How do you calculate risk with an automated system?

[horace]

I use a maximum loss for the day. That is, the sum of all costs of a loss of all trading systems in a portfolio. Based on a mean of a losing trade, commisions and splipage expected. That gives me a worst case number and I target that that number is no more than 2% of account equity.

Any different approach?

 

[4xpipcounter]

My approach is off-the-wall by comparison to most, but it is very effective for me.
I enter a trade when I know the trend within a given timeframe is stretched, then I enter the trade with 10% margining, which is 1 lot per 10K in the account. I kick back, and wait for the trade to make a favorable move, and then get out.
I usually have about 8 pairs a week that is on my particualr watchlist, because they are the ones to most likely make the favorable move I am looking for.
As an example, I just closed 3 GBP/CHF positions that were entered at 1.5711, 1.5574, 1.5428, and closed them at 1.5666. It doesn't look sexy, but it did get me a net of +284 pips. I view it as the bottom line being what is the reuslt once you press "close".

 

[horace]

Excuse me 4x but I don't understand. Where do I find the "risk" side on your exposure?

My approach is off-the-wall by comparison to most, but it is very effective for me.
I enter a trade when I know the trend within a given timeframe is stretched, then I enter the trade with 10% margining, which is 1 lot per 10K in the account. I kick back, and wait for the trade to make a favorable move, and then get out.
I usually have about 8 pairs a week that is on my particualr watchlist, because they are the ones to most likely make the favorable move I am looking for.
As an example, I just closed 3 GBP/CHF positions that were entered at 1.5711, 1.5574, 1.5428, and closed them at 1.5666. It doesn't look sexy, but it did get me a net of +284 pips. I view it as the bottom line being what is the reuslt once you press "close".

 

[wackypete2]

I use a maximum loss for the day. That is, the sum of all costs of a loss of all trading systems in a portfolio. Based on a mean of a losing trade, commisions and splipage expected. That gives me a worst case number and I target that that number is no more than 2% of account equity.

Any different approach?

If you are using several trading systems, automated or manual, then this appears to be a fair solution to minimise your losses. You could also have your ea's stop individally at a certain loss. Presumably some ea's will be stopped and others will be making gains. In this case you would almost never be completely shutdown. Of course your ea's can't all work off the same direction of the same trend in the same timeframe!.

Peter

 

[4xpipcounter]

Horace, I'm not clear on what you mean by you wanting to find the "risk side of my exposure". I enter a trade that has minimal risk because of my calculations on the extremity of the trend, which indicates the proximity of the reversal. If the extremity has not been hit, then there is a creteria that gets met on the corrction, so in that case, find that point when the correction is completed, then get in the direction of the trend.
If you reference has to do with some of the stereotypical risk: reward ratios, then I do not trade that way. I am not concerned with risk: reward ratios. I am concerned with how many pips I have once I press "close".
If the reference was made to getting out at the end of a certain amount of losses, then that is not something I am used to. I've had one losing week in the last 3 years. 80% of my trades end up in the + column.
If I answered your question, then okay. If not then maybe you can further clarify your question.
BTW, my methodology wins no popularity contests. It also does not fit the stereotypes of my forex philosophers or books they may right, which is why I don't spend a lot of time reading their books. The only thing my methodology does is win consistently for me.

Excuse me 4x but I don't understand. Where do I find the "risk" side on your exposure?

 

[4xpipcounter]

This is just my opinion, only, so it might stimulate some sort of dialogue, and it might be ignored completely.
I don't like stopping when and if I am down a certain percentage (In due respect to the original post). Just because I am down, it does not mean I have a problem. It just means a mild slump. The very next trade could be the trade that pulls me out of that slump. I once read a story about one guy that stopped digging 10 feet from gold. I threw his shovel down and left. His partner kept digging and found the gold. Just an analogy, but it has applied in my case.
It could be that experience has taught me to trade within my personal parameters, and has let me know the markets are bigger than me, even though I am still the boss. It could also be I have an unadulterated confidence in my methodology, which could be another reason I do not stop trading after certain amount of losses within a given time period. I also prefer to look at it that I am not trading on the defense, but on the offense.

