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| My philosophy of Trading https://www.stevehopwoodforex.com/phpBB3/viewtopic.php?t=3627 |
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| Author: | nanningbob [ Thu Jul 24, 2014 3:53 am ] |
| Post subject: | My philosophy of Trading |
We have had a similar discussion before so let me hit on two issues you have brought up. High leverage deceives you on the amount of funds you have available to trade. You will see the percent of the account put into play is very low with high leverage when in reality you have too much funds committed to lots. Yes you can just use small lots and still use high leverage but when you look at the figures at the bottom you will think you have lots of funds left to trade with when in reality you dont. That is the deception. Now could I trade high leverage and stay with small lots. Yes I could but a critical piece of information is missing when I trade. When I trade at 25:1 I have more of my money in play and the percentage numbers will be much different at the bottom of the screen. I can see the amount of money I have left to put into play is getting smaller and I am committing too much funds in total. So with that warning I quit adding trades or I start closing out trades that arent doing anything. You dont get that information with high leverage until its way too late. You are already a goner. Low leverage I can see my percentage left to play with is reaching the 300% then 200% levels I know I have too many lots in play and I can close some out with out damaging my account balance. With high leverage you get down to that 200% level, you already are cooked and you have to damage your account to close out trades. That is a big deal that very very few traders understand or even consider when trading. I stay out of trouble with my account because I can see that percentage number with low leverage and know its time to clean some junk out. High leverage accounts show you still have funds to play with when in reality you have already strained your account to its limit. You are done but you dont know it yet. The second issue is swap costs are the same, or the interest rate is the same whether you have high/low leverage. That also is a big deception. WHY? Because the interest rate maybe the same but the amount you borrowing is far different. If I put 400,000K in play with my 1000 dollars 400:1 leverage or I can only play 25K into play with 25:1 leverage, the interest or swap is the same but the amount you are paying compared to me is a BIG BIG difference. 10% interest on 400K over one year is 40,000 dollars. 10% interest on 25K over one year is 2500 dollars. You will pay 16X more money in interest trading the same size lots and trades that I do but you will not make anywhere near as much money as I do. Interest costs will eat up your profit from that 1000 dollar account. Again this is an area very very few traders comprehend or understand. The idea is swaps are the same so it makes no difference is very faulty logic. It shows that the trader doesnt understand the amount of money he is borrowing and the cost of borrowing that money to trade with. All he is thinking is the interest rate is the same so it doesnt matter. Well it does and long term you are really making less than you would with a lower leverage account. Well I hope I explained this good enough to understand. I tried my best. |
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| Author: | Pedigree [ Thu Jul 24, 2014 7:37 am ] |
| Post subject: | My philosophy of Trading |
Thanks Bob for taking the time to explain again. I appreciate it. |
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| Author: | iambadger [ Sun Jul 27, 2014 6:20 pm ] |
| Post subject: | My philosophy of Trading |
Bob, just wanted to extend my many thanks for this thread (alongside your many others). They're always a breath of fresh air and incredibly insightful. Wishing Noah a speedy recovery. |
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| Author: | EverEMan [ Fri Aug 01, 2014 3:08 am ] |
| Post subject: | My philosophy of Trading |
Many thanks, Bob! A very clear explanation. Thanks for all your done to help clarify trading issues. It really helps! |
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| Author: | nanningbob [ Sun Aug 03, 2014 4:57 am ] |
| Post subject: | My philosophy of Trading |
Because of my schedule of work I only trade higher TF charts. That is my bread and butter. However, Doug said some things about trading lower TF that I thought worth putting here. I appreciate Doug so much and what he has brought to the table in scalping and trading lower TF. Maybe someday I will give it a whirl again. You have to develop a psychology that is adaptive to scalping. You have to think of your trades as a batting average. You are waiting for the right pitch. You must not trade because you want action. Trading is not a natural process. It is a skill that must be learned. Scalping is the hardest form of trading because you are all the time battling the desire to over trade. You have less data to base a decision on because getting into a trade early is important to profit. So timing becomes a mental battle too. Do I have the entry or not. It is made easier though when there is real momentum in the market. In a dead market like right now you are probably chasing price and being beat by the spread. If you have the time to sit at the computer and master the psychology that is required to trade the one minute time period than that may become your favorite trading technique. However every body new to trading thinks the 1 minute is easy. The truth is it is the hardest trading period to trade. That is why I held up from doing the one minute initially as part of the ribbons. However with lower volatility seeming to be the new condition as we get farther from 2008 it may offer some trading opportunities when