The Active Forex Traders Discussion

[CarrieW]

with proper money management you can lose more then 60% of your trades and still be profitable... at least thats how I remember reading it. its been so long. but honestly its all about money management. it doesnt matter what size your account is. if your managment is incorrect you can win 80% and still lose money...

 

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[garyfritz]

Money management and % wins aren't really connected. You can lose 90% of your trades and still be profitable if your wins are 10x larger than your losses, regardless of your position sizing.

Position sizing determines how quickly you make OR LOSE money, for a particular set of trades or a particular system. Larger position sizes -- risking a bigger % of your account on each trade -- mean you win more when you win, and lose more when you lose. (With a caveat -- see below.)

"Traditional wisdom" says you should only risk 1% per trade. That's generally a really safe and conservative level. You can risk more than that and (if you have a good profitable system) you'll make more profit. You'll also have deeper drawdowns but you should come out with more profit in the long run.

UNLESS you bet too much. There is a "critical level" of risk for any trading system. Risking at that "critical level" means you end up with maximum possible profits in the long run. HOWEVER you will likely suffer 90-95% drawdowns along the way!! AND if you risk any more than that, you will start to make LESS profit. So you want to risk well below your "critical level" to keep your drawdowns under control and to minimize the risk of ruin.

So the $64000 question is, what's the "critical level" ? It's different for every system. It also assumes you trade CONSISTENTLY. If you change your approach every week, then there's no way to know what your system's "critical level" is. But if you trade consistently and record a history of your wins and losses, you can calculate your "critical level" pretty easily.

Take a list of all your trades. Calculate the average profit for all trades, wins AND losses, and call it AvgTrade. Then calculate the average profit for all WINNING trades, and call it AvgWin. Then your "critical level," also known as your Kelly percentage, is approximately AvgTrade / AvgWin. (This isn't a precisely exact calculation but it's close enough for our needs.) BTW notice the win % doesn't even enter into this calculation. It will affect your AvgTrade value.

So say you trade one mini per trade, and your average trade makes $5, and your average win is $20. Then your Kelly value is 5 / 20 = 0.25. Your "critical level" is 0.25, or 25%. Risk 25% PER TRADE and you will maximize your profits over the long run -- but in the short run you'll probably jump off a bridge because of the 95% drawdowns!! In actual practice you should bet a small fraction of the Kelly value, maybe 10-20%. So 10% of the Kelly value is 10% * 0.25 = 2.5%. Risk 2.5% of your account on each trade and you should be pretty safe.

If you're comfortable with spreadsheets, try entering all your wins/losses into a spreadsheet and see what happens if you risk different % of your Kelly value. That will help you develop a feel for the risk you're taking, and give you an idea how much drawdown to expect. But that will take a LOT of trades to give you a good sample. I'd record at least 50-100 before you pay too much attention to it.

Until you know what your Kelly value is, you should probably stick with 1% risk per trade. Assuming you have a profitable system, that should keep your drawdowns under control.

 

[garyfritz]

Udine, I finally got a chance to download and set up your indicators &etc -- thanks for sharing those!

So assuming you're still using the rules I described in my earlier post (take first arrow after Frankfurt open & London open, take another one if it switches direction, enter at breakout of H/L of signal candle, TP / 15pip SL / 5pip trail, cancel signal if stop not hit in next candle, etc), I think Mon-Thu of this week looked like this:

(all times GMT+2)

1/30 10:45 +10
1/31 08:00 -15
1/31 16:00 +10 (1 hr after NY open, and first short in the London session)
2/1 08:15 no trade, didn't break out in next bar
2/1 11:15 +10
2/2 08:15 -15
2/2 10:00 +10

See screen shots. I think that's following your rules, but it ended up making only 10 pips. Am I doing something wrong? The "trading box" goes from 08:00 to 18:00 GMT+2, so 06:00 - 16:00 GMT. Is that right? Both of my losses were on the 8:00 & 8:15 bars, so if I'm off by an hour that would make a big difference!

Gary

 

[Udine]

But you are off one hour

Udine, I finally got a chance to download and set up your indicators &etc -- thanks for sharing those!

So assuming you're still using the rules I described in my earlier post (take first arrow after Frankfurt open & London open, take another one if it switches direction, enter at breakout of H/L of signal candle, TP / 15pip SL / 5pip trail, cancel signal if stop not hit in next candle, etc), I think Mon-Thu of this week looked like this:

(all times GMT+2)

1/30 10:45 +10
1/31 08:00 -15
1/31 16:00 +10 (1 hr after NY open, and first short in the London session)
2/1 08:15 no trade, didn't break out in next bar
2/1 11:15 +10
2/2 08:15 -15
2/2 10:00 +10

See screen shots. I think that's following your rules, but it ended up making only 10 pips. Am I doing something wrong? The "trading box" goes from 08:00 to 18:00 GMT+2, so 06:00 - 16:00 GMT. Is that right? Both of my losses were on the 8:00 & 8:15 bars, so if I'm off by an hour that would make a big difference!

