Is my strategy good??

[prasadvissa]

I have been following a strategy, which i copied from some forums with a few minor corrections. I have been making profits consistently with success ratio of about 80 to 90%. and honestly i have been able to double my demo account in about one month's time.
but the catch is , when i make a loss trade , which is my signal for reverse trade, the quantum of loss is about 2.5 times of each successful trade. (as mentioned before , i have been making profits overall).

can you comment critically on my plan. Thank you.

 

[Lightning McQueen]

there's not a great deal of information to go on there. to get any assistance you need to give a general idea of what the strategy is prasadvissa.

 

[Shadowman540]

Hi Prasa,

if you've doubled your demo in a months it usually means too much leverage, same with the 2.5 times loss to average win.
Go look at the eur/chf in mid april and imagine you were on the long side and you only managed to get out at the bottom, what does your account look like now?, if you took a massive loss but are still at your desk the next day then leverage is ok, if your clothes are in bin bags on the front lawn maybe cut leverage and re asses?

 

[tomorton]

Make winners bigger or make losers smaller or do both.

Bigger wins should not come from greater risk or unjustified targets, but try holding longer. Back-track over your winning trades and check what would have happened if you had held the winners 50% longer.

 

[prasadvissa]

Hi Prasa,

if you've doubled your demo in a months it usually means too much leverage, same with the 2.5 times loss to average win.
Go look at the eur/chf in mid april and imagine you were on the long side and you only managed to get out at the bottom, what does your account look like now?, if you took a massive loss but are still at your desk the next day then leverage is ok, if your clothes are in bin bags on the front lawn maybe cut leverage and re asses?

Thank you @shadowman for prompt reply and inputs.
I am using a $ 5k demo account of FXCM. and they are allowing , I guess, 1:100 leverage.
Inspite of my loss trades which are 2.5 times more than the profitable trades, my success ratio was more than 80% and thats why I was able to double my account.
I just had a look into EURO/CHF chart for April2015. Honestly, I had 3 trades and all 3 are profitable.
is 1:100 leverage on the higher side??

 

[prasadvissa]

Make winners bigger or make losers smaller or do both.

Bigger wins should not come from greater risk or unjustified targets, but try holding longer. Back-track over your winning trades and check what would have happened if you had held the winners 50% longer.

Thank you @ Tomorton for your inputs. As pointed out by you, holding on to the trades for a longer period may have resulted in bigger profits, which I have to study and quantify. but to make a standard system/ strategy , I was getting out with minimal profits, to ensure that my hit ratio is high.

By holding on to trades I am sure if my successful trades ratio will be much less, but my profits may run longer( ??). I have been keeping track on the past trades also, and some of the trades have given 10 times the profits. but it is a difficult decision/ dilemma .
I thought , "Bird in hand worth two in the bush", so booked my profits with my set standard pips.

 

[prasadvissa]

there's not a great deal of information to go on there. to get any assistance you need to give a general idea of what the strategy is prasadvissa.

@Lightning McQueen. Thank you for your post. I am using a MA crossover in a shorter time frame and for every 10 successful trades ,one loss trade (approx), which is giving me overall profits to double my account.

 

[Forexmospherian]

Thank you @shadowman for prompt reply and inputs.
I am using a $ 5k demo account of FXCM. and they are allowing , I guess, 1:100 leverage.
Inspite of my loss trades which are 2.5 times more than the profitable trades, my success ratio was more than 80% and thats why I was able to double my account.
I just had a look into EURO/CHF chart for April2015. Honestly, I had 3 trades and all 3 are profitable.
is 1:100 leverage on the higher side??

Hi prasadvissa

I would say 1 100 leverage is not that high - many prefer under 1 50 - and its 1 200 up to 500 + that is too much leverage

More importantly what size stake are you using on a $5k account??- is it less than 2% with your maximum stop allowed - ie if your stop is 20 pips maximum size per pip then $5 . If capital dropped to say $4k then on 20 pip stop maximum stake size - $4 a pip

Many image when a trader doubles his account in a month - he is using say 5% or even 10% stake size - and unfortunately unless you are very experienced that can be a recipe for disaster.

