Kreslik.com - traders community since 2006

Hello,

I've been reading all the threads related to this strategy. It seems a simple idea, but 3 important questions have been raised and are unanswered.

For me, the strategy is theory only until they can be satisfactorily answered.

Your comments are most welcome.


1. STOP LOSS
Using the TRO Money Management tool, using a profit limit of 10 pips and a SL of 30 pips does not make good sense.

So:

I intend to place my orders ahead of time, as I do not watch the screen all day. These orders are:

i) A buy order at a level
ii) A sell order at level + 10pips
iii) A stop loss at level x <<<- yet to be determined

While a 30 pip SL does not make sense, there are also problems with small (eg-5-10pip) SLs. Very often there is whipsawing around the entry level, eg: buy at 1.9000, price goes up to 1.9003 then down to 1.8980 then up to 1.9007 (an example). You can get massacred on a smaller SL worse than using the larger SL values - ie. your SL gets hit a higher % of the time.

So for those of us that don't monitor in real-time, what is the solution? I could reduce my stop profit to 3 pips, but after commissions I make 1 pip - hardly worth my effort. And at this minute level, we are likely to get hit by spread alterations.


2. WHAT ACCOUNT % TO USE
Some people say risk no more than 2% of your account on a trade. This is independent of the SL level, and is used to guage how many lots to buy only.

What do people use?


3. AND WHY OPEN OR CLOSE?
Why are people waiting for the price to reach previous daily O/C levels?

Why not place two orders 10 pips from the current level? Surely the chance of reaching these is higher than waiting for the price to reach a higher/lower O/C value?

I agree, there are the same issues in that the price may reverse once the order has been opened before the profit target is reached, but this is no different than orders around the O/C values.

Alex

1) You are right. Someone was trying to prove this system doesn't work and used the 30 pip s/l.

2) I say start with 1 mini lot and work your way up. RISKING IT ALL!!

3) Why wait? Because that is what works.

Thanks.

1. What SL do you use Avery? If none, what would be a good one for me/us to use?

2. What would be your maximum % of account to use per trade as I work up through # of minilots.

3. Understood.

ALex

1) Use SL of 7

2) If you start trading 1 minilot and work your way up to 2 minilots, you would be trading your entire "pile" of 2 minilots. But ONLY do that AFTER you work your way up. If you can work your way up following the rules, then you can continue to do so.

Thank you Avery. Sorry for so many questions here, but I'm finding this really useful and it will allow me to start trading - and this thread will hopefully help others.

1. With your SL of 7, do you manually sell if you have entered a trade (say long), your profit target has not been reached but the current 1min candle closes below the line at which you bought - but not so much that the SL has yet been reached?

Or do you just wait for the SL to hit for a sell and ignore minor closes around the buy line in the meantime?

AC

Ali:

I focus on making money, not giving it away.

alichambers wrote:2. WHAT ACCOUNT % TO USE
Some people say risk no more than 2% of your account on a trade. This is independent of the SL level, and is used to guage how many lots to buy only.

The 2% risk shouldn't be independent of SL because that's what a SL is - the measure of risk you're willing to take. While a minilot requires a $50 investment to enter into the contract, that entire $50 is not at risk unless you set a stoploss of 50 pips. The 2% risk should correspond roughly to your stop loss. So if your account size is $1000, at no time should you be risking more than $20 in losses. So you could trade one minilot with a S/L of 20, or two lots at a time with a S/L of 10 on each.

I suppose you can argue slippage and fill times, but saying that your entire contract purchase fee is at risk is being too cautious, IMHO.