There is one thing that sort of near-guarantees winners. It is the fact that the best trades work IMMEDIATELLY in your favor. Other way to put is that as soon as the trade starts to be difficult I begin to plan exit. Yet, anoher way to put it, be able to recognize bad trade from a good one (which is actually not that difficult). This only works with combination of good entries. Good entries are planned entries and you can only plan a good entry when you have some kind of (valid) methology.
Is this kind of drawdown only 4 losers? What do you do? -$575 in red, winner? Holding on don't be a loser!!!! In fact, there is another -56 points b4 the YM landed, .......:eek: Not much ETers on this board lose -23 points but -79 points. areyoukidding?
I understand. Thats what I was referring to. Perhaps you see something I don't. Assuming a forex strategy that risks 1% per trade, a stop of 20 pips (including spread), and hedges by taking the opposite side of the same pair, the net loss for a trade that goes bad should be: total loss = hedge gain - 1% loss where, hedge gain = stop loss - spread / stop loss. Therefore, hedge gain = 20 - 3 (assuming 3 pip spread) / 20 = .85% So total loss would be = +.85% - 1% = -.15% Assuming a high enough risk:reward ratio, when trades go right, max loss per trade would be limited to 1% (hedge), with the remainder of winnings compensating for the hedge. This looks good so far. Where am I wrong? Why is this wasteful? You mentioned taking positive carry trades to hedge - or minimize draw down. But from my understanding, this would only work well for longer term trades; which incidentally also favor classical forex hedging by minimizing the cost of the spread. On the shorter frequencies (5 min) with tight stops, positive carry trades would earn so little interest in the 5-15 mins they might be on, as to offer very little, or no hedging utility. Again, I could be wrong. A good idea. Again, much appreciated. Minimizing drawdowns via hedging isn't something I've explored at much length. So this conversation is really interesting for me.
Well your wasting spread...if your using this to discover a direction...but if you use this to take off an extreme on one side and take a risk on its return to the other side, then it is not wasteful... until you take of one side you will not take a stake in direction...you can do this just with one pair then and save some spread... I put on hedges at different times (not at the same time) to slow the progress of a real strong trend...instead of using stops Perhaps you see something I don't.
My entries are made after a directional movement of some force is already established. I enter on a tight stop looking for a big wave. This could prove really useful for limiting dd. Thanks man! But only with the net effect of having less exposure per trade? Low reward strategies - like scalping - would be better suited towards one pair entries to minimize spread. But high reward strategies negate the cost of spread, making an inverse position practical. Always in? Catch all the move. Interesting way to go about it. Its fascinating how different personality profiles approach dollar extraction from the market in their own, unique ways.