jeudi 1 janvier 2015
Risking a n% of profit from previous winning trade on next
Posted on 06:37 by nice news
Hi guys, I need some advice, help and correction.
I love thinking about all things related to risk, position sizing, R:R etc but unfortunately I do not have a good grasp of maths so I am often frustrated not having the brain cell power to compute my musings into figures, hence I need some help.
Just for a glimpse of my normal MM at present. I risk 0.25% on my entries, if the trade goes against me I take my loss but if the trade goes for me I'm looking to add to my winners with further 0.25% add-ons. So I want to be as light as possible on my losers and as heavy as possible whilst controlling my overall risk on my winners. Added to this I look for R:R trades in the bigger range for example risking 1 vs 5 reward or better. I seem to have little problems taking my loses and am progressing with my weaker side that is, allowing profits to run. Basically a trend following mentality. I am just slightly better than BE but still a work in progress with a long way to go (very slowly:-).
So overall I am very careful with my risk at the start of the trade but want to press the trade when its going in my favour yet still watching my risk.
Now to my question. I have a smaller account that I want to try out the following that I heard apparently Ed Seydoka said somewhere. When you have a winning trade you risk a % of that win on your next trade and if its a losers you then drop back to your original % trade size. This will be a small but very aggressive account going for big gains, but trying to control the downside. I'll try to make my "clear as mud explanation better"....:-)
Starting bal $10,000 risking 1% per trade ($100) with a 20 pip stop loss and 60 pip Target profit. Then risking 50% of winning trades profit on next trade.
Trade win/loss bal
1 L 9,900 (lose 100)
2 L 9801 (lose 99)
3 L 9702 (lose 98)
4 W 9993 (I don't change anything yet as overall I am negative balance)
5 W 10292 (profit from balance 10,292 - 10,000 = 292 x 50% = 146 risk on next trade.)
6 W 10,730 (risking 146 but gaining 438 on the 1:3 R:R winner. I now take 50% of profit 438 x 50% = 219 risk on this trade)
7 L 10,511 (I lose 219)
OK guys I hope you get the idea, maybe some of my maths is out in the above example but I hope you grasp the general idea.
1. You risk 50% of your previous winning trade on your next trade
2. If you lose you go back to 1% until you have a wining trade when you rising 50% of your profit again.
3. Rinse, repeat.
I'm sure there are hidden flaws and traps I'm not seeing so please feel free to point out the flaws and better still refine and amend to improve. But to make clear what I am trying here..........this is for a small $500 account where I am trying find away where my risk is controlled (so I don't risk for example 10% on every trade and a run of losers wipe me out) but still be very aggressive using 50% of my profits. I would not use this seemingly aggressive MM on my normal account unless it could be proved statically that it is sound.
It would be great if some kind person could make a spreadsheet (another of my weaknesses....!) where we could add hypothetical or actual win/loss ratios, n% risk on normal trades (I used 1% for my example) etc so we could run simulations over a large trade sample, maybe in the 100's to test out the probabilities of such an idea.
I have looked on google for this idea but although I'm sure its there, its not popular (mmmmh maybe that's because its deeply flawed....arggggh) It just seems a reasonable method since you are risking a % of you profits and even if you lose that trade you still have a % of that profit still safe in your account and you go back to your normal % risk amount.
I look forward to hearing your input, tear it apart as much as you like as I am just thinking through these options and ideas.......thanks
I love thinking about all things related to risk, position sizing, R:R etc but unfortunately I do not have a good grasp of maths so I am often frustrated not having the brain cell power to compute my musings into figures, hence I need some help.
Just for a glimpse of my normal MM at present. I risk 0.25% on my entries, if the trade goes against me I take my loss but if the trade goes for me I'm looking to add to my winners with further 0.25% add-ons. So I want to be as light as possible on my losers and as heavy as possible whilst controlling my overall risk on my winners. Added to this I look for R:R trades in the bigger range for example risking 1 vs 5 reward or better. I seem to have little problems taking my loses and am progressing with my weaker side that is, allowing profits to run. Basically a trend following mentality. I am just slightly better than BE but still a work in progress with a long way to go (very slowly:-).
So overall I am very careful with my risk at the start of the trade but want to press the trade when its going in my favour yet still watching my risk.
Now to my question. I have a smaller account that I want to try out the following that I heard apparently Ed Seydoka said somewhere. When you have a winning trade you risk a % of that win on your next trade and if its a losers you then drop back to your original % trade size. This will be a small but very aggressive account going for big gains, but trying to control the downside. I'll try to make my "clear as mud explanation better"....:-)
Starting bal $10,000 risking 1% per trade ($100) with a 20 pip stop loss and 60 pip Target profit. Then risking 50% of winning trades profit on next trade.
Trade win/loss bal
1 L 9,900 (lose 100)
2 L 9801 (lose 99)
3 L 9702 (lose 98)
4 W 9993 (I don't change anything yet as overall I am negative balance)
5 W 10292 (profit from balance 10,292 - 10,000 = 292 x 50% = 146 risk on next trade.)
6 W 10,730 (risking 146 but gaining 438 on the 1:3 R:R winner. I now take 50% of profit 438 x 50% = 219 risk on this trade)
7 L 10,511 (I lose 219)
OK guys I hope you get the idea, maybe some of my maths is out in the above example but I hope you grasp the general idea.
1. You risk 50% of your previous winning trade on your next trade
2. If you lose you go back to 1% until you have a wining trade when you rising 50% of your profit again.
3. Rinse, repeat.
I'm sure there are hidden flaws and traps I'm not seeing so please feel free to point out the flaws and better still refine and amend to improve. But to make clear what I am trying here..........this is for a small $500 account where I am trying find away where my risk is controlled (so I don't risk for example 10% on every trade and a run of losers wipe me out) but still be very aggressive using 50% of my profits. I would not use this seemingly aggressive MM on my normal account unless it could be proved statically that it is sound.
It would be great if some kind person could make a spreadsheet (another of my weaknesses....!) where we could add hypothetical or actual win/loss ratios, n% risk on normal trades (I used 1% for my example) etc so we could run simulations over a large trade sample, maybe in the 100's to test out the probabilities of such an idea.
I have looked on google for this idea but although I'm sure its there, its not popular (mmmmh maybe that's because its deeply flawed....arggggh) It just seems a reasonable method since you are risking a % of you profits and even if you lose that trade you still have a % of that profit still safe in your account and you go back to your normal % risk amount.
I look forward to hearing your input, tear it apart as much as you like as I am just thinking through these options and ideas.......thanks
Risking a n% of profit from previous winning trade on next
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