Catastrophic event

[Depth Trade]

Don't be a pussy, you might end up on the right side of it too.

Best quote I have read so far. Exactly, if your consistently in the market one would think it would all equal out.
..And that's not taking into account that you have an 'edge' which you need to be profitable, so either way nothing has changed.

 

[wackypete2]

Best quote I have read so far. Exactly, if your consistently in the market one would think it would all equal out.
..And that's not taking into account that you have an 'edge' which you need to be profitable, so either way nothing has changed.

How does it all equal out if don't manage your account right and 1 cat event wipes you out?

Peter

 

[Depth Trade]

How does it all equal out if don't manage your account right and 1 cat event wipes you out?

Peter

Hello pete, you answered your own question. My description is based off managing one's account 'right' and having an edge.

 

[wackypete2]

Hello pete, you answered your own question. My description is based off managing one's account 'right' and having an edge.

That's what I've been trying to say

Peter

 

[DionysusToast]

One of the things that people sometimes forget is that when you daytrade stocks long, your potential downside is a total loss of all capital regardless of stop loss.

Stocks can be halted at any time and there is a remote chance that a halted stock becomes worth zero.

The chances of this are extremely remote and I've never heard of a day trader guarding against this.

 

[tar]

One of the things that people sometimes forget is that when you daytrade stocks long, your potential downside is a total loss of all capital regardless of stop loss.

Stocks can be halted at any time and there is a remote chance that a halted stock becomes worth zero.

The chances of this are extremely remote and I've never heard of a day trader guarding against this.

I am talking about futures ...

 

[tar]

Don't be a pussy, you might end up on the right side of it too.

dont be an a** h*** :cheesy:

 

[tar]

Best quote I have read so far. Exactly, if your consistently in the market one would think it would all equal out.
..And that's not taking into account that you have an 'edge' which you need to be profitable, so either way nothing has changed.

depth trade this has nothing to do with " the edge " a cat event happens once maybe so there is no chance to even out and no matter how small u trade u could end up losing third of your account in such an event unless your account is small then who cares

 

[eminiglobex]

I disagree. I scalp for 10-15 pips per trade, maybe 5-10 trades per day. Options are a waste of my money as the cost will put me in a negative expectancy. Options are not for scalpers. Most of my trade have a lower risk than swing traders use. I can't speak for anyone else but I have very little event risk, and trade with a lower account risk per trade than most swing traders, I do very well, and sleep good every night with no open positions.
Using options when swing trading is completely different but the OP clearly mentioned scalping.

Just my 2 cents...


Peter

I would agree with your comment for the majority re scalpers and options, but i do know a few people who professionally scalp and use options to provide some protection. May i ask what % of capital you risk on each of your trades? Must be tiny if your account can tolerate a 30% crash.

 

[wackypete2]

I'll give an example of exactly how I determine risk per trade. Since I trade spot forex and only scalp or daytrade there is very very little risk for extraordinary gap in price and zero overnight risk. This may not apply to other markets so you need to assess your own risk parameters, but this is how I do it.

example: $5000 account, day trading/scalping only, eurusd and audusd
normal stop loss: 10-15 pips.
max unthinkable gap against me: 400 pips - this is very very unlikely while daytrading.
$$ loss I'm comfortable with at the max gap: $1000 -- 20% of account drawdown at max gap.

So we calculate: $1000/400 = trade size of $4/pip
If you can average just 30 pips per week thats $120 profit each week. Very possible for experienced profitable scalpers.
$120/week @ 50 weeks = $6,000 per year (2 weeks vacation!) on a $5,000 account

These results are not only possible, but very conservative. Now if you are trading for a living multiply everything by 5 and you get a decent weekly income. This is not just bulls**t theory. I've been trading for many years. First and foremost is making absolutely sure you can survive another day no matter what happens. Easier said than done for new traders, I understand.

