'Line in the Sand'

Discussion in 'Strategy Development' started by Spectre2007, Feb 21, 2007.

  1. try this in a demo acct:

    1) pick a pair
    2) short or long that pair but do one or the other
    3) stay long if the price moves away up from your long
    4) stay short if the price move away down from your short
    5) if price travels though your entry reverse
    6) keep tab of how many pips its costing you to stay in the direction of the price
    7) when price finally does move or gap up away or down away from your entry only exit at 2 times the cost of your direction orientation. So your TP will always be twice what it cost you from previous trades.

    This method implies that you are using a ECN with 2 pip spreads. The more and more you do this. You come to realize the initial 'line in the sand' is crucial, and key points in the chart where you attempt to do this will determine how many times you get chopped up.
     
  2. then you come to realize the faster a price travels during the session, the more opportunity for the price to significantly gap away from your entry.

    1) You end up eliminating slow days from your trading.
    2) You end up eliminating trading in the middle of a high congestion zone.
    3) Your entries are always at the outliers.
    4) You become apathetic to where the price travels as long as it travels fast and away.
     
  3. your account size will determine how many times you can get chopped up.

    units of spread = US
    units in slippage = IS
    smallest lot size available = LS
    account size = AS


    (US + IS) x LS = A

    (.01 X AS) / A = # of times before 1% loss in equity
     
  4. TraderD

    TraderD

    Interesting ideas.
    If loss limit 1% is reached after X-number of stop outs, then *this* trade is closed? One "steps back": stop trading for the day, stop trading until range created by stop-outs is broken?