Practice Exercise #2 (Money Management Test on DEMO)


If you started this Practice Exercise #1 you probably notice that this isn't working on ranging market (we had some examples of 5% losses on the last couple of days, due to Cyprus situation).

Testing this, with a SL=30p, we notice that in a range market of let's say 50p, our profit target of 90p is almost impossible to reach even if our position run in profit, for a while. And the SL will be hit, eventually, unless the PA will break any side, to have that 50% to catch the new trend (based on flipping the coin math probabilities).

The first idea that we can think of, to improve the initial exercise, is to use the Position Management (to "lock the profits"). 

Therefore after the step no8 ("
8. After having 20 opened positions, stop trading"), we can use the next formula to move the SL for the profitable positions:

New SL = Entry
± Spread ± few pips (i.e. 5p)

Or we can use a Trailing Stop = Initial SL
± Spread ± few pips (In case you can monitor the platform)

(Ofcourse you need to calculate this for every pair, since the Spread can vary from 2p up to +25p or more, for some pairs.)

Then, we will have the next steps for this new exercise:

1. Open a DEMO account = $10,000 (or continue to use the old one)
2. Take a coin (yes a coin).
3. Establish which coin sides will give you the signals. E.q head = long, tail=short
4. Open 20 pairs on your platform
(only pairs for not ruining the margins requirement. e.q no gold/silver/oil/indices, etc)
5. Flip the coin for first pair.
6. Enter (market order) using 0.01 lots (0.1 for $100,000 account), SL = 30p, TP =90p
7. Go to the next pair and do the same entry technique, then the next...until 20 pairs
8. After having 20 opened positions, stop trading.
9. If any position run in profit, move the SL = Entry ± Spread ± few pips or use Trailing Stop (NEW)
10. Let all the positions to run, until the new SL/TP hit.
11. If any position is closed (TP/SL hit), on the next day, open a new trade by flipping the coin, again (and move, the SL, for the profitable positions - NEW).

* Important note: Practice TEST on DEMO purpose, only!
I expect the results to vary, because not everyone can monitor their trading platform, during the day trading sessions (i.e. NY, London). Also, for the Trailing Stop command, the trading station must be on (computer).

I will update here, the average results posted by all of you in my Main Facebook Group, on the end of the next week. We will look for developing new ideas (new exercises) to improve the original statistic, too.


Best Regards,
^^_Lord_Ice_^^ 


Practice Exercise #1 (Money Management Test on DEMO)


One month ago, we started this Money Management Exercise, on my Main Facebook Group.
The main ideas was the importance of the MM in trading, the risk and how this can be managed properly (read more here).

In case you want to do this exercise, follow the next steps:

1. Open a DEMO account = $10,000
2. Take a coin (yes a coin).
3. Establish which coin sides will give you the signals. E.q head = long, tail=short
4. Open 20 pairs on your platform
(only pairs for not ruining the margins requirement. e.q no gold/silver/oil/indices, etc)
5. Flip the coin for first pair.
6. Enter (market order) using 0.01 lots (0.1 for $100,000 account), SL = 30p, TP =90p
7. Go to the next pair and do the same entry technique, then the next...until 20 pairs
8. After having 20 opened positions, stop trading.
9. Let all the positions to run, untill SL/TP hit.
10. If any position is closed (TP/SL hit), on the next day, open a new trade by flipping the coin, again.
* Important note: Practice TEST on DEMO purpose, only!
I know it might sound crazy, but what I need you to see, is what really means to trade with a good MM strategy (+ medium R:R ratio 1:3) and no strategy at all (50-50% to be right, short/long, by flipping a coin).

Also, this way of doing "automated" trades, might help you, if you are the emotional type person (bad for trading). You will understand what really means trading by the rules.

Average results:

Initial account balance = $10,000

Total trades = 50-200 trades / week
Positive/Negative = 1/3-5 trades in profit, only
Total positive pips = 150-250p / week
Total positive profit = 1.5%-2.5% / week

Negative account balance = NONE / week


* Total no of trades (and profits) are related to the time invested in testing this strategy. Some traders couldn't monitor their trading platform whole days, due to their daily schedule, jobs, etc. So their closed positions were spot in the next day, only (to open a new trade / that pair). This decrease their total no of trades, pips and profits.


Conclusions:

As I expected, nobody had a negative account balance / week, by now. Ofcourse mathematicaly, this is possible, but rare (using math probabilities). But the Draw Down wont be higher than 5% ( Signals Providers, offer a DD of max 15%, usually)

And as you can see, by using a good MM and a very bad strategy, or none - flipping a coin is just luck - you can still trade profitable, as a beginner.

The profits, can't be considered "spectacular", thinking that we are using for this exercise a $10,000 account. But if we will remember that by trading Forex, 95% of the traders wipe out their accounts in less than 3 months... (some statistic data present this no even higher, close to 99%).
Also, by using an "automatic" strategy, reduce the time involved to your trading activity. Not to mention, the stress.

We will continue this exercise, to gather more statistic data. Meanwhile, I will recommend you, new exercises, by replacing this "strategy" (flipping the coin) with some real trading strategies. And we will upgrade, later on, the MM, as well.


Best Regards,
^^_Lord_Ice_^^
   
+9 pips
- news trade, spread up to 15 pips
- half size


+18 pips
- all half size trades
- initial news spike in gbp/usd wasn't convincing so I exit it quickly





+4
+11
-I'm not really proud of my averaging in eurjpy, risking much for no good reason. If I don't know where to put stop or don't want to accept that it's time for stop it's better not to trade that trade
- I'm far better in those nice scalping situation when stop or gain is quick and definite




Petition to save Google Reader

If you use this product as much as I do I'm sure you will want to sign it. This petition right now has more then 100,000 signatures. It doesn't mean that it will make Google reverse it's decision of shutting down reader but if I ever wanted to express my opinion and vote it's now for this.

Change.org
+5 pips
- various sizes
- news trade with limit orders didn't work (no spike) so I canceled them




+3 pips


+9 pips
- this news trading turns out to be quite nice sport
- third of usual size because on previous reports there were whipsaws, in previous few occasions move wasn't so big and lasted really only as initial spike that's why I closed it immediately
- good news after bad news in which Google announced shut down of Google reader


+6 pips
- not so good not knowing where my actual stop is, wan't prepared for this type of market action, I expected something easier
- half size trades


+15 pips

- I don't know why I didn't use before those bracket limit orders before the news if execution on Oanda is so good
- half size trades
- again problem with second add on trade, I just lowered my overall profit, move concentration away from first trade and made an exit at worst possible time
- third trade ok
- last two trades maybe holding on one of them longer


March

1.
+26 pips
- this is market suitable for scalping




4.
+11 pips
- I'm irritated with turning profitable trades in to stop losses




5.
-32 pips
- first loss, then recovery, then some stupid trades, after I recovered half and it wasn't good enough so in the end I made bigger loss



6.
-10 pips




7.
+15 pips
- it's important to learn to have a positive day and keep it


8.
+16 pips
- NFP scalping
- slow exit on second trade
- third and fourth with not enough courage to hold because of need to cover previous losses