I see your point and appreciate your input. I was just using the EURUSD as an example. Unfortunately I didn't create this system until recently, so I wasn't in that particular trade. What I'm trying to show is that if you would have entered in 2006 on the long signal, initial risk would have been 116 pips. Since then, there has not been a sell signal, so the trade is still valid. Assuming you hold until a reverse signal is given, you'd be up over 3000 pips now. How is that unrealistic? Catching as much of that move as possible is the whole point of me starting this thread. I'm trying to see if any traders have a trade management philosophy that might allow me to hang on for most of the move. Any ideas?
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Help with my trade management, see picture
- Thread starter SoCalTrader619
- Start date
I see your point and appreciate your input. I was just using the EURUSD as an example. Unfortunately I didn't create this system until recently, so I wasn't in that particular trade. What I'm trying to show is that if you would have entered in 2006 on the long signal, initial risk would have been 116 pips. Since then, there has not been a sell signal, so the trade is still valid. Assuming you hold until a reverse signal is given, you'd be up over 3000 pips now. How is that unrealistic? Catching as much of that move as possible is the whole point of me starting this thread. I'm trying to see if any traders have a trade management philosophy that might allow me to hang on for most of the move. Any ideas?
Quote from G-Boa:
Van Tharp is supposed to be coming out with a book this summer about position sizing ("the definitive guide to expectancy and position sizing") - i'mna get it and see what i can glean from it - you should look into it - read his "trade your way to financial freedom" book - it's a good read, i really enjoyed it.
another one that makes you think is "money management strategies for futures traders" - not so interesting, but it makes you stop and think about a couple things - couple of important things IMO.
Sweet! I'll have to check out those recommended books. Can you give an example from the book about money management? I would like a fixed system on when to take profits...
Quote from SoCalTrader619:
Here is the pic...
I trade the YM exclusively, so I am familiar with the chart you posted.
I grant the caveat that what works for you, might not work for me and v/v, but a couple of points to ponder:
1) It seems like you are looking for a mechanical methodology, but if you were to plot on the YM chart all of the weekly and monthly closes that acted as a pivot on the chart [LOC], then it would have been clearly discernable that your two initial short signals were at points where the YM , in falling PA might tend to hold, and in rising PA might tend to fail. Your two initial short signals were at points I was looking to go long.I am not sure a mechanical system has the capability to distinguish such chart history points.
2) As far as profit taking methodology, I keep it simple. I use a 14 bar moving average [Close], a breach of which causes a scaling back in position size or a complete exit,
Quote from SoCalTrader619:
Sweet! I'll have to check out those recommended books. Can you give an example from the book about money management? I would like a fixed system on when to take profits...
from "money management strategies for futures traders":
"The initial risk exposure on a trade is subject to change during the life of the trade, depending on price movement and changes, if any, in the number of contracts traded. Such an increase in the number of contracts during the life of a trade is known as pyramiding. The number of contracts to be added is a function of (a) the assured profits on the trade and (b) the proportion, p, of assured profits to be reinvested into the trade."
"In practice, the trader must decide the value of p he or she is most comfortable with, risking assured unrealized profits accordingly. The value if p could vary from trade to trade. The fraction, p, when multiplied by the assured unrealized profits, gives the incremental exposure on the trade. This incremental exposure, when divided by the permissible risk per contract, gives the number of additional contracts to be traded, margin requirements permitting. The formula for determining the additional number of contracts to be traded consequent upon plowing back a fraction of assured unrealized profits is as follows:
Increase in number of contracts = [(p x Assured unrealized profits) x (Number of contracts)] / Permissible loss per contract"
the book has example positions in various commodities of how to proceed with a winning trade. it also emphasizes, as everyone else does, to keep losses controlled. everything is easier said than done, but keep in mind the book was written by "Nauzer J. Balsara - an Associate Professor of Finance at Northeastern Illinois University, Chicago, and an active trader in the futures and options markets. He has a PhD in money and financial markets from Columbia University's Graduate School of Business, New York." - you're paying attention to the right type of individual, regardless of what any self-opinionated cocky unknown individual may say (i.e. "elite trader")
Van Tharp's "Trade your way to Financial Freedom":
"Making money in the markets is all about making sure that your position size is at a low enough level that you can achieve the long-term expectancy of the system"
"Your net results as a trader, over the very long run, will be a function of the expectancy of your system less any mistakes that you make"
"Those six key elements include (1) system reliability, (2) reward-to-risk ration, (3) cost of trading, (4) your trading opportunity level, (5) the size of your equity, and (6) your position-sizing algorithm"
i hope you get those books and glean some wisdom from them. trading is taken VERY seriously by many highly-educated professionals trying to make your dime while protecting theirs. there are also some good (and generous) traders here on ET, but you have to dig for, and pay attention to get, the pearls.
