| stevehopwoodforex.com https://www.stevehopwoodforex.com/phpBB3/ Print view |
|
| Lot sizing for success? https://www.stevehopwoodforex.com/phpBB3/viewtopic.php?t=229 |
Page 1 of 1 |
| Author: | r2997790 [ Mon Jan 09, 2012 2:55 pm ] |
| Post subject: | Lot sizing for success? |
Hey everyone, this post is going to be far from profound, but I was thinking about lot sizing and sizing out of positions over the weekend and it got me thinking.... Let's say you're long 1.0 lots on AUDUSD and you close out for 10 pips profit [for the sake of this conversation we won't discuss how you successfully took that trade -- although that's rather important!] Let's say you now take 0.99 lots off, so you're left with $1 on and 0.01 which is 10c/pip. More importantly, breakeven is now 1000 pips away and AUDUSD earns interest. Margin requirement now is also very small at just $2.50 at 400:1 so you're not tying up margin. So, my hypothesis is, you build positions in this way and earn interest (effectively further extending your b/e position as you do) ... if the market moves in your favour you will also gain further pips AND interest. You'd then build your positions every time the market moves, say 100 pips, against the direction of the interest (eg. lower in the case of AUDUSD) Spelling it out further... 1. Go Long at 1.0 lots, with a TakeProfit of 10 pips [let's assume you can do this -- need to figure out how and when, but that isn't what I am trying to explain now -- lets just assume you can] 2. Remove 0.99 of the trade (so you take of $99 profit) and leave $1 profit on at 0.01 lots (10c per pip). 3. The rollover is 2 pips, so you make 20c per day. 4. Significantly now, you need to have a move of -1000 pips to close at breakeven. 5. Any move up from this point is additional profit, any move down still pays interest, and you need a move down of 1000 to close out at breakeven. 6. Based on Friday's close you need to go back to September 2010 to see a move down of 1000 pips. 7. If you had have done this in September 2010 you would have made $289, broken down like this -- $90 in rollover interest (15 months x 30 days x 0.20c rollover/day = $90) + $99 original closed profit + 1000 pips up at 0.01 lots = $100 8. Once you've made your initial 10 pips at 1 lot you're are guaranteed profit or breakeven, of course as your rollover pip profit grows you could also extend your breakeven stoploss position, in the example I have above, $90 rollover profit would mean you could extend by now have extended your StopLoss position a further 1000 pips, so really you are unlikely at that stage to ever have to close at breakeven position. ---------- On the face the numbers are very small, but with compounding, sure success / breakeven at worse [*providing* you make the 1.0 lot 10 pip trade successfully] -- you could quite quickly build a quite good position. |
|
| Author: | r2997790 [ Mon Jan 09, 2012 3:40 pm ] |
| Post subject: | Re: Lot sizing for success? |
Er, thanks, I think Khalid. Sorry then for the misleading title. I just called it that as you reduce your lot size  ... excuse my ignorance. I don't know if you were being sarcastic or not, but I do know you are a lot smarter and more experienced then me so I defer to you. |
|
| All times are UTC | Page 1 of 1 |
|
Powered by phpBB® Forum Software © phpBB Limited |
|