## PA, S/R, ZL, EXTREMES & MOMO

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newscalper
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Trading through NFP is fine and dandy until the market gaps and you get filled 80 pips beyond your exit in the red.

paweldobkowski
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newscalper wrote:Trading through NFP is fine and dandy until the market gaps and you get filled 80 pips beyond your exit in the red.

dont hate yo

; D

Account size: \$100
Leverage: 1:500 (leverage needs to be big for this)
Risk: 5% (or You can risk less)

Then You play in 4 steps with SL 10p and TP whatever You can.

STEP1: You start with risking \$5 and You play with 0,05 lots. As long as You collect 10 pips with this size.
STEP2: Now You have \$10 to lose so You play with 0,1 lot until You collect 10pips.
STEP3: \$20 to lose. You play with 0,2 lots for 10pips.
STEP4: \$40 to lose (switch up to 0,4 lots) and after getting 10 pips You end up with \$80.

After STEP4 (collectig 40pips) You end up winning \$80 risking \$5. That is 1:16 RR Ratio which equals 80% ROI risking 5%.

Makes any sense? Any thoughts?

newscalper
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Just on the numbers it doesn't mean anything m8. I prefer MOs similar method of investing the money back into the stop and then riding a higher timeframe. Same idea but it gets easier the longer you go as you can ride out the volatility. Your way, one 10 pip move against and you're back to square 1. Don't forget your run could start with 3 losses too.

For every trading edge there's a random outcome of results. If you know your win/loss ratio then you can work out the worst case projected return for a given theoretical r:r and you MUST use the worst case, for either method using a casino sim.

So to compare the 'quick compounding' against 'straight trading' (just risking the same money amount each time starting at 5% risk for capital) you'd need the random set and then plug the trades in.

i.e. Assuming real-life realised 1:1 r:r say the random set starts with
loss loss win loss
quick compounding = -10%

win win win loss
quick compounding gives 0% (assuming we compound up to 4 trades)

etc etc
So you need to test returns after, say 500 trades, worst case scenario (some ratios can give +ve or -ve results after n trades depending on result distribution) and see which gives the best bang for the buck

Then I've not included testing against fixed ratio mm.

Don't be blinded.
Last edited by newscalper on Mon Apr 04, 2011 11:04 am, edited 1 time in total.

paweldobkowski
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newscalper wrote:Just on the numbers it doesn't mean anything m8. I prefer MOs similar method of investing the money back into the stop and then riding a higher timeframe. Same idea but it gets easier the longer you go as you can ride out the volatility. Your way, one 10 pip move against and you're back to square 1. Don't forget your run could start with 3 losses too.

For every trading edge there's a random outcome of results. If you know your win/loss ratio then you can work out the worst case projected return for a given theoretical r:r and you MUST use the worst case, for either method using a casino sim.

So to compare the 'quick compounding' against 'straight trading' (just risking the same money amount each time starting at 5% risk for capital) you'd need the random set and then plug the trades in.

i.e. Assuming real-life realised 1:1 r:r say the random set starts with
loss loss win loss
quick compounding = -10%

win win win loss
quick compounding gives 0% (assuming we compound up to 4 trades)

etc etc
So you need to test returns after, say 500 trades, worst case scenario (some ratios can give +ve or -ve results after n trades depending on result distribution) and see which gives the best bang for the buck

Then I've not included testing against fixed ratio mm.

Don't be blinded.

Thanks for reply NS : )

You are absolutely right looking at it Your way.

BUT (I like bit buts

1st of all You dont let the price hit Your stop every time. Matter of fact I do it VERY rarely. You dont have to let it go for -10p to know that You were wrong. As many others before me said: It's better to exit quick and eventually look for better price to enter.

2nd of all You can take 4 full SLs (20%) in the row and only 2 full TPs (20%) in the row to end up equal.

3rd of all You are right that losing once puts You back to square 1 but on the other hand the growth is very rapid during Your winning streaks. Also You can end up and start all over after STEP2 or STEP3.

It is also not the best way to manage big accounts but in the beggining when You need to be a bit more agressive it's ok in my opinion.

