Thursday, 30 April 2015

Risk Reward one more note ...

Another advantage of trading RR 1:1 is that if you miss a trade, you have missed a loss or gain of the same amount. In another words does not matter, because your overall gain is not based on few particular trades with RR 1:heaven, which if you are going to miss you are done.

I am spending literally weeks of recalculating real historical performance in terms 'what if ...' and although not sure if this is applicable to everyone, theoretical results kick me back to R1 again, again ...

So, if you have an edge in terms of predicting the market, you are going to earn with R1 nicely. If you don't, there is no Money Management miracle which going to help you. Nor Trade Management with bright ideas as trailing SL, partial profits and similar trials to cover that you don't know ho to evaluate what's going to happen next.

Tuesday, 17 December 2013

Time Frames

Trading is digital part of modern warfare called economy. Stepping into battlefield you are risking an injury.

From the realistic view that the whole game is manipulated, what time frame to trade to minimize the negative effect that we as retail traders are the last ones who got prices as well as data and news?

We have to trade "under or over the radar", that means work with one minute or tick charts to scalp immediate market moves or settle on dailies to fly over intraday swing moves.

Under the radar is obviously busy game with lot of opportunities and spread consuming your profits. Also one is going to shortly discover why scalping is publicly called as difficult. You really have to sit there, watch the screen and sit and watch ... . Also any slip or spread widening is going to be seen on P/L statement. But besides these disadvantages you are still under the radar and thats a good place where to trade.

Over the radar is still tricky in terms of trading data or news based on logic, because there is always serious risk that the new information is already priced in. For example I bought EURUSD once QE1 was announced with deep confidence because finally the volume was higher than expected. Well, nice top followed by long slow constant decline. Apparently the market was pricing in these new info for last few days seen on chart as steady uptrend.
But to fly above provides relative safety against intraday swings caused by scheduled data and unexpected news. Also worthy to mention: much less stress / don't need to place the order in few sec otherwise the edge fly away together with market's retrace we waited for last 90 min / fees are not issue any more / lot of free time to write a blog / your wife loves you again .. .

Wednesday, 31 July 2013

My story short:
For last cca two years time to time I read their free weekly reports. Interesting, it make sense, its similar to what I trade, so I decided to enrol.
Well, after 5 - 6 emails full of my questions about "What exactly I am going to get?", "Are my future mentors trading currencies?", "May I see P/L statement of my future mentors to clearly see that what they teach they are able to implement in real time markets?"
I have been told that they "exchanged with me  five to six emails already and I even did not paid the course yet" and that "I don't fit to their school" and this one really got me "Trading academy is afraid that I am not going to stop my efforts to see my mentor´s P/L statements once I enrol in!".

Fair enough :).

Risk Reward Ratio

Risk Reward Ratio: ok but whats the advantage of big RRR? I hope someone can really explain me, because we can look at that from mathematical and psychological perspective. First one shows that there is no edge, second that RRR 1:1 or even negative RRR is psychologically better.

Once we enter a market we have 50% chance that it goes up and vice versa. This is applicable to RRR 1:1 as well. But if our Stop Loss is 100 pips and Profit Target is 200 pips, thus implementing nice 1:2 RRR, from math point of view there is 33.33% probability that we cash and 66.67% that we loose. So in theory we gain 1x 200 pips & loose 2x 100 pips. Anyone see any edge? I don't ...

Trading RRR 1:1 seems to be ideal because I can win what is my risk (1R accordingly to van Tharp terminology) so if there is any real edge on my approach, P/L statement will show that clearly. Oh yes, don't forget fees...
Trading RRR 1:2+ leads to situation when we are enjoying open profits of R1+ but than the market for whatever reason retraces and we can lose what was winner already. Start to implement Trailing Stop Loss and you know what will be trying to figure out next few months /years. Fingers crossed ...

Negative RRR: After all I don't see any disadvantage regarding to Negative RRR. Probability against gain. Often small profits, one big loss time to time. BTW: did you enjoyed big looser turned into small profit? Nice experience! Anyway, don't go this way ..

Conclusion: as far as trading negative R leads to fear to open next trade, because one loss will wipe out few wins, at least from my point of view R 1:1 is ideal solution.

Note: this article is all about "is there sole advantage of positive RRR", ie without any relation to any strategy / approach based on data or TA.

What I trade?

Looking for holy grail? Good luck! In the mean time try to trade whats obvious. In another words FX is full of "maybe" and that's ok. Seems it can't be different. So the question is "What moves the market?". In my humble opinion I would say orders. Thus simple logic leads us to conclusion that we might trade with currently stronger side. And here comes all that mess.... D1 upTrend, H4 downTrend, H1 consolidation which might be the 38 - 62 FIB range before last leg of the H4 downSwing, .... or bulls got the power because of recently released data. Now its time to solve the question: What I trade?

Based on that answer one should know if trading D1 trend lasting few months or 5M scalps of H1 range.
Little example: new Interest Rates Release are critical for long term trader as well as for M15 swinger, but in totally different manner.

So what do you trade? Long term data trying to catch carry trades + potential profits? Are you trend follower? Ok, based on what edge? Trend Lines? Support / Resistances? Combinations of whatever?
Lets say Trend Lines: ok, so you believe that the BULLs  / BEARs fight get temporarily solved because of Trend Line. Well, maybe .. . As well as with whatever other approach it works sometimes and sometimes not. To optimise that by mixing with "only if" was not giving me better results at all. Or to be more specific, for some period of time yes, but only for some. So whats the improvement?

One thing is clear, FX markets are heavily manipulated and we as retail trades are the last who get news and prices.These two factors combined might be the answer why 90+ % traders are loosing. Maybe ...(again).

Does not matter, the question is: Why big boys place their orders?

Live trades 07/2013

 Realized trades July 2013:
- graphs from