How to make 100%

[meanreversion]

I am suffering from a searing sense of deja vu.

4x, I recall a while back you telling us how you consider the 3 M's to be paramount to successful trading.. mind, method and money management.

You might be ok with mind and method, but as for money management ... uh oh !

 

[4xpipcounter]

Re: Nugget II--Marginging

Like I said. the lasy time I had to do that was last year, and the 70%, by far is an execption to the rule.

10% margining means the account has to back up on my 1,000 pips. By adding it to the account, the trade has to back up on me another 1,000 pips or the total thereof. When optimal entry level has been entered, then a strong reversal is imminent. I had to jump to the margining part of the discussion ahead of what I really wanted to discuss ahead I wanted to discuss prior to this.

I mistated in using the term "comfort zone". I'm unfazed when a trade goes against me, because of taking the degree of confidence in my proven methodology. I do treat trading like a chess game, inasmuch that I have to stay 2 or 3 moves ahead of myself. It is also true that once a trade has gone the 2nd leg against me, until those funds are added, my whole world is shut down until The Move happens. That is the only time my wife actually has a clue how things are going at work by looking at my demeanor.

i'm sorry 4xpip, but I find this route to gain your comfort rather risky, so you just add more money to your account to cover the margin...!! not sure that would make me comfortable! All it takes is for one day for that to fail and your whole account plus your spare cash is gone! sounds like a medbs plan to me...

 

[4xpipcounter]

I'll give you an idea of how much I keep in my account. This is my only job, so I don't keep peanuts in my account. OTOH, if the whole thing blows up, my lifestyle will not change. As far as it blowing up, that won't happen. My money that is not seen in my account is part of my money management.
Stay tuned.

one further question 4xpip, i'm intrigued as to whether you'll hint at what actual $ size your account is which you can allow to go down 70%? I'm mightly impressed at your risk tolerance for example if you let a $100,000 account lose $70,000 !!!!!!

 

[glyder]

4XPIP - have you ever made a comparison of how your successful your system would be if you used stops as a comfort zone? You may find it work almost as well but with far less worry.

As an aside I would say that in presenting your system here you are likely to have your method regularly questioned - I suspect this type of process can have a subtle effect on trading decisions.

 

[meanreversion]

My money that is not seen in my account is part of my money management.

In which case the percentage returns you talk about are pure smoke and mirrors.

For example, if your trading pot is $100k, you might have $10k with your broker and the other $90k parked in a savings account. You then make $5k profit trading a position on margin, and hey presto, you made 50% (5k/10k).

Sorry, but it's actually only 5% (5k/100k).

Now, if you were REALLY risking 10-20% of your full trading pot per trade, e.g. $20k on a single trade, then you need your head examined.

I'm still interested to hear more about your trading strategy, but please don't misrepresent your percentage profits and risk in this way.

 

[anley]

Interesting thread so please keep it up 4X and of course realise that people are going to be hotly debating your risk managment as it's obvioulsy a hot topic in trading. But what works for you might not work for others and vice-versa.

Trading of course is a results driven game but how much was risked to get the result also has to be taken into account.

I like Tucker as well, please give him a rub on his tummy from me but is it a dog or a pet rat?

 

[Rossini]

In which case the percentage returns you talk about are pure smoke and mirrors.

For example, if your trading pot is $100k, you might have $10k with your broker and the other $90k parked in a savings account. You then make $5k profit trading a position on margin, and hey presto, you made 50% (5k/10k).

Sorry, but it's actually only 5% (5k/100k).

Now, if you were REALLY risking 10-20% of your full trading pot per trade, e.g. $20k on a single trade, then you need your head examined.

I'm still interested to hear more about your trading strategy, but please don't misrepresent your percentage profits and risk in this way.

Exactly what I was about to say...

 

[4xpipcounter]

If I put 5 trades up at identical time, it only allows 200 pips each for a drawdown. Depended on the pairs, about 2 legs against me wipes out my account. I just won't put up a trade on the GBP/USD, EUR/USD, and USD/CHF at the same time.

