I have seen a couple trade systems. In this days I have found a very nice article, which describe the nature of the risk, equity, I can't find that article. In short:
When you sit down to calculator you have a closed equity: no risk-no gain, it is your balance: 1000$.
When you open a position of 30,000 units with 100:1 leverage, than you are using 300$,1000-300=700 is free margin.
If you aren't using any SL, than the SL is the -100 pip Margin Call for the 300$ In this case the risk free equity is the 700$
Lets be there a 50pip SL. Than the risk free equity is the 700 + (300/2) = 850$
Let be the happy case and the price move in our direction 60 pip:+180$. Our total equity is 1180$ ( if we close the position now than that will be the balance, closed equity).
Lets move the SL to BE + 10 pip: so for sure we won the 10 PIP -if the SL is executed without slippage and so on- the risk free equity is 1030$, the total is 1180.
The system has more heat as more is the difference between the risk free equity and the total equity.
Here it comes the building a millipede, building positions systems: start small with 0:1 leverage, loosing bad trades, allowing good ones to run. In this case depends very much if the SL of the position is moved up or not. The system will heat, if not. If no room to play than less will be the good trades number.
The "set and forget" style is a set and pray actually.
In any system when we are right, than higher is the leverage than better is.
The "problem" and the general it is: when the price move against us -a bit. Can be at start, can be after hard earn green pips. INHO is almost the same: total equity loss, closer to risk free equity.
This will lead again to the trade size optimisation, which I have solved already at least theoretically. In practice still has effect on me if the 3-4th consecutive loss it was with the optimised leverage and I am at wrong side of the statistics and need a huge effort to recover from 25% the account even if I am getting up with +20-30% steps.(with 65% win rate the optimum risk should be 30% at least theoretically). Many big traders has used huge leverage and vent bankrupt a few times until they made 100 million. Those systems has a huge heat.
A very cold system with only +5% average return /month (79.59%/year)in 8 years is making +10,718%, around 100x. That is good for pension plan, or when the capital is high enough and don't want to risk it.
Now the question it is: when to mix the higher heat style with a cold one? - simply I am human and need room to play, I am not robot to execute orders, rules with 100% precision.
Mostly I am watching only one currency pair, because no time to analyze news, charts. I am trying to find a trend directional movements based on this chart:
This was one of the most trade improvement material read ever, and I have saved it, I think not available any more online. I will post later the article here.
My system in practice:
Sign marked with 3x up it means using maxed leveraged allowed by Dukascopy: 30:1, sign with red down it mark of close trade.
When I can't trade in this style, than I am doing what I am regretting later... - going to 5m chart and play with 2:1 , 8:1 leverage for 10-30 pip and all beginner stuff. Sometimes bring me some cache, sometimes just using my margin. That's why it was important to move from Oanda, because they introduced the FIFO and no hedge possibility.
Mostly I am watching the news releases. The result should have none change or trend direction impact to use high leverage. So I am not trading only based on chart, no system will be for me with " No news releases", because that is the motor. Also can't trade only on high impact news because those are rare, which has real power of trend change and I don't understand those financial words. Mostly ECB and FOCM statements are this king of imprevisible changes, not NFP, unemployments. Even if I don't understand a news written in financial language, I can see how the market reacts, I see the comments, which are more close to trader language. I can see if EUR/USD just changed direction and just moved 200 pip instead of 70-100 and so on.
I know I should find my system, maybe I need to change too, probably I will, when I will have more capital to trade full time ( around 1 year need to work very-very hard ( over 12h/day ) and trading in smoke breaks, lunch break, work time, when really-really need 5-15 min max to read a news an make my position.
As I read my post I should play with the Trailing Stop, to cool down the system, and protect my wins. I am very satisfied if I catch 40 pip from 100 pip movement, or 200 pip from 500, if I don't have to long red pips at equity.
Also it would be wise to stay out of market and watch how a few pip is going which I couldn't catch than be blocked with a huge size position in negative and pray to be once finally at BE!
I would like to have an enough dynamic system for me, even combined from several posts.
Edit:
found the article:
here
http://www.forexfactory.com/attachme...0&d=1360781599
Thanks for try to help!