Although keep in mind that I dont know the real probabilities behind this. I will probably work on it some more and maybe Ill just try it in practise. I just need some opinions on in or maybe someone already went through the same idea and is willing to share experiance.

Feel freet o comment

newscalper
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paweldobkowski wrote:
newscalper wrote:Just on the numbers it doesn't mean anything m8. I prefer MOs similar method of investing the money back into the stop and then riding a higher timeframe. Same idea but it gets easier the longer you go as you can ride out the volatility. Your way, one 10 pip move against and you're back to square 1. Don't forget your run could start with 3 losses too.

For every trading edge there's a random outcome of results. If you know your win/loss ratio then you can work out the worst case projected return for a given theoretical r:r and you MUST use the worst case, for either method using a casino sim.

So to compare the 'quick compounding' against 'straight trading' (just risking the same money amount each time starting at 5% risk for capital) you'd need the random set and then plug the trades in.

i.e. Assuming real-life realised 1:1 r:r say the random set starts with
loss loss win loss
quick compounding = -10%

win win win loss
quick compounding gives 0% (assuming we compound up to 4 trades)

etc etc
So you need to test returns after, say 500 trades, worst case scenario (some ratios can give +ve or -ve results after n trades depending on result distribution) and see which gives the best bang for the buck

Then I've not included testing against fixed ratio mm.

Don't be blinded.

Thanks for reply NS : )

You are absolutely right looking at it Your way.

BUT (I like bit buts

1st of all You dont let the price hit Your stop every time. Matter of fact I do it VERY rarely. You dont have to let it go for -10p to know that You were wrong. As many others before me said: It's better to exit quick and eventually look for better price to enter.

2nd of all You can take 4 full SLs (20%) in the row and only 2 full TPs (20%) in the row to end up equal.

3rd of all You are right that losing once puts You back to square 1 but on the other hand the growth is very rapid during Your winning streaks. Also You can end up and start all over after STEP2 or STEP3.

It is also not the best way to manage big accounts but in the beggining when You need to be a bit more agressive it's ok in my opinion.

Although keep in mind that I dont know the real probabilities behind this. I will probably work on it some more and maybe Ill just try it in practise. I just need some opinions on in or maybe someone already went through the same idea and is willing to share experiance.

Feel freet o comment

Yeah, I know you don't let it hit the stop every time. Likewise it doesn't hit the target every time. You have to run your sim based on real life attained results not some theoretical r:r. R:R is not per trade, it's realised r:r over the set. Therefore for the purpose of a sim it runs to full risk on every loss, likewise every win runs to target. It gives the same realised r:r as the real life ones and the two average out.

Step 2 and 3 are not really relevent - I know the theory but until it's tested on a significant sample size with known results for your style of trading it means nothing - your'e shooting in the dark and have NO idea whether the sometime big wins will outweigh the losses.

As I say, don't be blinded by the up side. You must take the down side into account. In fact the down side must be your priority for thought.

pika
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Ultimately you must be able to trade successfully, otherwise your account will be wiped out in no time. Why? You risk 5% for the first trade, but as you build up your acount, you are also increasing the risk with subsequent trades proportionately to the lot size (i.e. 10% on second trade, 20% on the third and 40% on the fourth). The moment you lose in any of the subsequent trades, you are back to square 1.

Besides, how will you manage your acount if it falls below \$100? Do you still risk 5% or \$5? If you risk \$5, that will be more than 5% risk. I would suggest that you manage your trade based on a fixed % stop loss of your equity. In this way, the lot size will adjust itself according to the size of your account and you can last longer in the game. All said, you still must find yourself a winning method, or else it will just be a matter of time before your accound will shrink so small that you only make pennies instead.

paweldobkowski
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dbl post ; <
Last edited by paweldobkowski on Mon Apr 04, 2011 6:51 pm, edited 1 time in total.

paweldobkowski
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pika wrote:Ultimately you must be able to trade successfully, otherwise your account will be wiped out in no time. Why? You risk 5% for the first trade, but as you build up your acount, you are also increasing the risk with subsequent trades proportionately to the lot size (i.e. 10% on second trade, 20% on the third and 40% on the fourth). The moment you lose in any of the subsequent trades, you are back to square 1.

