Registered: Aug 2010
10-19-11 11:04 AM
Quote from elcowen:
Where would your initial stops be? How do you protect from false breakouts is the biggest problem.
the initial stop would be say 1% (of your equity) from entry (it could be lower if you think that's too high) and you would scale in (in thirds).
you can't protect against false breakouts b/c no one knows beforehand which breakout will fail/turn into trend that pays for all the other failed breakouts.
for ex. divide your capital into 3 cars
price is above high of last 20 bars (say 500 tick)
buy 1 car risking 1% (really 0.33%)
if stopped out you only lose 0.33
if it continues another x atr buy another car risking same % and so on for the third contract.
to reiterate, during chop you will lose money period however you will only lose a little. it's like losing 0.33, then another 0.33, then another 0.33 then you make 4.00.