OddTrader, I will answer all your posts a bit later, sorry. At the moment I want to say I cancelled my order on eurgbp...
The following is my search results: http://www.fxtrek.com/universityEN/risk_management.asp Q Correlation is defined as the linear regression correlation coefficient of a stock portfolio (or a single stock) and the performance benchmark over a certain period of time. For example, one can compute the"of EUR/USD stock with respect to the S&P 500 index over the past six months by first calculating the time series of the daily percent change of EUR/USD stock prices and the daily percent change of the S&P 500 index. Then, one computes the linear regression correlation coefficient of the two time series. The meaning of this complicated idea can be simply put: if the index moves up,percent of the time the stock also moves up. In the FX world, we often compute the of one currency rate with respect to another currency rate. For example, over the period of 2/24/2001 to 5/24/2001, GBP/USD and EUR/USD have a of 0.88, and it means that the two currency rates are strongly positively correlated. UQ
Ok, OddTrader, I'm with you. Sorry for the delay. Lets go one by one. Yes, I would consider reentering. The situation happens quiet often, and I would like to share my view on it. First of all - I'm not trading for 20-50 pips. I'm targeting more. But my first moving of the stop is to guarantee no-loss trade. Even so, I move stop to b/e only after 50+move in my favor, but not always. It depends how secure I feel with the trade. If I feel secure enough, I may wait for 50+ move, if not, I may move as soon as 30 pip move occures. For ex. GBPCHF trade this week - I entered @2.1689 - the move down followed to 2.1620 - I moved the stop. Now back to the thinking behind it - after stop gets hit for b/e. First of all - when entering it was a trade - thats for sure right? Now lets follow the price. It went to desired direction, went all the way of 50 pips, and now it decided to come back to your entry levels, which you were seeking for as "good entry". First of all, its reasonable to close, and I think you will agree with me, as after the trade went 50 pips in your way, now coming back - there is a chance you;ll get stoped (there always is such chance). So is it resonable, after you were 50 pips in green, to take loss on trade? I dont think so. Its better to close at b/e. So I think its clear about moving the stop. So it was a good trade when you entered, but is it still? What may follow this b/e closing? 1) the trade simply reversed, and is going in opposit direction 2) this is just a correction, which happened to be strong enough to come back to your entry, and maybe is strong enough to take out your stop, before it resumes to your direction 3) this is little direction which "happened" to reach your entry and will resume your predicted move after you are out As you can see, in case its 1) or 2) - you did the right thing. Well, in case its 3) - you will not make profits. But at least you wont get stop for loss. I think its pretty obvious, that exiting at b/e is best in 2/3 of possible scenarioes. Now, your question was little different - whether I consider reentering afrer b/e. Well, in case its b/e, as you saw 2/3 (or 66.6%) that I wont reenter - not immidiately for sure. You need to reconsider the trade from the begining. And you agree that your analysis will be more reliable when you're out and not when your in. Thats another positive side when you exit. You're less emotional on that trade and you reconsider the situation as if you didnt enter it. So I will reconsider, but I wont enter having less confirmations and signals as firts time. It is new trade and is treated as such. Now to the next question.
About the stops - I have no definition about that's the size of stops. For each and every trade its calculated individually. I was asked about it this week on other forum (about the eurchf trade I had), so I will post both the q and the answer. I think it covers the stops issue: If you have any q about this, let me know. Next question.
Once more, I answered about the correlation and trading similar pairs today, so I will quote: About the risk - I dont quiet get your question, but those parts I did understand I will answer - its 2% average per trade - sometimes more, sometimes less. Abd as I said in quoted post - I dont care about correlating pairs. All I care is what I see on chart. If I see good trade - it doesnt mater. Nothing matters. But as you see, charts are not that often good to me - I have 10-15 trades a month. Not more. The truth - its enough. Well, I think thats about it. No trades, no orders. I can say this trading week is over. Have good w/e, everyone! Regards, Rezo.
How about if your calculation based on the above factors would be more than 100 pips, do you still use 100 pips stop?
Bruce Kovner says something quite interesting about his FX trading experiences in Schwager's Market Wizards. Happy trading and nice weekend!
Yes, I would put bigger stop in case risk:reward ratio is bigger than1:2. Ok, I'm gone now, see you all on sunday when I'll put weekly commentary. Good w/e.