10.4 A Complete System

[Pipstubborn]

Damn, I'm a bit lost with lot size allocation on the second trade.
Somebody can help me do the math ?

ACCOUNT SIZE : US 10.000$ 1$/PIP
RISKING 1% (100$) PER TRADE

LET’S SAY ORIGINAL STOPLOSS WAS 50 PIPS (Long at 1.6050 and SL at 1.6000) SO WE’RE LONG AT 0.20 LOT

QUESTION :
WHAT SHOULD BE THE LOT SIZE ON THE SECOND LONG TRADE (LONG2), IF WE
WANT TO STAY AT “BE” IF STOPPED OUT ??

That also means the SL will be somewhere between LONG1 and LONG2, how to correctly
set our LONG2 allocation (which will be different than the first one) if we still want to risk 1%
on the second trade ?

@ Ihdt If you have the info page, at the top you'll see the I Breakeven board... you can find the number you are looking for.

In your example trade 1 with 1% with an initial SL at the 240 line, trade 2 with 1% .... when trade 2 is triggered, look at the I breakeven on the INFO page an the exact number for break even both trades will show there for the desire currency pair.... which is more or less half way between the two trades.
So it's just easy too look at the board.

I hope this helps, Pipstubborn

[WideEyed]

As I understand the system reading it from the manual again and again and practicing it, Bob advocates that it's a free ride from the second trade onwards. This is the crux of it. You enter 1st trade, make x pips or x % sl but once you enter the second trade, that's it, no more losses. adjust the collective sl to achieve this one objective alone, no loss if second trade entered.... Imagine how many systems can claim this. It's like a win / win from here

That's how I understand it as well. Once you enter the 2nd trade it's a no-loss situation. Cool. Great. Fantastic. However, and we should not lose sight of this, if there are a large number of first trades that end up in loss it may not compensate for the few no-loss situations. It seems that this point is not getting much attention and all the focus is on the occasions where you end up with a worst case scenario of BE. Has anyone done a back test of this on any pair/s to see what proportion of trades end up in a loss vs those that end up at BE or profit ... and the net pips gained/lost?

[spotdespot]

Damn, I'm a bit lost with lot size allocation on the second trade.
Somebody can help me do the math ?

ACCOUNT SIZE : US 10.000$ 1$/PIP
RISKING 1% (100$) PER TRADE

LET’S SAY ORIGINAL STOPLOSS WAS 50 PIPS (Long at 1.6050 and SL at 1.6000) SO WE’RE LONG AT 0.20 LOT

QUESTION :
WHAT SHOULD BE THE LOT SIZE ON THE SECOND LONG TRADE (LONG2), IF WE
WANT TO STAY AT “BE” IF STOPPED OUT ??

That also means the SL will be somewhere between LONG1 and LONG2, how to correctly
set our LONG2 allocation (which will be different than the first one) if we still want to risk 1%
on the second trade ?

Me too to be honest. I know exactly what you're saying and I don't think anyone has answered it yet. When you place the second trade you know that you don't need to place the SL @ the 240MA as you want to set the trades for that pair at BE, which will be closer to the price so there is no need for the SL to be so far away from the price. BUT if you place it "somewhere" between the 2 trades your SL is less and your lot size for 1% is larger BUT if you use a larger lot size you make the BE point closer to the price....and in fact many times you may not be able to achieve a BE price as the larger lot size for the second trade would mean you need price to move further in your favour to achieve BE.

Just a math problem I guess and I suck at math

[lhDT]

hi folks could you help me out here my EURAUD chart's stockastic is upside down am i missing something here

Are you sure you have you "Price field" set to "close/close" ??

