trade by hand.. I've tried, and I can't smoke my calculator fast enough with watching the 5 markets that I do, to make them happen..

M15 I can do, but it even gets a little stressful.. I've done it on several occassions, but, I don't like it.. it doesn't fit my "style" very well..

M30 seems to work the best for the time that I have to devote to "screentime"

Sounds like I need to learn how to program..

:-)

ZsApprentice
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Postby ZsApprentice » Thu Nov 18, 2010 7:54 pm

I know I could make A LOT more money in the markets with my method if I switched to the M5 or even the M1 timeframes..

But, those are dang near impossible for me to trade by hand.. I've tried, and I can't smoke my calculator fast enough with watching the 5 markets that I do, to make them happen..

M15 I can do, but it even gets a little stressful.. I've done it on several occassions, but, I don't like it.. it doesn't fit my "style" very well..

M30 seems to work the best for the time that I have to devote to "screentime"

Sounds like I need to learn how to program..

:-)

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