Focus or Money Management?

[Sigma-D]

I'm only half laughing as I type this, but if I took a profit at double spread on every trade I've ever taken, I'd actually be in decent profit right now.

It's hanging on for the home runs that dip you back into the red.

 

[counter_violent]

Agree it is very labour intensive and not for everyone.

But surely if do this type of work over a long period.
You are better than a coin toss.

Yes exactly, because you can take a single trade and it works and you close, job done.

You can take another and it isn't working, so you bias in a related instrument and it works out and you close both for a net profit, job done.

Take another trade, it works out, close the trade, job done.

Take another trade, it isn't working, you bias the related instrument, direction changes again, you re-bias original direction, yada yada yada. You can take single position profit when you think the bias is going to change again, hence, not always a need to keep adding possies, either side can be reduced as well. It's just a way of keeping on managing until the cluster of trades end up net profit.

 

[counter_violent]

I'm only half laughing as I type this, but if I took a profit at double spread on every trade I've ever taken, I'd actually be in decent profit right now.

It's hanging on for the home runs that dip you back into the red.

Yeah I hear ya So i'll laugh with you, not at you

 

[Sigma-D]

Yes exactly, because you can take a single trade and it works and you close, job done.

You can take another and it isn't working, so you bias in a related instrument and it works out and you close both for a net profit, job done.

Take another trade, it works out, close the trade, job done.

Take another trade, it isn't working, you bias the related instrument, direction changes again, you re-bias original direction, yada yada yada. You can take single position profit when you think the bias is going to change again, hence, not always a need to keep adding posies, either side can be reduced as well. It's just a way of keeping on managing until the cluster of trades end up net profit.

A bit of me says this is, to use your words, yada yada yada...And another bit says this is probably exactly where it really is.

Almost random entry, trade while good; exit when bad. If bad, reverse entry,. Trade while good; ext when bad, reverse entry...ad profitarum

 

[counter_violent]

A bit of me says this is, to use your words, yada yada yada...And another bit says this is probably exactly where it really is.

Almost random entry, trade while good; exit when bad. If bad, reverse entry,. Trade while good; ext when bad, reverse entry...ad profitarum

Might sound a bit odd....but I don't exit the bad ones until I've made more on the good ones.

 

[Sigma-D]

Might sound a bit odd....but I don't exit the bad ones until I've made more on the good ones.

This is so sh!t. No offence, but that;exactly what I ended up doing (accidentally) this week.

I ended up quite unintentionally with a synthetic long audchf. The long audusd took off nicely, the long usdchf was suffering. When the audusd got into double digits profit, I took it an profit and left eh languishing usdchf on. WQhen it hit a +1, I took it.

Trade of the week for me.

Really. Is it it that basic?

 

[counter_violent]

This is so sh!t. No offence, but that;exactly what I ended up doing (accidentally) this week.

I ended up quite unintentionally with a synthetic long audchf. The long audusd took off nicely, the long usdchf was suffering. When the audusd got into double digits profit, I took it an profit and left eh languishing usdchf on. WQhen it hit a +1, I took it.

Trade of the week for me.

Really. Is it it that basic?

It's far from basic...what you did was manage to a successful outcome overall.

Most traders can't even think in one direction with one trade...let alone two directions with multiple trades. They never get beyond entry, target and stop before they give up on the whole thing !

 

[tar]

Also, you really do need to think about the first obstacle to overcome, which is spread cost.

How many trades might you do in a typical year? For me it could easily be 10 a day. Which equates to 2,500 a year. So lets assume a 2 spread x stake, even at a quid that's 5k large. A lot of traders would be very happy to make 5 large as opposed to losing 15!

+1

You will always read that the daily charts looks exactly like the short time frame ones , thats true but the costs are enormous on the short time frame charts , the spread is the same but the ATR is totally different , so instead of trading 10 pips moves and pay 2 pips in costs , one could pay the same spread and trade 100 pips moves . 20% vs 2% !

 

[Splitlink]

Commission or spread will affect this.

It will, but it is not too dificult to circumvent. If the trader uses 20 points loss and aims for a 15 point gain, for example, which is what I do. That would take into consideration the spread, wouldn't it?

I believe that short time frame trading is doomed to fail because it entails a shorter stop loss distance that the market is able to reach with no difficulty, at all-- and I mean in either direction, a kind of road roller effect.

Where trading is dangerous, on a 50-50 view is at all points where price touches any kind of line where traders have stops. You have to be very fast to take profit when it appears and hope that it goes into profit at once. If it does go into profit first and the trader does not take it, he has had it because the price will roll against him.

My problem with that is that, instead of reaching the traders target of 15, it goes to 12 and the trader waits. Too late! Perhaps the best thing to do is move loss up to breakeven, asap, but I have found that I go a long way in a long time, by doing that and is a waste of time.

 

[Trader333]

No trader333, it doesn't.

