bb01100100 wrote:Thanks Igazi - I always spend ages looking at the charts you mark up.
I have many questions (some of which I've meaning to ask for a while but didn't want to pester you, lol)
Am I understanding your example correctly?
- We see 'support 1' form: it zeroes that pinbar and retraces upward, creating a circa 2c range
- We've got an area to deploy one unit of risk (1x lot) into: circa $22.04.. if price pushes up and away, we're onboard.
- Price pushes lower, but we are working a "buy zone" (a multiple of 'support 1' range (3x)) that is 6c wide.. and choose an entry method below 'support 1' that makes sense (e.g. if it was me, I'd look at being long another 1x lot when the high of the prior candle was breached
- We then observe the same behaviour and do /exactly/ the same thing later on
- Doing this mechanically isn't enough - we need higher timeframe context.
If I've got the gist of that correct, where things get hazy is what happens after I've got 2x units of risk on.
If I'm following your account sizing model, I need the following for a five-lot trading line-of-business:
- 5x $500 (day trading margin) -> $2,500 of untouchable margin capital
- Minimum of $2,500 / 0.7 -> $3,571 investment
- Of which 3,571 - $2,500 -> $1071 is available for risk (operations)
So it's up to me how I want to run my business: trade maximum 2 lots until I transfer risk capital (profits) into margin capital, e.g:
- Minimum profit needed to add 1x lot to margin capital: (1x $500) / 0.7 -> $715
- Updated margin capital: 6x $500 -> $3,000
- Updated risk capital: $balance - $500
I might then enter with 1 lot initially, then add 2 lots... or some variation that adds up to 3, but never all 3 at once.
Or I might use risk capital to fund trading a different market.
So it's not about me trying somehow to add, add, add to a single trade, getting up to max size - it's about operating a process and shifting capital about in a planned manner.
Why am I sized for 5 but only use 2? Is it because this is part of a larger business operation: building up OPM with low risk until a situation arises when I want to use all 5 lots? If I'm wrong then I lose risk capital, but that capital was OPM so I'm protecting my operation.
Sorry for all the words.. I hope I'm starting to understand the bigger picture.
Support usually plays out in the following ways, with 'E' being the least common.
A, B, and D, can still morph into C; with E being more likely to morph into C in reverse.
You can count on there being at least two price levels.
Your contract cap vs how many contracts you can buy in the beginning are as follows:
10: 4 contracts
08: 3 contracts
05: 2 contracts
04: 2 contracts
03: 1 contract
You can still trade 2 contracts with a 3 contract cap, you just have to do so in a 'B' or 'D' situation.
You can trade above 2 contracts, you just have to do so using
only profit (OPM). . .
or have an 8 or 10 cap.
You must first limit your risk, and then you can worry about maximizing your profit.
The lower your contract cap the fewer your strategic options:
if you size too large in the beginning then you destroy your RR ratio.
Hopefully I have answered all of your questions.
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