When you sit down to calculator you have a closed equity: no risk-no gain, it is your balance: 1000$.
When you open a position of 30,000 units with 100:1 leverage, than you are using 300$,1000-300=700 is free margin.
If you aren't using any SL, than the SL is the -100 pip Margin Call for the 300$ In this case the risk free equity is the 700$
Lets be there a 50pip SL. Than the risk free equity is the 700 + (300/2) = 850$
Let be the happy case and the price move in our direction 60 pip:+180$. Our total equity is 1180$ ( if we close the position now than that will be the balance, closed equity).
Lets move the SL to BE + 10 pip: so for sure we won the 10 PIP -if the SL is executed without slippage and so on- the risk free equity is 1030$, the total is 1180.
The system has more heat as more is the difference between the risk free equity and the total equity.
Here it comes the building a millipede, building positions systems: start small with 0:1 leverage, loosing bad trades, allowing good ones to run. In this case depends very much if the SL of the position is moved up or not. The system will heat, if not. If no room to play than less will be the good trades number.
The "set and forget" style is a set and pray actually.
In any system when we are right, than higher is the leverage than better is.
The "problem" and the general it is: when the price move against us -a bit. Can be at start, can be after hard earn green pips. INHO is almost the same: total equity loss, closer to risk free equity.
This will lead again to the trade size optimisation, which I have solved already at least theoretically. In practice still has effect on me if the 3-4th consecutive loss it was with the optimised leverage and I am at wrong side of the statistics and need a huge effort to recover from 25% the account even if I am getting up with +20-30% steps.(with 65% win rate the optimum risk should be 30% at least theoretically). Many big traders has used huge leverage and vent bankrupt a few times until they made 100 million. Those systems has a huge heat.
A very cold system with only +5% average return /month (79.59%/year)in 8 years is making +10,718%, around 100x. That is good for pension plan, or when the capital is high enough and don't want to risk it.
Now the question it is: when to mix the higher heat style with a cold one? - simply I am human and need room to play, I am not robot to execute orders, rules with 100% precision.
Mostly I am watching only one currency pair, because no time to analyze news, charts. I am trying to find a trend directional movements based on this chart:
Attached Image
This was one of the most trade improvement material read ever, and I have saved it, I think not available any more online. I will post later the article here.
My system in practice:
Sign marked with 3x up it means using maxed leveraged allowed by Dukascopy: 30:1, sign with red down it mark of close trade.
When I can't trade in this style, than I am doing what I am regretting later... - going to 5m chart and play with 2:1 , 8:1 leverage for 10-30 pip and all beginner stuff. Sometimes bring me some cache, sometimes just using my margin. That's why it was important to move from Oanda, because they introduced the FIFO and no hedge possibility.
Mostly I am watching the news releases. The result should have none change or trend direction impact to use high leverage. So I am not trading only based on chart, no system will be for me with " No news releases", because that is the motor. Also can't trade only on high impact news because those are rare, which has real power of trend change and I don't understand those financial words. Mostly ECB and FOCM statements are this king of imprevisible changes, not NFP, unemployments. Even if I don't understand a news written in financial language, I can see how the market reacts, I see the comments, which are more close to trader language. I can see if EUR/USD just changed direction and just moved 200 pip instead of 70-100 and so on.
I know I should find my system, maybe I need to change too, probably I will, when I will have more capital to trade full time ( around 1 year need to work very-very hard ( over 12h/day ) and trading in smoke breaks, lunch break, work time, when really-really need 5-15 min max to read a news an make my position.
As I read my post I should play with the Trailing Stop, to cool down the system, and protect my wins. I am very satisfied if I catch 40 pip from 100 pip movement, or 200 pip from 500, if I don't have to long red pips at equity.
Also it would be wise to stay out of market and watch how a few pip is going which I couldn't catch than be blocked with a huge size position in negative and pray to be once finally at BE!
I would like to have an enough dynamic system for me, even combined from several posts.
Edit:
found the article:
here
http://www.forexfactory.com/attachme...0&d=1360781599
Thanks for try to help!
I want to buy PATIENCE