My reply at Forexfactory

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Originally Posted by yakumojpn Everybody is talking about how important the money management is, but still there's only threads about EMA5 crossing over EMA13 and so on with 30 pips stop and 60 pips limit. I guess there should be much more about money management than some stop loss, limit order, trailing stop, trade per 1% of your account. So please share some clever ideas for my money management, thanks.

Use a fixed % of exposure in each trade.
Let's say you choose 2%

If you have USD 100 ... you risk USD 2 (calculate appropriate stop loss that's equivalent to this USD 2). If your fund is small, consider using brokers like Oanda (you can even buy 1 unit).

Let's say you lose ... you are left with USD 98.
Next trade, you risk 2% of USD 98 ...

If you notice, when you are on a winning streak (experienced trader has more winning streaks than newbies do) .. you will be betting bigger and bigger each time ... this has the compounding effect. You bet more and more with the "markets" money. Many traders in Market Wizards "trades bigger and bigger when they are on a winning streak".
Fixed % risk is easy and it gets the job done. If you dont trust me on this, trust Merlin .. LOL.

If you use a broker that allow 1 unit lot size, it's very difficult for even a newbie to completely destroy his account if he follows this fixed % rule. Imagine this situation:

You have a fund and for every person you meet, you tell them to take 2% of the fund. Guess how many person you need to meet to finish the fund? Answer : the fund will never finish (ideally).

What happens if you tell everyone to donate 2% of the fund instead ? The fund will grow again exponentially no matter how much money has been taken out before.

In this business, as long as you survive the battle, you will most probably win. It's just a matter of time.

My post at Forexfactory

From Forexfactory
Quote:

One last thing - you yourself said that "normally"(with no initial position) you would have waited for break confirmation with a close outside. So what makes your current profit so expendable that you didn't think it more sensible to wait in this situation as well? Had you seen this move and behavior without seeing the triangle, would your behavior / trade handling have gone differently? Which way of dealing with the setup, if it is one for you, is the more profitable/sensible one and does it change merely by the outset of your open positions or is it a self-contained logic each time, regardless of whether what you have already have open before it or not? Nothing of the above meant as an insult, but as thought provoking.

No worries SL. I appreciate the feedback.

The Fiber had been ranging between 3600 and 3700 for a few days and I've been making some profit from that.

From my experience, triangles/wedges is only reliable 50% of the time.

But since I can lose 0 pips (worst case) by taking the risk, it looked attractive to pyramid. This kind of opportunity dont come very often and it (pyramiding) had worked for me a few times.

In a ranging market, its hard for trend-trader to make money, let alone building profitable pyramid. But I had a chance to build a pyramid in a ranging market at 0 pips cost. Too tempting.

On second thought, it would be more sensible (and easier) to just wait for the confirmation (Daily candle close). But by waiting, I need to give up the chance to pyramid.

That's what I was thinking about back then.

My Reply at Forexfactory

Quote:

Originally Posted by SeekingLight Hi cesarnc, I don't. I'm actually really curious about the questions. So far neither you nor luqmanz really answered them(although luq answered/gave a suggestion for the "what does it mean" part, thanks! =) ). There's a reason I asked them because even though sure I can project targets around into space(high-low-point of wedge/triangle, projected from possible break area), I was wondering what the point of the info was if there is no setup attached to it. No setup = no trade. ... SeekingLight

Hi SL,

Let me share with you how I use this info (triangles/wedges) in my trading.

At that time, I had a long position at 1.3600. Price looked strong to me so I think "hey the price looks so positive, why not take a little more risk, triangles is a trend- continuation formation anyway". I followed the age-old wisdom "never average down, just average up".

Worst case scenario, price touches 3700 and reversed.
Stop loss at 3650 for all position.
Long @ 3600 = 50 pips
Long @ 3700 = -50 pips

Net 0 pips for the risk taken. (Good bargain).

I placed a buy order at 1.3700.

Price went up to 1.3718. Stop loss moved to 1.3668 (50 pips trailing stop).
Price retraced. Stop loss got hit.
1) Position 1 @ 1.3600 = 68 pips profits
2) Position 2 @ 1.3700 = -32 pips

Net profit 36 pips.

If I dont have a position at 1.3600, I wouldn't take the 3700 trade. I'll wait till price close higher than 3700 on Friday.

Hope this helps. :-)

My Reply at ForexFactory

This is what I replied in a thread at ForexFactory.

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I have several solution to the issue you brought up. These solutions is for long-term traders using Daily charts to trade.

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However, it should be mathematically self-evident that “cut losses short, let profits run” only works to the extent that markets trend.

Just pick a market that the Daily charts show a strong trend e.g EURUSD.

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Think about it logically: if (hypothetically) prices trended indefinitely, then it wouldn’t matter when you entered, as long as you hold on for as long as possible, you will profit.

All trend will finish sooner or later. Solution, trade long-term because long-term trend continues for years like EURUSD.

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But if/when the probability of reversal (e.g. at support/resistance) exceeds the probability of trend continuation – if/where this can be approximately calculated – then the “cut losses short, let profits run” maxim breaks down. This will happen repeatedly during sideways price movement.

This is the time where entry and trail stop is crucial. With good execution, you will be able to cut losses short, but since the market is sideways, you cant let profits run simply because the market doesnt let you to. Just be happy and stick to your plan (buy, trail stop,buy trail stop) until one day the trend resumes. You dont have to make money everyday. Patience.

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So the question becomes: does your chosen currency pair “trend” sufficiently, in your chosen timeframe, consistently enough, to allow you to overcome costs? If so, you will profit overall; if not, your account balance will fall.

Hence the beauty of trading long-term (daily charts). You can hibernate for 3 months and the trend is still there. LOL.