Gary


View attachment 2832 View attachment 2833

View attachment 2834 View attachment 2835

Garyfritz,


glad you were able to test it, unfortunately your settings are slightly off. Due to winter time the settings should be at GMT +1. The Frankfurt open is 07:00 GMT time and London at 08:00 GMT time. Besides the dotted vertical lines represent the openings of Frankfurt, London and New York markets, which are all off on your chart.

I have attached my chart of the 2nd of February to show the correct settings and you can see the difference.This would also mean that some trades would not have been taken (both losing trades) so your result would have been +40 pips instead of only + 10 pips, Please check your trades with the correct settings.

Any questions, just ask !!

Udine

 

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[garyfritz]

Thanks Udine! I think I have it set up right now:



My broker is at GMT+2, whereas yours seems to be GMT, but I think I have it set right now.

One concern: I notice the FIFO ALERT indicators are very different between your system and mine!



Some minor differences would be expected due to differences in quotes between brokers. But these are major differences, and they're going to create totally different signals. E.g. I have no up-arrows during the London session but you have several. Those cyan up-arrows don't appear to be real signals, since the 240 was red during that time, but similar differences could change real signals. E.g. you have a "real" long signal on the 6th bar of the NY session, and I don't, because my 240 is red throughout that period. Was your chart painted in realtime, and maybe that was different than plotting it after the fact?

Finally, how did you handle the short signal on the first bar of the Frankfurt session? There was a red arrow but the next bar didn't break the low of the signal bar. Does that count as your "first short after the session started" or did you ignore it because it didn't get hit, and take the short one hour later? (You might have taken that one anyway because of the start of the London session, but for this question let's pretend those two signals happened at the start of the London and then one hour later.)

Thanks Udine!

 

[Udine]

Thanks Udine! I think I have it set up right now:

View attachment 2841

My broker is at GMT+2, whereas yours seems to be GMT, but I think I have it set right now.

One concern: I notice the FIFO ALERT indicators are very different between your system and mine!

View attachment 2842

Some minor differences would be expected due to differences in quotes between brokers. But these are major differences, and they're going to create totally different signals. E.g. I have no up-arrows during the London session but you have several. Those cyan up-arrows don't appear to be real signals, since the 240 was red during that time, but similar differences could change real signals. E.g. you have a "real" long signal on the 6th bar of the NY session, and I don't, because my 240 is red throughout that period. Was your chart painted in realtime, and maybe that was different than plotting it after the fact?

Finally, how did you handle the short signal on the first bar of the Frankfurt session? There was a red arrow but the next bar didn't break the low of the signal bar. Does that count as your "first short after the session started" or did you ignore it because it didn't get hit, and take the short one hour later? (You might have taken that one anyway because of the start of the London session, but for this question let's pretend those two signals happened at the start of the London and then one hour later.)

Thanks Udine!

Hi Gary,

I just took the picture when my broker was closed, so I could not tell. In the thread we have experienced that different brokers have different signals. Just for your info I am with alpari uk.

The short arrow on the first bar of the Frankfurt session is in my opinion the first signal. IF it would have been a BO, I would have taken it and also the short signal of the London sesssion. I take more signals but then it must be LONG / SHORT / LONG or vice versa during one session.

I post also my account situation since the 9th of january:

Weekly Update:

CW (= calendar week)

CW 2: + 16.50 %
CW 3: + 5.00 %
CW 4: + 14.75%
CW 5: + 17.50 %

January: +47.75%
February to date: +6.00 %

Any questions, just ask

Green pips

Udine

 

[garyfritz]

I've been running your indicators on a demo account. For some reason that demo account didn't start updating Sunday night. So I placed the indicators on a live account, and... it hangs up MT4!! I have no idea why they would work on demo and not on live, but I can hang MT4 very repeatably by applying your template, Udine... :shruggie:

 

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[cilaes]

I wish I understood this language that you're speaking. =X seems VERY interesting.

 

[Udine]

test it with another broker and see if it is a broker problem or pc problem.

Udine

 

[garyfritz]

Both the demo and the live are on the same broker, so I doubt it's a broker problem...

 

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[Udine]

Both the demo and the live are on the same broker, so I doubt it's a broker problem...

Has it been solved ??

Maybe you have to open it in the editor and compile it.

Might help.

Udine

 

[garyfritz]

Been too busy to try it, Udine. For now I'll just run it on the demo.

 

[Forza]

What timeframes are you guys trading? On the MT4 platform the trailing stop minimum is 15-20 pips which makes daytrading with this function almost pointless...?