I would suggest a new trader who is not yet profitable only use $2/pip to preserve account size until better days.

One problem I see all the time with new traders is they are expecting to make a several hundred a week with $5000 or smaller account and anything less isn't very appealing especially after seeing all the ads for making huge $$$$. Eventually they take risk they can't handle.

I welcome any comments!


Peter

 

[wackypete2]

I would agree with your comment for the majority re scalpers and options, but i do know a few people who professionally scalp and use options to provide some protection. May i ask what % of capital you risk on each of your trades? Must be tiny if your account can tolerate a 30% crash.

To be honest I've never heard of this while scalping and as I've stated I don't think I could make it work for me. I'd be interested in how it's done out of curiosity although at this time I don't have a need to use this type of method.

Peter

 

[eminiglobex]

So if i'm reading it right your risking approx 1% of capital each trade. Yes, that is conservative for scalping.

With regard to your performance figure, your example is returning over 100% of capital per annum. Whilst its doable, this sort of return would be exceptional. Have you actually had this sort of performance in real trading over a decent period, say five years in a row?

 

[brettus]

I'll give an example of exactly how I determine risk per trade. Since I trade spot forex and only scalp or daytrade there is very very little risk for extraordinary gap in price and zero overnight risk. This may not apply to other markets so you need to assess your own risk parameters, but this is how I do it.

example: $5000 account, day trading/scalping only, eurusd and audusd
normal stop loss: 10-15 pips.
max unthinkable gap against me: 400 pips - this is very very unlikely while daytrading.
$$ loss I'm comfortable with at the max gap: $1000 -- 20% of account drawdown at max gap.

So we calculate: $1000/400 = trade size of $4/pip
If you can average just 30 pips per week thats $120 profit each week. Very possible for experienced profitable scalpers.
$120/week @ 50 weeks = $6,000 per year (2 weeks vacation!) on a $5,000 account

These results are not only possible, but very conservative. Now if you are trading for a living multiply everything by 5 and you get a decent weekly income. This is not just bulls**t theory. I've been trading for many years. First and foremost is making absolutely sure you can survive another day no matter what happens. Easier said than done for new traders, I understand.

I would suggest a new trader who is not yet profitable only use $2/pip to preserve account size until better days.

One problem I see all the time with new traders is they are expecting to make a several hundred a week with $5000 or smaller account and anything less isn't very appealing especially after seeing all the ads for making huge $$$$. Eventually they take risk they can't handle.

I welcome any comments!


Peter

1000/400 = 2.5$ a pip. Your point is valid though. These threads make me scared about trading for no reason.

 

[brettus]

So if i'm reading it right your risking approx 1% of capital each trade. Yes, that is conservative for scalping.

With regard to your performance figure, your example is returning over 100% of capital per annum. Whilst its doable, this sort of return would be exceptional. Have you actually had this sort of performance in real trading over a decent period, say five years in a row?

1% of capital for scalping isnt conservative because you could easily make 1% a day off that and 250% a year is a ridiculous return. I wouldn't risk 1% scalping myself. I risk about 0.3-0.5% on any day trade max.

 

[wackypete2]

So if i'm reading it right your risking approx 1% of capital each trade. Yes, that is conservative for scalping.

With regard to your performance figure, your example is returning over 100% of capital per annum. Whilst its doable, this sort of return would be exceptional. Have you actually had this sort of performance in real trading over a decent period, say five years in a row?

Yes and no.
First, I've only been trading forex for about 6 years. I've traded US stocks since the 1980's but thats a different story and risk analysis.

2nd, On an annualized basis, then yes. However I don't trade for about 14 weeks or so over the summer due to the commitments of a small business I run so my actual net results on a per year basis are less that that. I consider my self a part time trader but based on the time I spend that's probably debatable.

I don't think the results are really that exceptional for an experienced trader. I've worked alongside equities traders who were considerably better than me and these results would not be exceptional to them at all. Of course I can't verify if they did it over a long term or not but my guess is they did or could.