Also make sure you take at least 100 demo trades + before going live - just 20 or 30 is not representative enough

Good Trading


Regards


F

Good Trading

 

[alexaherself]

I have been making profits consistently with success ratio of about 80 to 90%. and honestly i have been able to double my demo account in about one month's time.
but the catch is , when i make a loss trade , which is my signal for reverse trade, the quantum of loss is about 2.5 times of each successful trade.

If you can really sustain that over the long term, over clearly statistically significant numbers of trades, then it's a very good method.

I have one friend whose regular trading system has a stop-loss twice the size of its take-profit target, and she's been successful with it for years.

Many people are more familiar and comfortable with methods that have a higher reward-to-risk ratio and a lower success-rate, but that doesn't make your figures any less productive or profitable.

If you can consistently win 8 trades out of 10, and lose the other two for 2.5 times as much money, you're still effectively gaining 3 trades net, out of every 10 trades. The potential difficulty is that if you win only 7 trades and lose 3 (which is an only marginally different outcome), you're losing money instead of gaining it (7 - 7.5 = -0.5).

So, you have to be very confident that you do, reliably, win 8 trades out of 10. If you have even an only "slightly bad run" (which everyone does, at times), it will be difficult for you to tell whether it's just a bad run of a viable system, or it's stopped working for some reason. It's easy to lose confidence, that way, and psychologically difficult.

Also, be aware that the number of trades required, to prove statistical significance, is in exponentially inverse proportion to the disparity between the actual strike-rate and 50/50. Methods which involve a very high strike-rate can be problematic for this reason. It's all too easy for them to look good on demo, only to deteriorate when traded with real money. As you can see from the example I gave above, only one result out of ten "going the other way" can easily represent the difference between overall profit and overall loss.

Before trading like that with real money, myself, I would want to see an absolute minimum of 300 results, and I might still be nervous, even after that.

But in principle, it may be possible to make money steadily, over the long term, in the way you describe. Just be aware, also, of the potential disadvantages to it.

Good luck!

 

[prasadvissa]

Hi prasadvissa

I would say 1 100 leverage is not that high - many prefer under 1 50 - and its 1 200 up to 500 + that is too much leverage

More importantly what size stake are you using on a $5k account??- is it less than 2% with your maximum stop allowed - ie if your stop is 20 pips maximum size per pip then $5 . If capital dropped to say $4k then on 20 pip stop maximum stake size - $4 a pip

Many image when a trader doubles his account in a month - he is using say 5% or even 10% stake size - and unfortunately unless you are very experienced that can be a recipe for disaster.

Also make sure you take at least 100 demo trades + before going live - just 20 or 30 is not representative enough

Good Trading


Regards


F

Good Trading

@Forexmospherian. Thank you for your inputs.

can you please elaborate "More importantly what size stake are you using on a $5k account??- is it less than 2% with your maximum stop allowed - ie if your stop is 20 pips maximum size per pip then $5 . If capital dropped to say $4k then on 20 pip stop maximum stake size - $4 a pip.

Regards
Prasad

 

[prasadvissa]

If you can really sustain that over the long term, over clearly statistically significant numbers of trades, then it's a very good method.

I have one friend whose regular trading system has a stop-loss twice the size of its take-profit target, and she's been successful with it for years.

Many people are more familiar and comfortable with methods that have a higher reward-to-risk ratio and a lower success-rate, but that doesn't make your figures any less productive or profitable.

If you can consistently win 8 trades out of 10, and lose the other two for 2.5 times as much money, you're still effectively gaining 3 trades net, out of every 10 trades. The potential difficulty is that if you win only 7 trades and lose 3 (which is an only marginally different outcome), you're losing money instead of gaining it (7 - 7.5 = -0.5).

So, you have to be very confident that you do, reliably, win 8 trades out of 10. If you have even an only "slightly bad run" (which everyone does, at times), it will be difficult for you to tell whether it's just a bad run of a viable system, or it's stopped working for some reason. It's easy to lose confidence, that way, and psychologically difficult.