Can I handle it? I don't like throwing money at my account, so I'll just say I don't like it, as opposed to not handling it, which is why I wouldn't do it. I'd rather avoid something I don't like before dealing with something I can't handle.

BTW, by their mathematical relationships, all pairs are related. As an example: NZD/USD * GBP/CHF * USD/GBP = NZD/CHF. Multiply them togethe, and find out. In order to get the USD/GBP, us the reiporcal of the GBP/USD.

I was talking to a college professor who teaches business maangement and blew her mind. She had no idea you could short the stock market. I was not in on the action on May 5th, but I predicted what happened as per my blog at 4xpipcounter.blogspot.com. I did catch a short on the DJIA on a very rare occurence of me trading it. That was when it rebounded to circa 10,700. I was in the short at 10,693.

That was the day cable had a reversal that led to the last leg up to over 2.11. Cable had a 360-pip hi-lo spread that day. A few comments, and one will lead to where I eventually wanted to go from the beginning. First, I don't remember what I did trading-wise that day. It is too far back. I do remember that day was about a month and a half before my current streak of no losing months, and one losing week started. That was the exact time when I adopted the ichimoku cloud as the integral part of my methodology. It was also the month when I finalized the formula for my S&R's. Very fond memories!

First, I'll add a rearview slant on this. If you were trading cable that day, it would have been a winner regardless which way you went if you entered at the day's beginning. Pips could have been made on the final rush down the hill, or you would have taken the scenic route on your way north in subsequent days. If you were long, there would have been a 300-pip pullback, but the final result was worth it. The best trade I ever had endured a circa 300-pip pullback when I entered a short on cable at 1.6650, and exited at 1.4650 about 6 months later.

The important thing about cable that day, as far as the trader is concerned is that it probably would not have been the best time to enter a short. Too much writing for now, but I will cover it in subsequent nuggets.

Re drawdown - suppose you're trading multiple pairs (5, say), they become closely correlated and all go against you by say 3 or 4 legs. Can you handle that?

Were you in trades during the flash crash (6 May), or in August 2007 (if memory serves, 16 August 2007 was an interesting day)? What were your experiences ?

Cheers

 

[meanreversion]

Can I handle it? I don't like throwing money at my account, so I'll just say I don't like it, as opposed to not handling it, which is why I wouldn't do it. I'd rather avoid something I don't like before dealing with something I can't handle.

So basically your account occasionally gets wiped (although it's only a small part of your overall trading pot), and after this event, you simply replenish it?

Hmm, it's fairly clear where you get your large percentage numbers from

 

[4xpipcounter]

Re: Nugget II--Marginging

Hoggums, I knew from the beginning my view on margining would not win any popularity contests. Especially when I jumped in the middle. My original intent was to cover the nature of trends, and the margining approach wasn't suppose to happen for about 3 months (Believe it or not.). I will cover things as they happen, thus my metaphor, "A drunken butterfly. He floats. You just don't know where he is going to land."

Understand, as part of my margining is my backup, which are the funds I keep that are at least equal to what is in my current account, even though there is much more.
My "disaster plan" is the fact everything I own is not in my trading account. Don't think I blindly jumped in and just decided this is what I'm going to do.

I can assume it will always go my way, but if it don't, that is where decision making comes it, thus, my "disaster plan". This is why I've said so much to newbies. Do not put you last cent into your trading account. Be comfortable.

I also think I mentioned somewhere (this is alos part of my safe margining plan) that if my current account wiped out (This is so bizarre I'm talking about this, but glad you brought it up.), my life wouldn't miss a beat. I will always say this. Make sure you have a methodology you have total and absolute confidence in. Make sure all your bases are covered with regards to margining. In other words, make it impossible to bankrupt. You got to admit, 1,000 pips is a lot to go against you, especially in entering at optimum entry points. If I run into another situation like I had last year, well that's okay, the liquidity is there to back me up.

20 years? You're too late. There's enough equity in my account to live nice, not to get crazy with. Again, my life won't change if I bankrupt my current account (Did I say that again?). My security and comfort grows, not diminish.

This is why I say I will never be back to where I started. Where I started was low funds in my trading account and low funds backing me up. I won't let the broker control the totality of my assets-- not even close.

