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Trade small to win

Cuong (CuongVC)
Jun 06 2010 at 22:54
237 posts
Yes, the ratio ROR/MaxDD (per each cycle) is an important parameter.

The higher this ratio the better the trader/EA is.
I am curious to see what range this parameter the investors feel comfortable with. Let see some examples of the combination of ROR and MaxDD (and calculated ROR/MaxDD ratio):

1a/ ROR= 8%.........DD= 25%..........ROR/MaxDD= 8%/25%= 0.32
1b/ ROR= 10%.........DD= 30%..........ROR/MaxDD= 10%/30%= 0.33
2a/ ROR= 8%.........DD= 20%..........ROR/MaxDD= 8%/20%= 0.4
2b/ ROR= 10%.........DD= 25%..........ROR/MaxDD= 10%/25%= 0.4
3a/ ROR= 5%.........DD= 10%..........ROR/MaxDD= 5%/10%= 0.5
3b/ ROR= 10%.........DD= 20%..........ROR/MaxDD= 10%/20%= 0.5
3c/ ROR= 20%.........DD= 40%..........ROR/MaxDD= 20%/40%= 0.5


Which one is more appeal to you? Which ones are not accepatble to you? Everyone are welcome to give the opinion.


Thanks,
CuongVC

If you can prove that you can make money grows, tons of money will flow to you.
Patience
Jul 18 2010 at 20:36
230 posts

CuongVC posted: Now I am focus on small and consistent.

I think, if we can only make 3% a month consistently, we are already in good shape. We should start making consistent small return first then improve that rate gradually. Say 1% per month first, then 2%, then 3%, 4%,...


I agree with your thinking. I generally trade small and my results reflect this. It's kept me in the game for over 6 years and I expect it to continue. I also don't aim for any set percentage per month or anything. Whatever the market feels fit to give me, I will take with pleasure. I traded large when I first started (like all noobs do) and it wasn't a pleasant experience. Now everything is calm and I sleep like a baby even when A/J drops 1,000 pips in a day 😀

Cuong (CuongVC)
Jul 19 2010 at 02:32
237 posts
Yes, most of us are not happy with small return like 5% per month because we have small account size. Thing is like this: you have 500USD account, 5% of it is 25USD, very small amount compare to the effort we spend severall hours a day, every day. So we increase the size of trades, and get some quick buck like 100USD (25%, so good) and then after a short while this type of trading kill the account. Then we try again by deposit another 500USD to the account. Fail again..., this can happen many times.

If we have 5,000USD acount, then 5% is 250USD a month, it brings a better feeling.
If we have 20,000USD acount, then 5% is 1000USD a month, it is now a boost to our living condition.

So, we have to increase the capital, target on reasonable return. Then we will success.

If you can prove that you can make money grows, tons of money will flow to you.
Patience
Jul 19 2010 at 03:47
230 posts
Yes, it helps to have more capital. I am adequately capitalised but I still prefer to trade small as it offers many more opportunities like being able to trade other currencies or adding to your existing trades at a better price (I'm not very good with perfect entries). I'll whack a larger trade on now and again but it's not often because the market will usually remind me why I stopped doing it in the first place.

You've got it perfectly right in my book. Once you know how to trade, then trade with a well capitalised account so that you don't need to take unnecessary risks that you would if trading with a small account. The problem is, if you haven't got good money management with a small account then you probably aren't likely to with a larger account. I think a lot of people have unrealistic expectations of what return they should be making and that's why we see the boom and bust of so many accounts.

Patience
Jul 19 2010 at 12:00
230 posts
Here is a good thread that a friend just recommended to me. I need to do more of this style of trading. I have sub-accounts set up to do more longer term trading but I always seem to cut the trades short (the ones that are in profit of course). It's that instant gratification thing that just gets in the way.

https://www.forexfactory.com/showthread.php?t=245149

SIM
pip2cash
Jul 19 2010 at 14:58
423 posts

CuongVC posted:
    Yes, most of us are not happy with small return like 5% per month because we have small account size. Thing is like this: you have 500USD account, 5% of it is 25USD, very small amount compare to the effort we spend severall hours a day, every day. So we increase the size of trades, and get some quick buck like 100USD (25%, so good) and then after a short while this type of trading kill the account. Then we try again by deposit another 500USD to the account. Fail again..., this can happen many times.

If we have 5,000USD acount, then 5% is 250USD a month, it brings a better feeling.
If we have 20,000USD acount, then 5% is 1000USD a month, it is now a boost to our living condition.

So, we have to increase the capital, target on reasonable return. Then we will success.


