Focus or Money Management?

tar

Legendary member
10,443 1,313
Surely costs have a huge impact on overall profitability , if we dont pay any costs most traders will BE as long as they trade small - to handle consecutive losses - .
 
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counter_violent

Legendary member
11,328 3,034
+1

You will always read that the daily charts looks exactly like the short time frame ones , thats true but the costs are enormous on the short time frame charts , the spread is the same but the ATR is totally different , so instead of trading 10 pips moves and pay 2 pips in costs , one could pay the same spread and trade 100 pips moves . 20% vs 2% !

Yes wouldn't that be lovely. The problem though currently with trading anything forex....those 100 pippers just aren't there. Volatility and volumes are way down, and I see no reason why they will increase, until such times as interest rates come back into the mix in a meaningful way ! I'm not talking about drip drip 0.25%'s either, but more when interest rates are around historical norms of say 5%. Which presents the next problem....It could be 5-20 yrs before that happens :LOL:

So for me, it's just not acceptable for someone to say, I'm a forex trader and that's what I trade..... endex, when there are instruments which are clearly more volatile, ie- where the trading action is currently.

That's not to say we cannot use the currencies to inform on other asset classes which we might trade...but that's a different matter altogether.
 
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Sigma-D

Established member
648 62
So for me, it's just not acceptable for someone to say, I'm a forex trader and that's what I trade..... endex, when there are instruments which are clearly more volatile, ie- where the trading action is currently.
A point made to me be someone else as well this week which has helped me identify the basis under which I came into trading and why it has been, and is, for me, a cul-de-sac.
 

tar

Legendary member
10,443 1,313
So for me, it's just not acceptable for someone to say, I'm a forex trader and that's what I trade..... endex, when there are instruments which are clearly more volatile, ie- where the trading action is currently.

That's not to say we cannot use the currencies to inform on other asset classes which we might trade...but that's a different matter altogether.

Many prop traders don't even trade FX or indices , just spreads and flys ... etc .
 
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12WBT

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Many prop traders don't even trade FX or indices , just spreads and flys ... etc .

Tell more lost me
 

tar

Legendary member
10,443 1,313
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tar

Legendary member
10,443 1,313
Yes wouldn't that be lovely. The problem though currently with trading anything forex....those 100 pippers just aren't there. Volatility and volumes are way down, and I see no reason why they will increase, until such times as interest rates come back into the mix in a meaningful way ! I'm not talking about drip drip 0.25%'s either, but more when interest rates are around historical norms of say 5%. Which presents the next problem....It could be 5-20 yrs before that happens :LOL:

An idea is one may switch to GBP/NZD - 4 pips spread - instead of cable , moves like the old cable and it looks like it @ 1.97 :) , but should be aware of NZ economic figures overnight .
 

Sigma-D

Established member
648 62
An idea is one may switch to GBP/NZD - 4 pips spread - instead of cable , moves like the old cable and it looks like it @ 1.97 :) , but should be aware of NZ economic figures overnight .
Checkout OANDA right now (closed market) and the spread is a comfy 32 pips. But even during normal trading it's 6-7 pips.

Having said that, whenever I've had a conviction on gbpnzd it's generally served me well even with the largest spread of all the majors. In fact, I let the cost of doing business with it put me off which is crazy given that it has looked after me better than most.
 

Sigma-D

Established member
648 62
+1

You will always read that the daily charts looks exactly like the short time frame ones , thats true but the costs are enormous on the short time frame charts , the spread is the same but the ATR is totally different , so instead of trading 10 pips moves and pay 2 pips in costs , one could pay the same spread and trade 100 pips moves . 20% vs 2% !

Yeah, I was convinced this was the way to go at one point. The charts do look similar on all (most) timeframes and the spread compared with the daily range as compared with the spread compared with the range on a 5 min chart - true there are economies of scale (economies of timeframe?), but...

The spread isn't the determinant for profitability.

On a 15 min chart I may be looking at 15-30 pip stops. On the daily I'd need 50-100 pip stops. Sure you can configure your position size to accommodate any size stop, but that misses the point.

It's not whether you have a 2 pip spread and are looking for 100 pip moves or 10 pip moves - it's the size of your stop with respect to your average pips win. If I make 5 intraday trades with a 15 pip stop and a 15 pip win, I'm streets ahead of the guy who makes one intraday move with a 100 pip stop and a 100 pip win.

Providing I have more winners than losers.

It's not the spread or the size of the stop or the timeframe - it's the win:loss ratio.
 
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Splitlink

Legendary member
10,850 1,234
Yes, with daily charts, that is the problem. How many losing trades can one afford before he has a winner?

