Weekly Thread: July 20-25
- Thread starter rezo_s
- Start date
The following is my search results:
http://www.fxtrek.com/universityEN/risk_management.asp
Q
Correlation is defined as the linear regression correlation coefficient of a stock portfolio (or a single stock) and the performance benchmark over a certain period of time. For example, one can compute the"of EUR/USD stock with respect to the S&P 500 index over the past six months by first calculating the time series of the daily percent change of EUR/USD stock prices and the daily percent change of the S&P 500 index. Then, one computes the linear regression correlation coefficient of the two time series. The meaning of this complicated idea can be simply put: if the index moves up,percent of the time the stock also moves up.
In the FX world, we often compute the of one currency rate with respect to another currency rate. For example, over the period of 2/24/2001 to 5/24/2001, GBP/USD and EUR/USD have a of 0.88, and it means that the two currency rates are strongly positively correlated.
UQ
Ok, OddTrader, I'm with you. Sorry for the delay. Lets go one by one.
Yes, I would consider reentering. The situation happens quiet often, and I would like to share my view on it. First of all - I'm not trading for 20-50 pips. I'm targeting more. But my first moving of the stop is to guarantee no-loss trade. Even so, I move stop to b/e only after 50+move in my favor, but not always. It depends how secure I feel with the trade. If I feel secure enough, I may wait for 50+ move, if not, I may move as soon as 30 pip move occures. For ex. GBPCHF trade this week - I entered @2.1689 - the move down followed to 2.1620 - I moved the stop.
Now back to the thinking behind it - after stop gets hit for b/e. First of all - when entering it was a trade - thats for sure right? Now lets follow the price. It went to desired direction, went all the way of 50 pips, and now it decided to come back to your entry levels, which you were seeking for as "good entry". First of all, its reasonable to close, and I think you will agree with me, as after the trade went 50 pips in your way, now coming back - there is a chance you;ll get stoped (there always is such chance). So is it resonable, after you were 50 pips in green, to take loss on trade? I dont think so. Its better to close at b/e. So I think its clear about moving the stop. So it was a good trade when you entered, but is it still? What may follow this b/e closing?
1) the trade simply reversed, and is going in opposit direction
2) this is just a correction, which happened to be strong enough to come back to your entry, and maybe is strong enough to take out your stop, before it resumes to your direction
3) this is little direction which "happened" to reach your entry and will resume your predicted move after you are out
As you can see, in case its 1) or 2) - you did the right thing. Well, in case its 3) - you will not make profits. But at least you wont get stop for loss. I think its pretty obvious, that exiting at b/e is best in 2/3 of possible scenarioes.
Now, your question was little different - whether I consider reentering afrer b/e. Well, in case its b/e, as you saw 2/3 (or 66.6%) that I wont reenter - not immidiately for sure. You need to reconsider the trade from the begining. And you agree that your analysis will be more reliable when you're out and not when your in. Thats another positive side when you exit. You're less emotional on that trade and you reconsider the situation as if you didnt enter it. So I will reconsider, but I wont enter having less confirmations and signals as firts time. It is new trade and is treated as such.
Now to the next question.
About the stops - I have no definition about that's the size of stops. For each and every trade its calculated individually. I was asked about it this week on other forum (about the eurchf trade I had), so I will post both the q and the answer. I think it covers the stops issue:
If you have any q about this, let me know.Originally posted by rezo_s
Hello, ifsclusa.
Glad to see you in my thread. Thanx for the compliment on eurchf trade, but its still far from being secure - stop is not moved to b/e yet.
Stops:
No, its not only the room. You see, I do belive in levels that strong (they are considered of course, but in the end they are also to be broken...), but I have my own calculations when it gets to entry, stop or target. About this stop - bad would be a break of even 1.5400. But extra room/market noise/broker speculations are also taken in consideration. Mainly there are three thing I take in account when calculating stop:
1. recent volatility
2. rupp/ress levels
3. ma s and ema s
4. trend lines *
5. figures (triangles etc.) *
First three are always taken in consideration, and most stops are calculated based on these data. When we go those '*' - I consider (try to) those as well.
Some have more weight, some less (in calculation I'm talking about)...so I cant really tell you how it works, sorry.
But in general thats almost all I use to define stops.
Good Luck,
Rezo.
Next question.
Once more, I answered about the correlation and trading similar pairs today, so I will quote:
About the risk - I dont quiet get your question, but those parts I did understand I will answer - its 2% average per trade - sometimes more, sometimes less. Abd as I said in quoted post - I dont care about correlating pairs. All I care is what I see on chart. If I see good trade - it doesnt mater. Nothing matters.
But as you see, charts are not that often good to me - I have 10-15 trades a month. Not more. The truth - its enough.
Well, I think thats about it.
No trades, no orders. I can say this trading week is over.
Have good w/e, everyone!
Regards,
Rezo.