You need to “get real” before you put your hard-earned money at risk. You might want to read this post (¿again), just as a reminder, before you do anything else. This post has been deliberately made sticky, because we want you to be aware of what you are doing. That is not because we are … [Read more…]
In the last part of this series of posts, we said that we needed to find some repeatable, measurable, price activity to create a trading method with which to tackle the market. How do we go about this? To put it succinctly, by looking at a historical chart. So let us examine a chart. We … [Read more…]
Do we really have to use fixed Targets and Stop Losses? Up until now, while discussing how to trade by using Expected Value, we have been looking at making our statistical analysis with a trading method that uses a consistent fixed number of ticks for a Stop Loss and a fixed number of ticks for … [Read more…]
There are really only 2 ways to look at the market. One is: “This is how much I want to make, and this is how much I want to risk, because my guru told me to always use a 3:1 ratio.” So give me 600 ticks/pips, because my stop loss is 200 ticks/pips. The other … [Read more…]
There are as many methods to trade as there are traders. Indeed, probably more methods than traders, as many traders have multiple methods that they use. Ultimately creating or finding a successful trading method boils down to a few very definitive steps. No matter what, even though many are unaware of it, the first stage … [Read more…]
An interesting question. What lies behind it? A belief held by many traders that they must have a win rate where they win 70% or more of their trades and also be able to place their targets using some magic ratio (usually 3:1), the distance from their stop. Of course, the stop must also be … [Read more…]
I can hear you asking:”What in the blue hell is an EVRatio?” To put it simply, the EVRatio (as we shall choose to refer to the Expected Value Ratio) is the true Reward/Risk ratio of a trading method, after the probabilities of the exits (both target and stop) being hit have been taken into account,. … [Read more…]
Paradoxically, most traders,especially the ones with the “Get Rick Quick” mentality are all gung-ho about how much money they want to make, and have no considerations on how much they might lose. The stars in their eyes show all the potential profits, and never consider the potential losses if they are wrong in their trade. … [Read more…]
There are some who think that trading is easy. We almost all did at some time. Then we learned better, did we not? Trading is not easy, but actually it is simple: we must sell at a price higher than we buy. That is pretty much it. But we know that there are many times … [Read more…]
In Part 2a, we showed how despite using the much vaunted 3:1 reward/risk ratio of 3:1, a trader could still end up with a losing trading system. We asserted that the profitability of a trading system depends not only on the relative sizes of the distance to target and stop, but also on the probability … [Read more…]
Stage 1: Usually this happens in the very first trade; sometimes in quite a nice winning streak of the first few trades. The trade(s) are very successful, and the novice trader thinks he is a genius. He starts figuring how long it will take to buy the new car, the boat, build the new house … [Read more…]
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Futures and Options trading has large potential rewards, but also large
potential risk. You must be aware of the risks and be willing to accept them in
order to invest in the futures and options markets. Don't trade with money you
can't afford to lose. This, and all other information on our website, is neither
a solicitation nor an offer to Buy/Sell futures or options. No representation is
being made that any account will or is likely to achieve profits or losses
similar to those discussed on this web site. The past performance of any trading
system or methodology is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.