On the other hand, short time frame charts can be exceedingly painful, because the market is able to trigger the stops set. In fact, they set the stops, themselves, in many cases, and remove them as they wish. It is, all, very manipulative.

As I have read, many times, "Where the stops are is the point that one should be entering--not exiting" Very easy to say, but not so easy to achieve correctly.
 

tar

Legendary member
10,443 1,313
Providing I have more winners than losers.

It's not the spread or the size of the stop or the timeframe - it's the win:loss ratio.

The cost % will affect the win rate and the win:loss ratio , the lost edge will hurt your odds , the more you give away the more you lose , so if you consistently give away 20% of a move surely this will hurt your odds and your win:loss ratio , its like swing trading aiming for 500 pips while paying 100 pips as a spread !

Lets say you aim for 15 pips and pay 2 pips : When the market moves in your favor you are up 13 and when it moves against you 15 pips you are down 17 , so instead of 15 vs 15 , the spread made it 13 vs 17 .

Another problem with short time-frames , is you tend to trade much more , check CV's example .
 
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Sigma-D

Established member
648 62
As I have read, many times, "Where the stops are is the point that one should be entering--not exiting" Very easy to say, but not so easy to achieve correctly.
An extremely insightful point.

When you examine the charts at the end of the day, the most 'obvious' points to have got in are where the instrument has finished its minor reversal and resumes it's move with the predominant trend. These are also the tops and bottoms that we are advised NOT to chase.

When you examine the position from which these moves are born, they are the most contra setup possible with regard to the underlying trend. All you are getting is exit signals, not entries. I've tried trading these on this basis using this rationale and yes, when you crack a good one the ride is rather satisfying. The problem is, you bag far fewer home runs than whipsaws. The move that looks so perfect as the start of that 'massive' (for current markets) move of 60 pips is also identical to the setup the previous dozen times when nothing developed and you would have had to sit through hours of close to stop action, or worse, multiple failed entries.

Perhaps there are some that can discern the subtle nuances and differentiate the action between the myriad false starts and those rare rapid moves into profit from the dark abyss of informationless data from which all moves are born. I'm not one of them. I haven't met anyone who can. I don't know of anyone who can.
 
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robster970

Veteren member
4,566 1,390
An extremely insightful point.

When you examine the charts at the end of the day, the most 'obvious' points to have got in are where the instrument has finished its minor reversal and resumes it's move with the predominant trend. These are also the tops and bottoms that we are advised NOT to chase.

When you examine the position from which these moves are born, they are the most contra setup possible with regard to the underlying trend. All you are getting is exit signals, not entries. I've tried trading these on this basis using this rationale and yes, when you crack a good one the ride is rather satisfying. The problem is, you bag far fewer home runs than whipsaws. The move that looks so perfect as the start of that 'massive' (for current markets) move of 60 pips is also identical to the setup the previous dozen times when nothing developed and you would have had to sit through hours of close to stop action, or worse, multiple failed entries.

Perhaps there are some that can discern the subtle nuances and differentiate the action between the myriad false starts and those rare rapid moves into profit from the dark abyss of informationless data from which all moves are born. I'm not one of them. I haven't met anyone who can. I don't know of anyone who can.

Stops are cheap liquidity. If there are a lot of them bundled in one area it represents an opportunity to buy/sell into the market at a discount.

Also Sigma, the data is not informationless, you just have to know what to look for. Sometimes it pays off and sometimes you do get a false start but even on the false starts, the auction rotations are generally large enough for you to pull something small out of the market as the move loses momentum. It is those with static trading strategies that lose in this situation and this is why I think many find it difficult.

Finally to answer the OP's question: Focus on those timeframes. The assumption is that you are not a tard and can manage your money. If you can't you should not be trading. Period.
 
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Splitlink

Legendary member
10,850 1,234
Stops are cheap liquidity. If there are a lot of them bundled in one area it represents an opportunity to buy/sell into the market at a discount.

Also Sigma, the data is not informationless, you just have to know what to look for. Sometimes it pays off and sometimes you do get a false start but even on the false starts, the auction rotations are generally large enough for you to pull something small out of the market as the move loses momentum. It is those with static trading strategies that lose in this situation and this is why I think many find it difficult.

Finally to answer the OP's question: Focus on those timeframes. The assumption is that you are not a tard and can manage your money. If you can't you should not be trading. Period.

Well, I do keep my losses under control, but these stop areas are zones and can be dozens of stop points wide. My feeling is that

a) the trade should be taken in the direction of the movement remembering that it is a momentum movement, likely to reverse at any second.

and b) the time for entry should be at the earliest point possible that you think that the stop zone should be starting at, so as to get that momentum. Let it go go past, too much, and you have missed the boat.

Even knowing that, I find it very difficult to do in reality.
 
 
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