To be fair, although I consider equities easier to trade and I've done well over the years, I've never achieved the same results as I have in forex. Sounds contradictory, but the risk/reward is completely different.

Peter

 

[wackypete2]

1000/400 = 2.5$ a pip. Your point is valid though. These threads make me scared about trading for no reason.

hehe...that's what happens when you try typing an answer too fast!
My 3rd grade math teacher would be horrified

Thanks for correcting.

Peter

 

[arabianights]

I'm fine so long as exchange (or my connection to it) doesn't get taken out in the catastrophic event.

Otherwise, potentially, I'm wiped out (Or I make an absolute **** load of money). Or more accurately my trading accounts are, they're limited liability. And if they weren't, the LTD and LLP all my trading is done through both are (you can't really trade as an individual tax effectively). I won't be going bankrupt or anything.

Something I live with, and am well aware of, basically. Not cost effective to protect against. My trades can be worth billions, notionally. Oh well.

But it IS something I worry about. Certainly.

 

[DashRiprock]

I'll give an example of exactly how I determine risk per trade. Since I trade spot forex and only scalp or daytrade there is very very little risk for extraordinary gap in price and zero overnight risk. This may not apply to other markets so you need to assess your own risk parameters, but this is how I do it.

example: $5000 account, day trading/scalping only, eurusd and audusd
normal stop loss: 10-15 pips.
max unthinkable gap against me: 400 pips - this is very very unlikely while daytrading.
$$ loss I'm comfortable with at the max gap: $1000 -- 20% of account drawdown at max gap.

So we calculate: $1000/400 = trade size of $4/pip
If you can average just 30 pips per week thats $120 profit each week. Very possible for experienced profitable scalpers.
$120/week @ 50 weeks = $6,000 per year (2 weeks vacation!) on a $5,000 account

These results are not only possible, but very conservative. Now if you are trading for a living multiply everything by 5 and you get a decent weekly income. This is not just bulls**t theory. I've been trading for many years. First and foremost is making absolutely sure you can survive another day no matter what happens. Easier said than done for new traders, I understand.

I would suggest a new trader who is not yet profitable only use $2/pip to preserve account size until better days.

One problem I see all the time with new traders is they are expecting to make a several hundred a week with $5000 or smaller account and anything less isn't very appealing especially after seeing all the ads for making huge $$$$. Eventually they take risk they can't handle.

I welcome any comments!


Peter

:?:

if normal your stops are 10-15 pips, put your stop there or do like i do an put a stop maybe 20 pips away and work yourself out if you dont like the trade. maybe if your doing it with a sber its different but if your trading on an exchange (it depends on what your trading a bit) but like a gap of 10 or 20 ticks is not likely gonna happen unless its going into a release. same with slippage.

if your going into big figure then fine it can happen, but if there is world war three or sumthing its gonna take time to work its way through the market, and even if ts a matter of seconds its long enough for the market to trade past your stop and get you filled on the way out for ok slippage.

arabianights is right about exchange connections tho because they can cause you problems... your internet connection going down might not be so bad if your orders are native and resting on the exchange or on your brokers co-loc servers but if they are resting your your pc is can be bad news.

other bad thing is whole exhcnage going down then but you can always leg into a spread as a bodge of a hedge.

there are other problems for scalpers tho like having offers working further up and down the book just to give you a nice place in the cue for an exit of a trade you havent put on yet

 

[wackypete2]

Hi Dash.

Some of what you are saying is not really applicable to spot forex because it's not exchange-traded, but otherwise you are right on.

Thats why I said in my comments that it was market specific to spot forex because that's what I am currently trading. The idea rather than the specifics are what counts.

Peter

 

[wackypete2]

BTW, this is an interesting thread. One of the few that are good for some exchange of ideas rather than only for the lulz. Thanks to tar for starting it!

Peter