You've seen that happen on this board many times, because people get on this board wanting to blow steam to hear them talk. Thye try to impress people with anything and everything that is not substantiated. I will never seek to say something just to impress you. My desire will always be to say something and be able to back up my words, such as the legitimate concern you expressed.

It is possible for disaster to hit with any trading plan. I don't ever want to say I entered at the optimum entry, and so it is impossible for this trade to back up on me 1,000 pips. I got to go back to my original assertion. Cut and paste this, "Never put you last dime in your trading account. Have plenty of liquidity outside of your trading account."

Hoggums, I know you are probably not convinced, but stay open-minded. WE have a long ways to go. I hope backup capital makes sense. I also hope it makes sense this business is designed to prosper a life and not hold it under the auspus of trading every single dollar one has and not really getting anywhere.

Sorry 4xpip but you are sufferring from hubris here. You have no disaster plan - you are assuming things will always go your way eventually. What happens if they don't - what are you going to do? Saying it won't happen is foolish. You can trade for the next 20 years - it only needs to happen once in that time for you to be wiped out and back where you started, non the wiser.

A common mistake and one I fell for when I started trading. We've seen it happen on this board many times, each time there's the protest of regulars who say this is not sustainable and every time the trader in question dismisses the argument because it can't happen with their system. And every time they go for a month or two and then suffer a huge loss & disappear.

 

[4xpipcounter]

Meanreversion, read my previous post and response to Hoggums. It should make sense, at least what I view as margining. It is an outside-of-the-box view.

BTW, all 3 M's have got to be working. If not, then disaster hits. One person's interpretation of proper margin management may not be someone else's. I said that to show how proper management applies to me.

I am suffering from a searing sense of deja vu.

4x, I recall a while back you telling us how you consider the 3 M's to be paramount to successful trading.. mind, method and money management.

You might be ok with mind and method, but as for money management ... uh oh !

 

[meanreversion]

Meanreversion, read my previous post and response to Hoggums. It should make sense, at least what I view as margining. It is an outside-of-the-box view.

BTW, all 3 M's have got to be working. If not, then disaster hits. One person's interpretation of proper margin management may not be someone else's. I said that to show how proper management applies to me.

Is it the case that you have (e.g.) $10k with your broker (out of a $100k trading pot), and if you make $5k you represent this as a 50% gain, when in fact it is a 5% gain?

 

[Rossini]

I am completely open minded, make no mistake about that.

But answer me this: From what I can gather from your posts you must at all times have the value of your trading account in cash ready to put into your trading account if you need it.

I'm much more interested in your methodology than all the MM stuff, but cant you see that if you must have the value of your trading account waiting in cast this effectively halves your gains....

Or to put it another way, why not just have double in your account to begin with and trade the same size...

Makes no sense to me??

 

[4xpipcounter]

Worry!? I have ice in my veins.

This is why developed my system the way I did. There is no comfort in knowing I might get spiked out of a trade. There is comfort in knowing if a trade moves against me, that it will return in my favor.

Glyder, this is why I opened this thread. After all the nuggets have been presented, I am hoping that just a few will benefit and make exactly what I said they can make. In the mean time, everyone's questions and concerns have been candid and open, and I am having a wonderful time. This is why I said the more opportunities you have to enunciate your system, the more saturated it becomes in your consciousness, which, in turn, makes me an even better trader. Up to this point, I can tell I have become the benefactor more than I have benefitted. I also hope, that up to this point, this has all made good reading. Having said that, I'll reiterate, keep an open mind. I'm looking forward to the few to become benefactors.

The effect that being in an open forum has on my trading decisions is that it forces me to be a litttle more circumspect in my decisions. After all, many are looking on. My ego tells me I need to look good. The humble side always tell me the markets are bigger than me, so make sure your decisions are right, and make them with no regrets.

4XPIP - have you ever made a comparison of how your successful your system would be if you used stops as a comfort zone? You may find it work almost as well but with far less worry.

As an aside I would say that in presenting your system here you are likely to have your method regularly questioned - I suspect this type of process can have a subtle effect on trading decisions.