[lhDT]

Me too to be honest. I know exactly what you're saying and I don't think anyone has answered it yet. When you place the second trade you know that you don't need to place the SL @ the 240MA as you want to set the trades for that pair at BE, which will be closer to the price so there is no need for the SL to be so far away from the price. BUT if you place it "somewhere" between the 2 trades your SL is less and your lot size for 1% is larger BUT if you use a larger lot size you make the BE point closer to the price....and in fact many times you may not be able to achieve a BE price as the larger lot size for the second trade would mean you need price to move further in your favour to achieve BE.

Just a math problem I guess and I suck at math

YES ! We are on the same page !
So basically, you will have bigger lot size on your second trade. Of course SL will be near the price. If it's a BE ok, no loss, if not, it's big money.

[McNish]

... BUT if you use a larger lot size you make the BE point closer to the price....and in fact many times you may not be able to achieve a BE...

Very correct. So it just means you have to use the same lot size for the second trade too. Is that not obvious? Or am I missing something? Just try it by the book till you get a good hang of it and then bend some rules to suit your style.

... However, and we should not lose sight of this, ... Has anyone done a back test of this on any pair/s to see what proportion of trades end up in a loss vs those that end up at BE or profit ... and the net pips gained/lost?

Great, seems you have found your self a test job . Pls report back with your findings here.

[spotdespot]

... BUT if you use a larger lot size you make the BE point closer to the price....and in fact many times you may not be able to achieve a BE...

Very correct. So it just means you have to use the same lot size for the second trade too. Is that not obvious? Or am I missing something? Just try it by the book till you get a good hang of it and then bend some rules to suit your style.

No you don't have to use the same lot size for the second trade for this to work at all. In fact if you risked 1% on both trades and played it "by the book", in the example above, your second trade would have a smaller lot size as the 240MA would still be used as the SL and it would be further away. Also, as in some of Bobs examples, you place additional trades before the first one is triggered as price continues to move towards the 240MA, so you would have different lot sizes - the last one placed having the biggest. Using the same lot size would work (in most but not all cases) but it might not be optimal at all.

I am sure it is not your intention but you are coming across as very patronizing in some of your responses. There are a few people here who have been round the block a few times and is doesn't come across well.

[aristid]

my 2 cents,
same percentage of risk is taken on all entries.
lot size is calculated by the distance to the 240ma.
the second entry will be further away from the 240ma than the first entry, so a smaller size will be calculated.
this will bring the BE stoploss at some point between them, but closer to the first entry, because the first size is bigger. how close depends on the relative distance of entry to ma and entry 1 to entry 2.

very neat.

[Dewey McG]

Hi Guys,

Just working though this system and it seem like at least 5 pairs are setting up for trades within the next 24 hours, so it going to be interesting...

I places a pending on the GBPAUD (See below) and just looking for confirmation that my entry looks good and is consistent with the 10.4 strategy...!

GBPAUD Trade Pic-2 19-2-2013.jpg

Basically, price below 240 MA, RSI is flat and AO is the only concern....I think ideally we need this above zero from what i understand...Although i also understand you don't need both indicators for an entry...

I have placed my sell below mid pivot and I'm targeting Weekly Sup1

Any feedback welcome....

Regards
Wiggy

I have the same pending order. Good luck!

[mjws00]

I believe Bob's intent is SIMPLE almost hands off trading. Not higher math. One trade has risk all others are FREE.

Simple is pick a safe lot size based on 240MA. Use it for the trade series.

Entry 1: .2 lots @ 1.6000 SL @ 240MA 1%risk
Entry 2 (next pivot): .2 Lots @ 1.6100 SL @ 1.6050 (Your average cost and BE) No Risk.

Now if we want to go off path a little, we can manipulate size on the second order. It is a direct trade off with the size of the position determining how far we can retrace before getting stopped out. Half Size will give you more room at the cost of future profits. Double size less.

It is the classic free-ride pyramid dilemma. More size will always give more stop outs.

Adding additional risk is where the fun starts. And if you read Bob's notes, not the end of the world if a pullback goes deeper than you thought. The magic is the small position to start.

Mike