krolyk55, Sorry that is what I meant, not original price but average price. How do you know how far it's going to reverse, you don't. The market could take off without a large enough pullback. Not trying to be an ass just trying to save yours. The risk/reward ratio on your trades are probably so skewed. One bad day shouldn't wipe out so much profit. Talk to your trader buddies about your trades, and please listen to some of these guys.
Oh, we aren't confused ... Here's the last guy who tried to trade using the technique which you're describing (and he went to great lengths talking about it, too). Saxon22 Gets a Job
Thanks for the comments. As I said when I started the thread my purpose with this journal is to learn and solicit constructive advice, and I am getting it. I am aware that the odds are against me and I will need to lose some money as part of the learning process. I can accept and fortunately I can afford to lose some so I won't be devastated when it happens. I'm not going to simply stop trading, cause then I'll never learn, I'd rather lose money then stop. But based on many of the comments so far, it seems that I need a tighter stop loss strategy, so when I do have the bad days it won't wipe out my whole account. Any advice on how to determine where to place my stops?
That depends on your strategy. Why are you entering the trade. There must be some reason. What does the market have to do to prove your reasoning wrong. When you're wrong thats where your stop should be. Get out of the trade and wait for your next signal. you are entering with additional contracts where you think the market will correct. If you took a quick and small loss you can still enter at that point.
Without knowing what rules you use to enter a trade, what you use for a setup and a trigger, it is difficult to give you pertinent answer. Where I suggest you start is with the individual trades that were winners and represent what you envision as the kind of trade you are trying to make. Look at each of those trades and note the amount of heat you got after entry and before the trades went positive and you took your profit. The stop value you want is the number of ticks that would have kept you in all of those winning trades, allowing you to take profit on each one. The trades that do not fit the profile of these winning trades will trigger the stop. The way you then win at this version of the game is by concentrating on excluding the trades that do not fit the winning profile. Then it becomes not about making winning trades but about not making losing trades.
Thank you Boib and thank you Pivotas good comment and very logical. I am going to do this right now and implement it in my trading tomorrow.
This shows how green I really am, but apparantly there is a name for the system I'm using, The "Averaging Down" method, which as I stated in the beginning was taught to me by a buddy of mine who has experienced alot of success with it. I came across this thread from a few months ago: http://www.elitetrader.com/vb/showthread.php?s=&threadid=106227&perpage=6&pagenumber=10 There was alot of early critisizm but then plenty of supporters. It seems to work for some people and for the guy who showed me in person so I'm going to keep at it for now, but trying to keep the number of contracts lower. If anyone has any experience trading with this technique please share.
http://tradermike.net/2005/07/position_sizing/ position sizing $45,000 x .02 or 2% =$900 Therefore if you lose $900 you stop trading for the day. I think you should use half of that as a beginner. So the most you should lose in a day is $450 or 1%, pretty simple this wil keep you from blowing out your account. es mini or esm08 is $12.50 per tick, so $450 / $12.50 per tick means on a trade you can lose 36 ticks total on a one lot. That is a lot of ticks to be wrong by the way. Even more important you can't dictate to the market how much you want to make, that plus over trading will kill you. Before you enter a trade : Why am I in the trade? Where is my exit? Where is my stop loss eg. $45,000 x .01 = $450 Now write a check for $50 to a charity; Lord knows you will lose that much the way you are going.
Maybe you should stop trading, short term. Of all those that post on ET, Pivotas seems to have his head screwed on the most - good advice all round. However, HOW DO YOU KNOW IT WILL WORK FOR YOU? You can't just think, hey that's great advice, i'll try that tomorrow. You need to take some time, test the assumptions and see if you are comfortable with the results. If that is the case, them implement in your strategy. For all you know as a rookie, Pivotas may be talking crap. What ever you do, DON'T keep chopping and changing. Develop a strategy that works for you, then stick to it. IF it doesn't work in real time, stop trading and develop another strategy. There is plenty of time, the market aint going nowhere. Your enthusiasm is great so don't shoot yourself in the foot. pneuma