Still too many are reporting profits?

[xtsunami]

Dude, if you have an indication of a pull-back before you make a trade, why would you not take advantage of it?

In the scenario you give, with that trade size, you are giving up a nice size profit.

FWIW, you may want to reconsider your risk to reward ratio. I personally use about ten percent of my trading capital. In this example, you would be trading with 2 lots not 5. I try to keep that ratio at 1:1.5, meaning, I am risking $1 for a return of $1.50. In this example, your ratio is over 2.5:1 (you are risking over $2.50 to make $1). Seems backward, doesn't it?


XT

[gregh285]

griffin,
too much leverage. You could hedge 2 100k contracts.(not recommendation, not my style)
Use trailing stops to lock-in profit.
Personally, Risk/reward is all wrong for the trade, risk 100pip, gain 50.
I would not enter this trade.


buy 1.6030, stop 1.6000, limit 1.6150, something like that.
greg.

[griffin]

Hmm, guess I'm not ready to go live for a while yet.

Ok, this is the way I looked at it....

If I buy 5 lots at say 1.6040, then if the price moves to 1.5950 ('if', that bit I wasn't as positive about, hence not going short) I could buy another 2 lots in the expectation of it going above 1.61 (or at least in that general direction)
If it only went to 1.6030 then although the 5 lots would show a loss of $500, the 2 lots would show a gain of $1600....that was the plan. On the other hand if it didn't go down before going up there would be no need/opportunity to buy the other 2 lots and just be a matter of deciding at what point to sell.

I guess I'm way off here, wrong risk/reward ratio (back-to-front even), too much leverage, don't know where (or why) to set stops.

Thanks guys, I feel like I've been hit with the sledgehammer of reality that I really don't have a clue what I'm doing. Better to find out now than -20k later!

I think I'll go back to reading for a while...and keep the day job!

Cheers

Peter

[gregh285]

griffin, griffin,
What you are talking about is averaging down the price or bottom fishing. This is a highly dangerous game to play, DO NOT PLAY forex without stops. Do not add to a losing position.
You are trying to make sure you do not lose, this will not work. Work out your exposure from your stop and that is your risk.
If it drops fast you will have a margin call and lose everything, think smart.
Enter trade from one side and set stop, you cannot win all the time. More winners than losers is the key, let winners run, cut losers short.
do not buy 500k as a beginner, you will become another statistic. If you have 20K account trading 1/2M, you have only 400pips for a wipeout.
The £ has lost that over a few sessions on occassions, unlikely but possible.

[griffin]

Thanks Gregh, and there I was thinking I was doing ok!

Right, now I understand the point of stops, to cut losing positions free and limit loss, it seems so obvious now,(doh!). Would it be right then to say that if I set a limit at twice the stop then on average I would only have to be right for half the deals? How would this deal seem to you...

Same account size, 20k

GBP/USD 1.6000/04, going long 2 lots, set the stop at 1.5965 and the limit at 1.6070, is that too tight a stop or too optimistic a limit? I suppose it depends on the market volatility. That would be a risk/profit ratio of 1:2, maybe that's a bit high is it? Maybe 1:1.5 ie stop at 1.5965, limit at 1.6053? Have I got that right?

I think I might be in the wrong forum here (advanced!!), and diverting this thread, sorry.

Peter