I was referring to overall profitability which it has a big impact on. It is comparable to the roulette wheel where many punters bet on red or black and for the most part the ball will land on one or the other. However, when it lands on white then everyone loses and the more times punters play the more that statistical probabilities will prevail giving an edge to the house or in the case of trading the brokers.

 

[tar]

Surely costs have a huge impact on overall profitability , if we dont pay any costs most traders will BE as long as they trade small - to handle consecutive losses - .

 

[counter_violent]

+1

You will always read that the daily charts looks exactly like the short time frame ones , thats true but the costs are enormous on the short time frame charts , the spread is the same but the ATR is totally different , so instead of trading 10 pips moves and pay 2 pips in costs , one could pay the same spread and trade 100 pips moves . 20% vs 2% !

Yes wouldn't that be lovely. The problem though currently with trading anything forex....those 100 pippers just aren't there. Volatility and volumes are way down, and I see no reason why they will increase, until such times as interest rates come back into the mix in a meaningful way ! I'm not talking about drip drip 0.25%'s either, but more when interest rates are around historical norms of say 5%. Which presents the next problem....It could be 5-20 yrs before that happens

So for me, it's just not acceptable for someone to say, I'm a forex trader and that's what I trade..... endex, when there are instruments which are clearly more volatile, ie- where the trading action is currently.

That's not to say we cannot use the currencies to inform on other asset classes which we might trade...but that's a different matter altogether.

 

[Sigma-D]

So for me, it's just not acceptable for someone to say, I'm a forex trader and that's what I trade..... endex, when there are instruments which are clearly more volatile, ie- where the trading action is currently.

A point made to me be someone else as well this week which has helped me identify the basis under which I came into trading and why it has been, and is, for me, a cul-de-sac.

 

[tar]

So for me, it's just not acceptable for someone to say, I'm a forex trader and that's what I trade..... endex, when there are instruments which are clearly more volatile, ie- where the trading action is currently.

That's not to say we cannot use the currencies to inform on other asset classes which we might trade...but that's a different matter altogether.

Many prop traders don't even trade FX or indices , just spreads and flys ... etc .

 

[12WBT]

Many prop traders don't even trade FX or indices , just spreads and flys ... etc .

Tell more lost me

 

[tar]

Tell more lost me

I've heard and read this many times that many prop traders - especially the successful and profitable ones - dont trade directional or FX and indices , but rather trade futures spreads like Energy spreads and Interest rate futures calendar spreads or butterflies ... etc , check this guide for definitions :

http://www.cmegroup.com/confluence/display/EPICSANDBOX/Futures+Spreads

 

[tar]

Yes wouldn't that be lovely. The problem though currently with trading anything forex....those 100 pippers just aren't there. Volatility and volumes are way down, and I see no reason why they will increase, until such times as interest rates come back into the mix in a meaningful way ! I'm not talking about drip drip 0.25%'s either, but more when interest rates are around historical norms of say 5%. Which presents the next problem....It could be 5-20 yrs before that happens

An idea is one may switch to GBP/NZD - 4 pips spread - instead of cable , moves like the old cable and it looks like it @ 1.97 , but should be aware of NZ economic figures overnight .

 

[Sigma-D]

An idea is one may switch to GBP/NZD - 4 pips spread - instead of cable , moves like the old cable and it looks like it @ 1.97 , but should be aware of NZ economic figures overnight .

Checkout OANDA right now (closed market) and the spread is a comfy 32 pips. But even during normal trading it's 6-7 pips.

Having said that, whenever I've had a conviction on gbpnzd it's generally served me well even with the largest spread of all the majors. In fact, I let the cost of doing business with it put me off which is crazy given that it has looked after me better than most.

 

[tar]

I recall FXCM NDD account its usually 4 pips which is good ...

 

[Sigma-D]

+1

You will always read that the daily charts looks exactly like the short time frame ones , thats true but the costs are enormous on the short time frame charts , the spread is the same but the ATR is totally different , so instead of trading 10 pips moves and pay 2 pips in costs , one could pay the same spread and trade 100 pips moves . 20% vs 2% !

Yeah, I was convinced this was the way to go at one point. The charts do look similar on all (most) timeframes and the spread compared with the daily range as compared with the spread compared with the range on a 5 min chart - true there are economies of scale (economies of timeframe?), but...

The spread isn't the determinant for profitability.

On a 15 min chart I may be looking at 15-30 pip stops. On the daily I'd need 50-100 pip stops. Sure you can configure your position size to accommodate any size stop, but that misses the point.

It's not whether you have a 2 pip spread and are looking for 100 pip moves or 10 pip moves - it's the size of your stop with respect to your average pips win. If I make 5 intraday trades with a 15 pip stop and a 15 pip win, I'm streets ahead of the guy who makes one intraday move with a 100 pip stop and a 100 pip win.

Providing I have more winners than losers.

It's not the spread or the size of the stop or the timeframe - it's the win:loss ratio.