Hi,

You are right. This is what i am doing right now.

SIM

Casey Lim (bestforexea)
Jul 20 2010 at 02:13
75 posts
Interesting... allow me to share my thoughts.

Trading small is a great way for ppl like me who knows jack about trading manually. I use to think $100 to turn into $1000 in a month. Or rather I was influences by that though. But that's a gamblers though.

I am trying to achieve 5% per month which would bring about 60% per year. That is a great business return if you ask me. However that is gross profits... if I were to think more like a business... then 25% net profit is considered a great return after deducting operation... Pocket money and VPS and probably expenses on buying EA.

However... at this point in time. 5% seems to be a far reach for me.. As I am only managing 2% per month. Don't get me wrong... 2% is still as good as it gets for a guy like me.

I guess these sort of target is very relative and it should improve with time and experiences. 5%-8%.... probably I need another year of experiences to bump my targets up a notch. Hey... as they say... aim high and if you miss the target... give or take... 4% might still be an improvement to my current 2%... hehe

But one day... I will master it and make gazillion % per month... muahahaha

Cuong (CuongVC)
Jul 20 2010 at 04:00
237 posts
Thank you for all the participants.

I start to love this forums. I hope we continue to have a good atmosphere for disscussing. As some of you may know, I have been a pretty active poster in Oanda forum but there are so many 'fighting on the internet' there so I almost stop posting there. I think forums should be a place that promote everyone to speak out one's thought in a respective maner.

I have many ideas and I will gradually post in here, as long as the atmosphere/environment promote/encourage it.


Back to Forex trading...

So we can say that the main factor to be a long term, consistent winner is to trade small enough. Ofcourse, different trader can have different return but if you found yourself having a very choppy Equity curve then you need to reduce the size of your trades.
To measure how heavy we are trading, I use the parameter 100PV% (100-pip-value%). For a 1000USD account if you often trade so that 1 pip move change your equity 1 USD, that is a change of 1/1000= 0.1% of the equity. The 100PV% will be 100x(1/1000)= 10%. This means a 100 pip move will change your equity 10%.

Based on this parameter I classify the trade level into severall cases:
Case.........................1..............2..............3...............4..............5..............6.................7
Equity (USD)............1000.........1000........1000........1000.........1000........1000...........1000
PV (USD) ..................0.1...........0.25...........0.5............0.75.........1.............2.5..............5
100PV% (%).............1.0%.........2.5%........5.0%.........7.5%........10.0%.......25.0%.......50.0%
Speed (Miles/hr).........10.............25............50.............75............100...........250...........500

With level 1, 100 pip change equity only 1%, is very safe like driving a car with 10 miles per hour. At level 7, 100 pip can make your equity increase 50% or decrease 50%, this is very high speed like 500 miles per hour.


Experience/skillfull traders can trade at high level safely (and gain a lot), this is simmilar to experience/skill full car driver can drive at higher speed safely (and get to the destination much sooner). You have to know your safe 'driving speed' to not exceed that. With time, your safe speed will increase then you can drive faster. You can always drive safely.

CuongVC

If you can prove that you can make money grows, tons of money will flow to you.
Patience
Jul 20 2010 at 09:50
230 posts
Mmmm, that's still too much for me. If I had a $1,000 account the most I would be trading would be 50 cents (whether that be one trade or a few e.g. 20 cents + 20 cents + 10 cents etc). I only have one account where I have been trying to practice really good money management and I've got positions open equalling 5:1 true leverage (position size/account size). In my other accounts I'm not so good and if I go slightly overboard in one account, I just transfer some money over from another account. I keep spreadsheets of account balance, open positions, current drawdown etc so I can see where everything is at. At the moment over all my accounts I have true leverage of 3.4:1. As I don't use hard stops (unless my positions are in profit) I've worked out this leverage by position size/account size minus margin + drawdown. Of course this is subject to change on a daily basis as I haven't defined my risk by using a hard stop. I hope I am making sense here as I am by no means a mathematician. And if I had a $1,000 account, I woud have to totally change the way I trade, define my risk and use hard stops.

Cuong (CuongVC)
Jul 20 2010 at 12:33
237 posts
With PV=50 cents for 1000USD account, you are in a very safe area. Lots of room to take action. You are right that PV (pip value) is not for one trade but for all trades, in Oanda we call it position. I am refering to 'only one pair trading' since it is my style and much simplier to calculate/evaluate.

Ok, we have been in agreement that trade small is the key to win long term. Now I think we can talk about the return. How to get say 2% a month? I welcome any thoughts. I will be back soon.


If you can prove that you can make money grows, tons of money will flow to you.
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