Some people out there believe that we can just pick some R:R ratio and that is what it will be because we think it should be like what we want.
I on the other hand believe that "The Market Will Give You What The Hell It Wants To Give You".
How many times have you picked a target, say based on a 1 hour chart?
The price doesn't get to the target but strangely turns a 180 degrees and moves against you. Then of course someone says well it hit the 15 minute zline/support/resistance/demand etc. etc.
Or, price does the same thing but this time it hits the zline/support/resistance/demand etc. etc. of the 4 hour chart.
Looking at those facts how can a set it and forget it strategy be viable without taking into consideration all timeframes and their possible turning points
To combat this we need to manage the trades which is as important as the entry in my opinion.
When taking a trade it is good to be able to exit a portion of the trade at different intervals. I trade at Oanda so I need to place two orders so I can bail on one when price is acting questionable. (It is called getting in and then limiting risk)
I look to get out of a trade when:
= I am at a resonable profit say 2% or better and price is acting funny
= A candle on my timeframe closes against me
= My entry candle closed against my zline
= Getting out after 3 candles if they seem like duds (NO MOMENTUM)
Another thing that is useful is placing your stoploss where it should actually be and not where your lot size determines. Determine you maximum lot size by (account size * risk percentage) / (stoploss +spread)
The answer to that equation will be your maximum $ risk per pip.
$100,000 *2% = $2000
13 + 3 = 16
$2000/16 = $125/pip or 12.5 lots
On a final note:
my trading partner was having trouble getting some decent returns and we had a discussion about it to see what was happening.
He only made .5% and 1% on a few trades and was wonder what was happening. The thing is he had made some nice 5% trades and now he was thinking he is superman and can get that all the time.
Come on let us have a reallity check. I don't care that es/pip, Mightyone, and Dragon33 can make 100% a week. I couldn't play basketball like Michael Jordan either.
The point is these types of people are gifted (all-stars)
making 5%, 10% or more a month is superhuman.
Bank interest 3% 1 year
Money Market 5% 1 year
Nice Hedge fund 40% 1 year
Forex 6% a week compounded for 1 year 2000%
That is 3 nice "cherry" trades per week at 2% each, you don't need 30% a week to be rich with Forex Trading.
I don't know if this will help anyone but it sure did put things in perspective for my trading partner.