Besides, how will you manage your acount if it falls below \$100? Do you still risk 5% or \$5? If you risk \$5, that will be more than 5% risk. I would suggest that you manage your trade based on a fixed % stop loss of your equity. In this way, the lot size will adjust itself according to the size of your account and you can last longer in the game. All said, you still must find yourself a winning method, or else it will just be a matter of time before your accound will shrink so small that you only make pennies instead.

Thanks for You input Pika : )

Don't get me wrong. I'm certainly not saying that if You keep losing in the markets You are going to become profitable using this.

The thing that I've showed also was only an example. Im not good enough to risk 5%. My case is that I still cant handle emotions while trading. Im more or less consistent playing small lots though and I wanted to make it my advantage.

The risk that I can accept before putting a trade (which I belive is essential to be profitable) and feel comfortable with is 1% per 10p right now. I put on a trade and I feel like that 1% is gone and I dont care. I feel no stress. I dont hesitate to take any setup I see. I feel fine about getting out with small loss and there are no bad emotions involved. Whats also important I dont rush to get out. I can calmly look how the trade develops. I dont want to go up for 2, 3 or more percent yet therefore I figured out this "trick".

The only good way to test this on me is to play it so today was my first day trying it and it was a pretty good day. It was a first day so I cant say a lot so far BUT I still feel comfortable with risking 1% of my account and after getting first 10p I feel like Im playing for free. Just like in poker when You get someones money it is better to push aggressively with them.

ALSO risking that little I can make 16% in 40p instead of 160p like before. SO YES when I lose at any point Im back to STEP1 but if I make those 40p in any of 4 attempts (before gaining 160p) I still make 16% working less than before.

Hope that it makes sense. Im sorry for any mistakes in my english : )

cwn6161
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paweldobkowski wrote:
pika wrote:Ultimately you must be able to trade successfully, otherwise your account will be wiped out in no time. Why? You risk 5% for the first trade, but as you build up your acount, you are also increasing the risk with subsequent trades proportionately to the lot size (i.e. 10% on second trade, 20% on the third and 40% on the fourth). The moment you lose in any of the subsequent trades, you are back to square 1.

Besides, how will you manage your acount if it falls below \$100? Do you still risk 5% or \$5? If you risk \$5, that will be more than 5% risk. I would suggest that you manage your trade based on a fixed % stop loss of your equity. In this way, the lot size will adjust itself according to the size of your account and you can last longer in the game. All said, you still must find yourself a winning method, or else it will just be a matter of time before your accound will shrink so small that you only make pennies instead.

Thanks for You input Pika : )

Don't get me wrong. I'm certainly not saying that if You keep losing in the markets You are going to become profitable using this.

The thing that I've showed also was only an example. Im not good enough to risk 5%. My case is that I still cant handle emotions while trading. Im more or less consistent playing small lots though and I wanted to make it my advantage.

The risk that I can accept before putting a trade (which I belive is essential to be profitable) and feel comfortable with is 1% per 10p right now. I put on a trade and I feel like that 1% is gone and I dont care. I feel no stress. I dont hesitate to take any setup I see. I feel fine about getting out with small loss and there are no bad emotions involved. Whats also important I dont rush to get out. I can calmly look how the trade develops. I dont want to go up for 2, 3 or more percent yet therefore I figured out this "trick".

The only good way to test this on me is to play it so today was my first day trying it and it was a pretty good day. It was a first day so I cant say a lot so far BUT I still feel comfortable with risking 1% of my account and after getting first 10p I feel like Im playing for free. Just like in poker when You get someones money it is better to push aggressively with them.

ALSO risking that little I can make 16% in 40p instead of 160p like before. SO YES when I lose at any point Im back to STEP1 but if I make those 40p in any of 4 attempts (before gaining 160p) I still make 16% working less than before.

Hope that it makes sense. Im sorry for any mistakes in my english : )

You say two conflicting things. First, you say you aren't good enough to risk 5%. Later though, you seem confident that in 4 attempts you have no problem winning all of them.

If you aren't good enough to risk 5%, you won't win 4 in a row.

Why not risk the smallest amount you can, and get to a point where you are consistent enough to be comfortable with 5%?

JESGPY
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kreslik is back up!