Leverage on managed account

[Bank Trader]

You surprise me. You talk like your an expert but even the lingo you use screams rookie. You're proably an older rookie, but a rookie nevertheless. I would love to lecture you in the ways and means of FX, but quite frankly, I just don't care.

Pips?

What about option strategies?

I don't target any 'pips' for the month. I have weekly/monthly/yearly drawdowns. When they are reached I stop for the week/month/year, period.

In order not to reach those levels, you have to have at least a 2.5-1 risk/reward ratio.

That will allow you to be right only 35% of the time in order to be making money.

As a fund manager/prop trader, the most important thing is consistent returns, which means if you trade 1-1 your going to get toasted. The FX market is designed to seek out the 1-1 traders and gobble their money up.

As for bank traders not making money, I won't even acknowledge that with a response, clealry you have no clue and your friends who are 'bank traders' may indeed be bad at it, but to categorize everyone as such is simply nonsense.

You sound very much like the typical retail FX trader, I wouldn't be surprised at all if your a guy 2-4 years new to FX.

I've been in the market trading FX for a bank for 19 years. I run a desk of 16 prop traders globally at one of the largest banks in the world. I've made over 120 mio USD in my career and taken home close to 10 mio myself in bonuses.

But what do I know James, your the expert.

[James]

Well good for you, Bank Trader. You ARE good.

However, your observations about me are almost all entirely wrong.

As for 1:1 trading, you misunderstand my comments as well. I referred to trading leverage, not risk/reward. Do you know the difference?

Gee, I wish you would lecture me on FX trading. It would be very enlightening, and if your comments on this thread are anything to go by, I would imagine entertaining too.

You have made some pretty poor comments. I think I shall add you to the list of "bank traders" I referred to earlier, with the same categorisation.

Ciao

[James]

Originally posted by Bank Trader

You sound very much like the typical retail FX trader, I wouldn't be surprised at all if your a guy 2-4 years new to FX.

The "retail rookies" who you pooh-pooh so readily, are the traders who populate this forum, so perhaps you are in the wrong place and ridiculing the wrong group of people. These are just people trying to make a living from this interesting and exciting market, and don't deserve to be looked down upon, no matter how new to the business they are.

Anyway, I don't want to get into a slanging match with you, so I wish you all the best and good luck with your trading.

[elmagd2000]

Thanks Banktrader and James for sharing your ideas..

Bank trader,
It may of use for most of us to share some of your trading strategies or at least concepts, rules or advices.

good luck
Hani

[James]

Hi Hani

Salem Rachma Allah Barakatu

check out

www.investforex.com/strategy.htm

For my trading approach

[jsoft]

Originally posted by James
Hi Hani

Salem Rachma Allah Barakatu

check out

www.investforex.com/strategy.htm

For my trading approach

Quick question, James: why your managed funds are at -0.1% this month (while your strategy is 777pips up so far in Sep)?

[James]

Originally posted by jsoft

Quick question, James: why your managed funds are at -0.1% this month (while your strategy is 777pips up so far in Sep)?

Funds at +0.5% and strategy close to +1000 now. Results differ to signals as I am only introducing them incrementally, as I want to be sure of various factors first. I have been on a tough road this year and I want to be sure of things before settling on this system. I am really returning to my sucessful strategy of the past few years now. I plan to follow the signals to the letter from this week/next week onwards on managed funds. If you are wondering, the signals results are fully verifiable by our clients, and audited monthly. We gained +69 today a little while ago.

[jsoft]

Originally posted by SimSpeed
When planning your “trade system/money management” program; the first thing you better know is: “How many trades in a row can I lose before I go broke.”

It is correct in very general terms, but requires some clarifying:

your logic above assumes you're prepared going broke (in worst case scenario); loosing $500 account and funding another one is not the big deal to you; for most traders like myself, we are trading a significant part of our savings - we think more in terms of loosing 10% up to 30% in the worst case scenario; should such a scenario ever occur, I want to have some capital left to come back.

I'm afraid very similar logic is used by investors.

Originally posted by SimSpeed
Obviously, the answer depends on how large is your trading account and how much of it are you placing “At Risk” on each trade. Are you comfortable risking 1%, 100%, or something in between? The answer lies entirely on each person’s goals for account growth; periodical income withdrawals; and one’s personal tolerance to stress.

My comment above still applies. Also in case you're trading investors funds, you have to satisfy their risk parameters, or they won't allocate to you.

Originally posted by SimSpeed
Did you know for example, that a $500 trading account with a 10% risk factor could withstand 19 consecutive (-25 pip) losing trades before going broke? We are all aware there are trading strategies out there that have 50% win/loss ratios with maximum losing trade draw downs far short of 19 consecutive losses. Knowing that to be true, why should I limit my trading to some arbitrary leverage ratio that doesn’t take these factors into consideration?

Well, there are many reasons. Some have been listed already.

Loosing 19 trades in the raw - what about loosing 10 trades in the raw, making 1-2 winners and loosing another 10? Or loosing 7, winning 1, loosing another 7, winning 1 and loosing 7 more? The point I'm making is it is not just loosing trades in the raw you're concerned about, it is your combined equity drawdown. In your example you may have no more than 5 loosing trades in the raw and still go broke.

Originally posted by SimSpeed
The thing to understand I believe, is not how much or how little am I leveraged on any given trade (in and of itself irrelevant,) but more importantly, does my current “level of risk” conform to, or fall within the win/loss parameters of my known trading system?

Again, correct in general terms, except you should be aware of general tendency underestimate the worst case scenario.

Originally posted by SimSpeed
And if so, am I maximizing my income potential with 10% risk (as exampled above), or can I afford a greater degree of risk to increase my trading account while producing a weekly income stream to live on? The answer is yes if all the relevant factors are taken into consideration and dynamically plotted trade by trade.

Let's take a quick quiz

Assuming the following scenario:

1) account size $500
2) loosing trade $50 (10%)
3) winning trade $100 (20%)
4) ratio of #winners/#loosers 2:3

What are the chances of going broke?

The answer will follow in my next post, please free to guess