MoneyTec.com Traders Community Forum - View Single Post

gazelle · 29-07-2003, 11:59

Any advice in this area would be appreciated as I am trying to gain a beter understanding on spread strategies and how to approach things .
Hypothetical example - USDCHF - price action is ranging between 13400-13500 on the H1 chrt shrt term
Medium term trend is down and we are monitoring this range for a break to the downside inkeeping with the direction of the intermediate trend.

Our strategy is to shrt the USD -price breaches our target @ 13400 and we check the spread which is 13395-13390 as this is a significant technical point and will probably register on many trading systems I would imagine a mass of mkt participants running to the door and looking to execute all at once - will you have trouble being filled at this area if price moves down quickly - perhaps the spread might jump down to 13390-13385 if downward momentum accelerates

As we are an undercapitalised swing trader with 15000USD deposit how could we approach this trade and what position sizing strategies could be utilized

entry @ 13395 shrt USD
stop @ 13420 stop R1
$Risk = 25 points 250.00USD
%Risk = .016% on 15000USD deposit
MAE = 13440 worst case scenario stop = 45 points .03%
PT1 = 13345 2RGain
PT2 = 13330 2.6RGain

mkt moves in our projected direction and hits PT2 so we close the position , it seems that in an ideal world when we can shoot for 2.5-3.5 RMultiples this compensates for the spread , we loose 5 points on the purchase and 5 points on the sell is this right ?
so in our above example we make 65 points subtract (10points round trip) = 55 points after the spread?

Now if the trade moved too far beyond resist and the spread was 13385 and we went shrt USD at this point our risk would be further magnified

entry @ 13385
stop @ 13420
$Risk = 35 points 350.00USD
%Risk = .023%
a string of 5 consecutively loosing trades would shave approx 10% of our deposit

Also the notion of placing your stops at an easily recognisable technical lv - are there any dangers here , I have heard that some of the larger players will sabotage clean cut S/R areas in an endeavour to shake out weak hands , position traders may be able to ignore these tactics and remain unaffected by the small gyrations as they have a large position size and relative their size they can afford to employ 100 point stops

A trader with 15000.00USD - setting a stop @ 100 points would be risking .06% and even if his analytical skills were sharp he could only tolerate 7-8 trades and if they were all loosers his deposit size would dwindle 50% approx

Not really quite sure where to start when it comes to position sizing , have a pretty basic model but I need to do mare work in this area.

Thanks Gazelle

29-07-2003, 11:59	#1 (permalink)
gazelle level 1 Join Date: May 2003 Posts: 17 Rep Power: 0	spread questions Any advice in this area would be appreciated as I am trying to gain a beter understanding on spread strategies and how to approach things . Hypothetical example - USDCHF - price action is ranging between 13400-13500 on the H1 chrt shrt term Medium term trend is down and we are monitoring this range for a break to the downside inkeeping with the direction of the intermediate trend. Our strategy is to shrt the USD -price breaches our target @ 13400 and we check the spread which is 13395-13390 as this is a significant technical point and will probably register on many trading systems I would imagine a mass of mkt participants running to the door and looking to execute all at once - will you have trouble being filled at this area if price moves down quickly - perhaps the spread might jump down to 13390-13385 if downward momentum accelerates As we are an undercapitalised swing trader with 15000USD deposit how could we approach this trade and what position sizing strategies could be utilized entry @ 13395 shrt USD stop @ 13420 stop R1 $Risk = 25 points 250.00USD %Risk = .016% on 15000USD deposit MAE = 13440 worst case scenario stop = 45 points .03% PT1 = 13345 2RGain PT2 = 13330 2.6RGain mkt moves in our projected direction and hits PT2 so we close the position , it seems that in an ideal world when we can shoot for 2.5-3.5 RMultiples this compensates for the spread , we loose 5 points on the purchase and 5 points on the sell is this right ? so in our above example we make 65 points subtract (10points round trip) = 55 points after the spread? Now if the trade moved too far beyond resist and the spread was 13385 and we went shrt USD at this point our risk would be further magnified entry @ 13385 stop @ 13420 $Risk = 35 points 350.00USD %Risk = .023% a string of 5 consecutively loosing trades would shave approx 10% of our deposit Also the notion of placing your stops at an easily recognisable technical lv - are there any dangers here , I have heard that some of the larger players will sabotage clean cut S/R areas in an endeavour to shake out weak hands , position traders may be able to ignore these tactics and remain unaffected by the small gyrations as they have a large position size and relative their size they can afford to employ 100 point stops A trader with 15000.00USD - setting a stop @ 100 points would be risking .06% and even if his analytical skills were sharp he could only tolerate 7-8 trades and if they were all loosers his deposit size would dwindle 50% approx Not really quite sure where to start when it comes to position sizing , have a pretty basic model but I need to do mare work in this area. Thanks Gazelle