Also, be aware that the number of trades required, to prove statistical significance, is in exponentially inverse proportion to the disparity between the actual strike-rate and 50/50. Methods which involve a very high strike-rate can be problematic for this reason. It's all too easy for them to look good on demo, only to deteriorate when traded with real money. As you can see from the example I gave above, only one result out of ten "going the other way" can easily represent the difference between overall profit and overall loss.

Before trading like that with real money, myself, I would want to see an absolute minimum of 300 results, and I might still be nervous, even after that.

But in principle, it may be possible to make money steadily, over the long term, in the way you describe. Just be aware, also, of the potential disadvantages to it.

Good luck!

@alexaherself, Thank you for your valuable inputs.

 

[Lightning McQueen]

Thank you @shadowman for prompt reply and inputs.
I am using a $ 5k demo account of FXCM. and they are allowing , I guess, 1:100 leverage.
Inspite of my loss trades which are 2.5 times more than the profitable trades, my success ratio was more than 80% and thats why I was able to double my account.
I just had a look into EURO/CHF chart for April2015. Honestly, I had 3 trades and all 3 are profitable.
is 1:100 leverage on the higher side??

@Lightning McQueen. Thank you for your post. I am using a MA crossover in a shorter time frame and for every 10 successful trades ,one loss trade (approx), which is giving me overall profits to double my account.

I've put a pair of averages up and can see the three trades you state in your successful example month of april on eurchf. I'd like see a market and month example of where it all goes wrong and you're stopped out for a big loss.

 

[Shadowman540]

Thank you @shadowman for prompt reply and inputs.
I am using a $ 5k demo account of FXCM. and they are allowing , I guess, 1:100 leverage.
Inspite of my loss trades which are 2.5 times more than the profitable trades, my success ratio was more than 80% and thats why I was able to double my account.
I just had a look into EURO/CHF chart for April2015. Honestly, I had 3 trades and all 3 are profitable.
is 1:100 leverage on the higher side??

You miss my point about leverage P, if I traded the swissy idve been short too but that's not the point, it went south supper fast nearly 2500 points, how much left of your account (demo) would've been left after 2500 point @ say 5ppoint were vaporised?.
leverage is very personal ive seen some of "forexmos" post and he uses loads more than would (granted its less after that chf fiasco), but still I don't know how they do it.
ive picked a worse case scenario as well there and ive picked the absolute bottom for your broker to let you out, but still,,,,,

 

[prasadvissa]

I've put a pair of averages up and can see the three trades you state in your successful example month of april on eurchf. I'd like see a market and month example of where it all goes wrong and you're stopped out for a big loss.

Thank you for putting up a chart.
I am using a different time frame , and different moving averages. Also, I exit my positions after a few pips instead of a reversal, for fear of losing all my profits!!!
I hope I have made my plan clear.
Good Luck.

 

[alexaherself]

I am using a different time frame , and different moving averages.

It's comparatively easy to derive profits from trending markets, using moving averages. I have yet to see a moving-average-based system which doesn't incur losses in non-trending markets. Many markets are trending probably around 15% of the time.

I exit my positions after a few pips instead of a reversal, for fear of losing all my profits!!!

Risk-control and loss-avoidance are indeed hugely important aspects of trading. Be aware, also, that some losses are inevitable and that - especially when using a trend-based strategy - fast exits typically also ensure the loss of potential further profit, and sometimes very substantial potential further profit.

The underlying basis of the profitability of trend-following methods in trading is to let profits run, while cutting losses short.

In this book, which you may find very helpful, the author explains at length and in detail, with countless examples, exactly why trend-following methods which can be sustainable over the longer term are usually those with overall success-rates between 25% and 50%, and why similar methods with significantly higher success-rates than that are unlikely to be sustainable or viable.

 

[Forexmospherian]

@Forexmospherian. Thank you for your inputs.

can you please elaborate "More importantly what size stake are you using on a $5k account??- is it less than 2% with your maximum stop allowed - ie if your stop is 20 pips maximum size per pip then $5 . If capital dropped to say $4k then on 20 pip stop maximum stake size - $4 a pip.