 

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[Udine]

What timeframes are you guys trading? On the MT4 platform the trailing stop minimum is 15-20 pips which makes daytrading with this function almost pointless...?

Hi Forza,

depends on the broker I am with one who accepts 2 pips for EU and 3 pips for GU

Udine

 

[Udine]

Been too busy to try it, Udine. For now I'll just run it on the demo.

Garyfritz,

today a difficult day to trade.

Had only one trade for +2 pips .

Explanation is on the thread of all signals.

Udine

 

[garyfritz]

Your FF thread? I haven't been following that closely. Been too busy. I'll take a look.

I've been running your indicators since the 6th, so I have "realtime-generated" signals on my chart. Let's see how they did... (this is EU)

2/6 10:30 (GMT+2): Short, looks like +10
2/6 18:00 Long, entry not hit
2/7 07:00 Long, +10 (Another long at 11:45 (probably 1-2 pips) and at 15:15 (+10), no shorts)
2/8 10:00 Long -15
2/8 12:15 Short -- not hit (also longs at 13:00, 15:15, 17:00, none hit)
2/9 10:30 Long -15
2/9 13:45 Short -- maybe 1 pip? (also long at 15:00, probably +10, and 18:00, -15)

Checking your FF thread, it looks like you've changed the rules. You're not taking all arrow signals (60/240), you're taking some with just 60 and some with just 240 signals, and you're filtering on news agagin. Last week I asked if you were still using the same signals and you didn't say no, so I assumed it was still the same. I'll have to look through the FF thread to figure out the rules you're trading now.

 

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[Forza]

Hi Forza,

depends on the broker I am with one who accepts 2 pips for EU and 3 pips for GU

Udine

Thanks, any broker recommendations?

 

[garyfritz]

Forza, where are you? The answer depends a bit on that. US vs. non-US is a big question.

 

[Forza]

Thanks Gary

 

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[Udine]

Garyfritz,

Last week was not an easy week to trade. I have explained for example in detail the EU and GU trades on page 251 and 252. You have to choose your battles.

If trading would be just entering after a signal, then trading would be easy and everybody would be rich already.

I have repeated my rules in the thread;

trade only when:

1. 60 & 240 have same color
2. not before red news
3. no trade when signal bar is market open
4. HH/LH/LL/HL
5. Check SR levels

Any questions, just ask

Green pips

Udine

 

[CarrieW]

how is everyone?

markets have been crazy the last 2 weeks. I havent been able to trade very much at all. I hope things settle out soon. I am getting bored. I enter trades and end up getting stuck for an entire session or more!

reloaded my account but since I havent been trading much there isnt a whole lot to report. just wanted to check in and see how everyone else is faring out!

 

[garyfritz]

Hey Carrie,

January was great except 2 horrific days. My month went from +15% to -7%. February is looking good so far, up 16%.

I keep researching new strategies. I've added two strategies to my active trading and that should help smooth out the drawdowns from my main breakout system. Haven't tried to do anything serious with Udine's method because it primarily trades at about midnight-6am my time.

 

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[^eagle^]

Been around Break even for the past week or two. Not much to report. Havent had time for Udines method for the same reason as Gary.

 

[CarrieW]

yeah the markets have been really crazy. thats te only way I can explain it. I refilled my account to 250 about 3 or 4 wks ago, and I am down about 6dollars trying to trade this mess. I watch and watch all day but nothing really is showing its face other then a bunch of bouncing around crap. for idk how long I just move my fibs up closer to the edge of the chart but they dont really seem to be moving at all. I think I am going to be staying out untill this subsides and really starts moving again. till then I am just a spectator.

hey eagle I didnt realize you lived in florida.(my neighbor to the south!) where abouts in florida are you? we live just outside of savannah ga which is about 3-4 hours from like jacksonville I believe. also My father lives in kissammee. a long long time ago (seems like another life) I lived in Winter Haven, which is in polk county.

 

[willymo]

Had a pretty good trading day today. Shorted pound at 1.5788 and took first profit at +30 pips, second profit at +60 and closed the remainder at +82. Then took a small counter trend trade (buying the pound) at 1.5659 and closed it for +11.

 

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[^eagle^]

I live in west pasco which is about 40 minutes North west of Tampa. Kissimmee's a great town. Got a time share there. Love old town.

 

[CarrieW]

oh yeah! when I lived in Winter Haven we would go to olde town all the time! we used to do that reverse bungee jumping thing there.. they have awesome shops. and all the old cars on the weekends... totally forgot about that place!

 

[willymo]

waiting to short pound at 5750

 

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[CarrieW]

gpb/usd? I am looking for it to go up! good luck!

 

[willymo]

gpb/usd? I am looking for it to go up! good luck!

Thanks I am probably going to need it because I am the only one looking to short. Maybe I am missing something.