Hi everyone,
I'm not a frequent poster in the forum since I'm still in the quest to solve my own trading puzzle.
I'm trying to develop a system based on the assumption that TA (s&r, trend lines and price action) work to a certain extent and give us a better than 50% chance of one outcome over the other. And use frequency and money management to hopefully achieve a smooth ascending equity curve.
So my initial idea goes like this.
1.-Choose 10 pairs as uncorrelated as possible (fairly subjective..i know)
2.-Before market open (europe session for me) try to pick a decent trade on every one (it could be based on anything that makes you believe that there is a better than 50% chance of price reaching your TP before your SL). It doesn't have to be an A++ trade, but there most be some reasoning behind it to justify it.
3.-Set your SL at the level needed for the trade and calculate your position size to be 0.3% on every trade (3% max exposure)
4.-Set your TP at 1.2 R:R
5.-No moving to BE, trailing stop, or partial profits. Either take a win or a loss.
Based on this rules, if you place 10 trades in the morning, some may trigger and some may not. Let's assume that on average 4-5 trades are triggered every day.
After 1000 trades (200 days or 6 months aprox) if you achieve a 50% hit rate, you would have 100R (500 winnersx1.2= 600R - 500 loosers x 1R = 500) that translate to 30% in this case (0.3R x 100 Trades) (not considering compounding)
If you achieve a 60% hit rate the number jumps to 96% in 6 months....
You would need a 46% hit rate to Break even using this methodology.
I know that the profitability and success or failure of the system depends 100% on the trader's ability to choose the trades.
What I would like to hear are opinions or comments on flaws on my logic.
Assuming that TA works to a certain degree and that you select OK entry and SL points it seems to me that it could be a way to achieve profitability....
I'm not a frequent poster in the forum since I'm still in the quest to solve my own trading puzzle.
I'm trying to develop a system based on the assumption that TA (s&r, trend lines and price action) work to a certain extent and give us a better than 50% chance of one outcome over the other. And use frequency and money management to hopefully achieve a smooth ascending equity curve.
So my initial idea goes like this.
1.-Choose 10 pairs as uncorrelated as possible (fairly subjective..i know)
2.-Before market open (europe session for me) try to pick a decent trade on every one (it could be based on anything that makes you believe that there is a better than 50% chance of price reaching your TP before your SL). It doesn't have to be an A++ trade, but there most be some reasoning behind it to justify it.
3.-Set your SL at the level needed for the trade and calculate your position size to be 0.3% on every trade (3% max exposure)
4.-Set your TP at 1.2 R:R
5.-No moving to BE, trailing stop, or partial profits. Either take a win or a loss.
Based on this rules, if you place 10 trades in the morning, some may trigger and some may not. Let's assume that on average 4-5 trades are triggered every day.
After 1000 trades (200 days or 6 months aprox) if you achieve a 50% hit rate, you would have 100R (500 winnersx1.2= 600R - 500 loosers x 1R = 500) that translate to 30% in this case (0.3R x 100 Trades) (not considering compounding)
If you achieve a 60% hit rate the number jumps to 96% in 6 months....
You would need a 46% hit rate to Break even using this methodology.
I know that the profitability and success or failure of the system depends 100% on the trader's ability to choose the trades.
What I would like to hear are opinions or comments on flaws on my logic.
Assuming that TA works to a certain degree and that you select OK entry and SL points it seems to me that it could be a way to achieve profitability....