Regards
Prasad

Hi Prasad

Well first question to ask you on your demo

What stake size are you presently using to take trades - ie $5 a pip / point - $10 a pip or higher ? - and whats your average stop size - ie the amount of pips you would exit if it not going in your direction - would you get out within 10 pips or over 20 or 30 pips ???

Once you answer me - i can then maybe assist you more

Also - how many trades so far have you needed to double your demo account so far ??

Regards

F

 

[Lightning McQueen]

Thank you for putting up a chart.
I am using a different time frame , and different moving averages. Also, I exit my positions after a few pips instead of a reversal, for fear of losing all my profits!!!
I hope I have made my plan clear.
Good Luck.

I'm not really clear at all on your plan.

as you haven't mentioned your settings I fully expect you will indeed using something different than the example I've tried to formulate from postings so far. really all we have to go on is three trades in april on eurchf, moving average cross, short timeframe.

it's difficult to offer any critique at all without some sort of guidance to what instrument you're trading.

as per the 3 winners you can see in Aprils eurchf can you point us in the direction of a losing example within a month period? I want to see the looser.

 

[prasadvissa]

Hi Prasad

Well first question to ask you on your demo

What stake size are you presently using to take trades - ie $5 a pip / point - $10 a pip or higher ? - and whats your average stop size - ie the amount of pips you would exit if it not going in your direction - would you get out within 10 pips or over 20 or 30 pips ???

Once you answer me - i can then maybe assist you more

Also - how many trades so far have you needed to double your demo account so far ??

Regards



Hi @Forexmospherian,
First, I am not into scalping trades.
As mentioned earlier I use a demo account of $5k, with 1:100 leverage with FXCM. and I am trading 0.5 lot of the standard size(.i.e. 50,000).
My total trades are about 80 out of which 37 ended up as losses,my highest loss being $750 and highest profit being $592 with 7 trades continuous profits and 5 continuous loss trades.
My major loss was on 6th May(election day) in GBP. may be I shd have avoided that currency on that day. both my long & short trades were losses totalling to about $1000.
Regards
Prasad

 

[Forexmospherian]

Hi Prasad

Well first question to ask you on your demo

What stake size are you presently using to take trades - ie $5 a pip / point - $10 a pip or higher ? - and whats your average stop size - ie the amount of pips you would exit if it not going in your direction - would you get out within 10 pips or over 20 or 30 pips ???

Once you answer me - i can then maybe assist you more

Also - how many trades so far have you needed to double your demo account so far ??

Regards



Hi @Forexmospherian,
First, I am not into scalping trades.
As mentioned earlier I use a demo account of $5k, with 1:100 leverage with FXCM. and I am trading 0.5 lot of the standard size(.i.e. 50,000).
My total trades are about 80 out of which 37 ended up as losses,my highest loss being $750 and highest profit being $592 with 7 trades continuous profits and 5 continuous loss trades.
My major loss was on 6th May(election day) in GBP. may be I shd have avoided that currency on that day. both my long & short trades were losses totalling to about $1000.
Regards
Prasad

No - not wanting you to scalp - just interested in your strategy

So your biggest loss pre UK election day was over 150 pips at 0 5 lot ??

Largest win at $592 then at 0 5 lot approx 118 pips ??

Win ratio approx 54 %

On first take looks a recipe for disaster unfortunately

Will come back to you later


Regards


F

 

[prasadvissa]

It's comparatively easy to derive profits from trending markets, using moving averages. I have yet to see a moving-average-based system which doesn't incur losses in non-trending markets. Many markets are trending probably around 15% of the time.



Risk-control and loss-avoidance are indeed hugely important aspects of trading. Be aware, also, that some losses are inevitable and that - especially when using a trend-based strategy - fast exits typically also ensure the loss of potential further profit, and sometimes very substantial potential further profit.

The underlying basis of the profitability of trend-following methods in trading is to let profits run, while cutting losses short.

In this book, which you may find very helpful, the author explains at length and in detail, with countless examples, exactly why trend-following methods which can be sustainable over the longer term are usually those with overall success-rates between 25% and 50%, and why similar methods with significantly higher success-rates than that are unlikely to be sustainable or viable.

@alexaherself,
Thank you for your valuable inputs and I shall be referring this book you mentioned at the earliest opportunity.