there is some separation on the CSS that higher time periods do not offer for intraday trading. However I have always recommended to new people to start with Bob's 10.6. Now since he developed the 10.7 - 10.9 system trading that on the hour and up charts is a good place to start. You can do the latter with my ribbons or with Bobs charts. It does not mean you will not find your way to scalping or for that matter intraday trading. Becoming successful at trading first is easier on the higher time periods. You simply have more data to make a decision when using a good system like Bobs. Lastly, DO NOT SCALP NEWS. Go to a higher time period if you want to trade the news. The 1 minute at the release of news is just to volatile to get your bearing looking at it. A move up looks enormous on the 1 minute but that may be followed by an even bigger move down. You just loose perspective on the one minute. So beware of when these news releases occur. Fading the news may be your best technique with the 1 minute. What is important in trading is the process of trading. Great traders enjoy the process of trading which is documented in some of the books of Jack Schwager. So you have to find your time period to trade that best fits your life and psychology once you have established some success. If scalping is your strong suit you will want to find a broker that offers the lowest spreads. There are a couple in the US that do that. I will not get into naming them but you can do some shopping. If you do have the resources to open a professional account usually over 10000 dollars many broker will give you better spreads. However that is not necessary. Do some shopping and comparison, than I think you will be happy with the results. Out side the US you have even more choices but look carefully for proper regulation. |
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| Author: | fullaforex [ Mon Aug 04, 2014 2:17 pm ] |
| Post subject: | My philosophy of Trading |
Hi Bob, Just finished reading this thread and find it all very interesting and I'm learning a lot. I would like to trade longer term with the trend preferably on the Daily charts and have downloaded the CSS to get started but I'm wondering what chart setup you use and why?. ie; indicators Mas etc. Thanks in advance. Fulla |
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| Author: | nanningbob [ Mon Aug 04, 2014 3:22 pm ] |
| Post subject: | My philosophy of Trading |
That is easy go to 10.9 thread |
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| Author: | pattyloo [ Sun Aug 31, 2014 7:28 pm ] |
| Post subject: | My philosophy of Trading |
"I cant hedge trade in the USA so the only thing I can do is take a loss or set up a second recovery trade. I had only started playing with hedge trading when it got banned in the USA." Confused about comments above re: no hedging in US. I am in the US, but my broker, Tallinex, is in Estonia (Europe). I am new at this, but I started using the MPTM.mq4 EA, and it did place hedge trades against my losers. Is this allowed for me due to broker location? In case I don't understand hedging - here's what MPTM did. I had an old short position in GBP/CHF. This dog had been down as much as 600 pips, but I was hanging on to it. When I turned on MPTM, it immediately made a hedge trade (signified by 'hedge order #' in the comments of the order). The hedge was long GBP/CHF. I was happy with this, because as the short position deteriorated, the hedge grew. Eventually, I closed out the hedge for 163 pips. At this point, the original short is down 400 pips, but I know in back of my mind I've made back 163 of that already. |
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| Author: | nanningbob [ Mon Sep 01, 2014 11:52 pm ] |
| Post subject: | My philosophy of Trading |
Well USA brokers cannot hedge and have FIFO first in first out. In other words if you have multiple positions you have to close out the oldest trade first. Dumb. You are with a foreign broker so you dont have that problem. You also dont have NFA rules with banks, like CITI Bank. Hedging is a time out so you dont increase your losses. It allows you to wait until you get the trading conditions you want and then you bail out. If you want to get out of the gbp/chf trade you will need a 2nd position at some point to retrace back. Waiting for a currency to move back to its original position can take years. So you take a 2nd position and you only need 200 pips to get back to 0 or reduce the loss to more acceptable loss to close. I personally dont trade the gbp/chf because it is such a screwy pair. The Swiss National Bank SNB has taken the position of tying itself to the euro so it moves the same as the euro. So I dont trade the eur/gbp and therefore dont trade the gbp/chf. Here is a pic on the daily. The gbp has broken back up into UT territory again and if it doesnt go to new highs you are OK but if it does that trade is in big trouble. You should hedge above that red line and undo the hedge below it and place a 2nd sell. Every time you take a profit you should reduce the losing trade. For example if the trade was .10 lots you won back about 20% so you should have closed .02 lots so you should have .08 lots left. This reduces your losses piece by piece until it is gone. So that is what I would do with a trade like that. |
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| Author: | pattyloo [ Tue Sep 02, 2014 12:05 am ] |
| Post subject: | My philosophy of Trading |
Bob - Thank You for taking the time to explain all of this. I am only trading .01 lots. And, that particular bad trade was just a single .01 lot. I am studying the docs and threads from your 10.x and Steve's Best Bob EA, in hopes one of them will work well for me. I am still learning, and finding this website and these forums have made a huge difference in my understanding. |
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