Quote from SoCalTrader619:
I see your point and appreciate your input. I was just using the EURUSD as an example. Unfortunately I didn't create this system until recently, so I wasn't in that particular trade. What I'm trying to show is that if you would have entered in 2006 on the long signal, initial risk would have been 116 pips. Since then, there has not been a sell signal, so the trade is still valid. Assuming you hold until a reverse signal is given, you'd be up over 3000 pips now. How is that unrealistic? Catching as much of that move as possible is the whole point of me starting this thread. I'm trying to see if any traders have a trade management philosophy that might allow me to hang on for most of the move. Any ideas?
i just read Barth Vaders response - and his is real life trading. NO ONE hangs on for the entire move (you make your money and go), except jack hershey and he makes 3 times the ATR. catching as much of the move as possible would seem more realistic in a macro event like the guys who made billions trading the demise of subprime mortgages. they obviously didnt make a billion daytrading it. they traded the fundamental market flaw for months going on years. that's different than daytrading or swing trading, IMO.
Very interesting thread. I have the same issue trading ES and have yet to satisfactorily resolve it. I'm not sure you can have it both ways, minimize risk and maximize the gain.
However, I think taking off half of the position at b/e and leaving your stop in place is a good start. Think about what happens at a crap table: dice chop around and then sometimes there is a really hot roll. Smart players will always take back their initial bets (rather then pressing or letting them ride) and play with "house" money?
Although you won't capture every tick a monster move, why not scale out of your position in 1/8ths for each point and let the last 1/8 go for for all the glory with a stop placed somehwere that makes you happy.
However, I think taking off half of the position at b/e and leaving your stop in place is a good start. Think about what happens at a crap table: dice chop around and then sometimes there is a really hot roll. Smart players will always take back their initial bets (rather then pressing or letting them ride) and play with "house" money?
Although you won't capture every tick a monster move, why not scale out of your position in 1/8ths for each point and let the last 1/8 go for for all the glory with a stop placed somehwere that makes you happy.
Quote from blackdog:
Very interesting thread. I have the same issue trading ES and have yet to satisfactorily resolve it. I'm not sure you can have it both ways, minimize risk and maximize the gain.
However, I think taking off half of the position at b/e and leaving your stop in place is a good start. Think about what happens at a crap table: dice chop around and then sometimes there is a really hot roll. Smart players will always take back their initial bets (rather then pressing or letting them ride) and play with "house" money?
Although you won't capture every tick a monster move, why not scale out of your position in 1/8ths for each point and let the last 1/8 go for for all the glory with a stop placed somehwere that makes you happy.
Doesn't that mean you'd trade 8 systems? Each of the 1/8 exits could be backtested and would show a different result over a large number of trades. One of them would be best. Probably the last one.
Not sure I understand what you mean by trading 8 systems. I suppose one could backtest each entry signal and see what the runner rate is, but that's not an acceptable answer if one believes that except for some pockets of non-randomness--which is what traders base their entries on--the markets will move in a random fashion and who knows what that will be.
Play the probabilities based on your entries, and then protect capital and take profit as the market gives it to you.
Play the probabilities based on your entries, and then protect capital and take profit as the market gives it to you.
maybe at the b/e point, rather than taking profit on 1/2, just start to tighten up your stop on half, thus still letting it go if there is more to be had, but making sure you will get some profit on at least part of the position. Just keep gradually tightening your stop on half. if you have made a decent profit on that half when you are taken out, and the position begins to firm up and continues in your favor, use the opposite strategy; just keep widening the stop on the remainder as it moves in your favor. for example, if the position moves one point in your favor, maybe your stop only moves up one-quarter.
Alright, see partly what you mean.Quote from blackdog:
Not sure I understand what you mean by trading 8 systems. I suppose one could backtest each entry signal and see what the runner rate is, but that's not an acceptable answer if one believes that except for some pockets of non-randomness--which is what traders base their entries on--the markets will move in a random fashion and who knows what that will be.
Play the probabilities based on your entries, and then protect capital and take profit as the market gives it to you.
But how would you go about finding a pocket of non-randomness and then determining how to exploit it other than through backtesting? Would be kind if you would explain.