 

[barjon]

4pip

Forgive me for not being entirely au fait with your methodology, but there's one thing I've never quite understood about these "hold 'til they come good" strategies. Forgive me again if that's not quite describing your strategy.

I presume that your method gives you an indication of whether you should trade long or short - let's assume long.

So you enter long and the trade goes against you, which is all well and good while your method continues to tell you that long is the place to be. However, with the sort of drawdowns you are talking about, it surely can't be long before your method starts telling you that you should be short - and the more sensitive your method the quicker that point will arrive. So, by hanging on to the long trade, you find yourself in a position that you must ignore your method - in which you have great confidence - which seems contradictory.

Is this a scenario that arises?

cheers

jon

 

[Jason101]

Fair play. The risk tolorant has been picked up on and 4x has made his position clear. Maybe now we should let 4x get on with his thread at his own pace and order.

Maybe his risk tolerance will not be for you. Maybe you will want to use stops, maybe you will not want to incorporate use/adapt any of his methods.

On the other hand you may pick up some nuggets like how to use Ichimoku clouds.

Lets move on.

 

[4xpipcounter]

Hot dog, Meanreversion! I was waiting for someone to say that!

It is very important. It is common sense to not put all your money in your trading account. You can't do it and alleviate stress associated with trading. You have to have money backing you up. I also can never guarantee myself to not have another losing month, even though it is so far in my rearview mirror, I can't hardly see it (Okay, Oct. 2007). There needs to be a nest egg that assures my life goes on as natural as possible, regardless what happens to my trading. Percnetages are also calculated based on equity in the account, not based on someone taking action that his life will go on regardless of what happens to his trading.

MR, I know you have been around quite awhile. In viewing previous posts, you seem to be doing well. Are you telling me every last pence you own is sitting in your trading account? I think I know the answer. Well, I am also a good trader, and all my money is not in my trading account. So misrepresentation? Why don't I add my cars, house, and even the grandkids, and then say that is my trading capital, and base my percentage on that. We can go to all kinds of extremes. Back to my point. Percentage is based on returns by comparison to the equity in your account, and that is the way my returns will always be represented.

And yes, my methodology is one of the strangest things you will ever see. This is why in terms of trading, there are a few absolutes, and then there are the things that make up the personal touch. This is why I never impugn my methodology on anyone. The absolutes, though, are just that.

In which case the percentage returns you talk about are pure smoke and mirrors.

For example, if your trading pot is $100k, you might have $10k with your broker and the other $90k parked in a savings account. You then make $5k profit trading a position on margin, and hey presto, you made 50% (5k/10k).

Sorry, but it's actually only 5% (5k/100k).

Now, if you were REALLY risking 10-20% of your full trading pot per trade, e.g. $20k on a single trade, then you need your head examined.

I'm still interested to hear more about your trading strategy, but please don't misrepresent your percentage profits and risk in this way.

 

[Jason101]

Many eminent traders start their opening sentence on money management with. -"Firstly divide your trading capital in two. Then place half in your brokers account and half in a cash account.”

This is normal lets move on.

 

[meanreversion]

Er, did he really say that he had ice in his veins? Is that like the character from Top Gun?

Oh my, oh my.

Ok I shan't interrupt anymore, let the games, sorry I mean trading, begin.

 

[4xpipcounter]

Anley, you move to the top of my list. Tucker is m'boy. He's right here on my lap, guarding the domain.

I knew my margining practices would be debated. We might as well get it out of the way before we move on to further nuggets. This topic would have not have been as hotly debated had I been able to adhere to the original order of things. But, that's okay. We'll take things as they come. When all the dust has settled, I'm sure we will all know this whole thing was worth it. As I mentioned in another post. I am having a wonderful time.

Interesting thread so please keep it up 4X and of course realise that people are going to be hotly debating your risk managment as it's obvioulsy a hot topic in trading. But what works for you might not work for others and vice-versa.

Trading of course is a results driven game but how much was risked to get the result also has to be taken into account.

I like Tucker as well, please give him a rub on his tummy from me but is it a dog or a pet rat?