If you are using several trading systems, automated or manual, then this appears to be a fair solution to minimise your losses. You could also have your ea's stop individally at a certain loss. Presumably some ea's will be stopped and others will be making gains. In this case you would almost never be completely shutdown. Of course your ea's can't all work off the same direction of the same trend in the same timeframe!.

Peter

 

[horace]

Hi 4x.

I know understand your point. You trade without a stop loss. This, for me, is unacceptable because you only rely on a good entry method and good money management to escape your ruin. Y do not have any winning strading strategy that ir right more tan 40-50% of the time on a regular basis. So I can't aford not using a stop loss.

Thx for your help.

This is just my opinion, only, so it might stimulate some sort of dialogue, and it might be ignored completely.
I don't like stopping when and if I am down a certain percentage (In due respect to the original post). Just because I am down, it does not mean I have a problem. It just means a mild slump. The very next trade could be the trade that pulls me out of that slump. I once read a story about one guy that stopped digging 10 feet from gold. I threw his shovel down and left. His partner kept digging and found the gold. Just an analogy, but it has applied in my case.
It could be that experience has taught me to trade within my personal parameters, and has let me know the markets are bigger than me, even though I am still the boss. It could also be I have an unadulterated confidence in my methodology, which could be another reason I do not stop trading after certain amount of losses within a given time period. I also prefer to look at it that I am not trading on the defense, but on the offense.

 

[horace]

Hi Pete,

And what aboput the 2%? Is this reasonable for a portfolio wher trading systems do a 40-50% average being right?

H

If you are using several trading systems, automated or manual, then this appears to be a fair solution to minimise your losses. You could also have your ea's stop individally at a certain loss. Presumably some ea's will be stopped and others will be making gains. In this case you would almost never be completely shutdown. Of course your ea's can't all work off the same direction of the same trend in the same timeframe!.

Peter

 

[4xpipcounter]

Horace, maybe you can clarify what you mean when you say, " Y do not have any winning strading strategy that ir right more tan 40-50% of the time on a regular basis."
I am right 80% of the time, that is if a closed trade in the + column is being right.
Also, you asked in your original insertion, "Any different approach?" That would imply you were looking for a difference of opinions, and not an implementation for your methodology.
In sharing an opinion, I don't ask for someone to agree with me, but just share the opinion, so when you say, "Thx for your help.", it leaves me scratching my head.

Hi 4x.

I know understand your point. You trade without a stop loss. This, for me, is unacceptable because you only rely on a good entry method and good money management to escape your ruin. Y do not have any winning strading strategy that ir right more tan 40-50% of the time on a regular basis. So I can't aford not using a stop loss.

Thx for your help.

 

[horace]

Hi 4x,

You are right. Your approach is different. I'm not critizising it, I just said that I'm not able to trade likw you do cause I wouldn't know how.

Your opinion was helpfull. Really. Maybe it's my english that is not as good as it should.

I concieve trading in a way that risk needs to be limited in each trade. You concieve it diferently, that's all.

Horace

Horace, maybe you can clarify what you mean when you say, " Y do not have any winning strading strategy that ir right more tan 40-50% of the time on a regular basis."
I am right 80% of the time, that is if a closed trade in the + column is being right.
Also, you asked in your original insertion, "Any different approach?" That would imply you were looking for a difference of opinions, and not an implementation for your methodology.
In sharing an opinion, I don't ask for someone to agree with me, but just share the opinion, so when you say, "Thx for your help.", it leaves me scratching my head.

 

[4xpipcounter]

I never took it you were critcizing me. Funny thing is, many people have said how different and even strange my methodology really is. This is why when I work with others, I never impugn my methodology on them. We have to do and trade what is right for us as individuals.
I wish you well.

Hi 4x,

You are right. Your approach is different. I'm not critizising it, I just said that I'm not able to trade likw you do cause I wouldn't know how.

Your opinion was helpfull. Really. Maybe it's my english that is not as good as it should.

I concieve trading in a way that risk needs to be limited in each trade. You concieve it diferently, that's all.

Horace