This thread is missing the point. The term "risk" in trading means the amount of capital that you are willing to lose in a trade (someone can correct this definition if there is a more clear way of stating it). If the OP used appropriate position sizes and appropriate stops, he would not be complaining here. Every financial instrument has spikes up and down. Look at CL. It's typical. You have to be trading with an edge that allows you to make money in the market, and statistically you are going to lose sometimes. The goal is to minimize your RISK (capital you can lose in the trade) by managing your trades properly.
OP is basically saying "I would have lost $625 in this trade if I was in it". Well, should he have been in this trade in the first place? Assuming that his trading strategy would have told him to enter long at the close of the bar right before the spike down... he still should have been using a position size and stop loss that would MINIMIZE RISK. You should only have been in the trade in the first place if you thought that the probability of winning multiplied by the potential reward was greater than the probability of failure multiplied by the size of your risk (Reward*Probability of winning > Risk*Probability of losing). Trading is a game requiring you to have a statistical edge, and you need to see it as a game of probabilities.
This thread is going off in a strange direction. No need to discuss economic news and whatnot.
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example; you go to work and you know what you’re doing, chances are you are going to do your job properly, if however you have no prior knowledge or experience to do your job, it’s very likely that you'll going to make mistakes.
Fundamentals are the driving force, understanding the fundamentals are valid approach to limiting trading risk.
You are using the term "risk" completely differently. What you mean to say is "difficult". We have to define these words properly for the sake of accurate discussion. Your prior knowledge of what to do and what not to do does NOT have anything to do with a particular instrument's market characteristics. OP was asking basically if it is more difficult to trade forex intraday than other instruments. Fundamentals do not play a role in this question.
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You are confusing "having a statistical edge" with "having certainty". Unfortunately, there is no such thing as "certainty" in the market. There is only "probability". Even if you accurately read the market direction, you can still be stopped out based on your poor entry point or your inability to position your stops properly. But keep this in mind - your read of the market direction was simply an inference based on a number of factors, none of which (even together) gave you absolute certainty.
Your take on probability is severely lacking - when you say 90% chance of taking 10 ticks, what are you defining as the other 10%? "Not taking 10 ticks" can be any one of a huge number of things, like "10% chance of losing 20 ticks", "10% chance of losing 200 ticks", or even "10% of chance of losing 10000 ticks and going bankrupt". You can only define this with an actual strategy that has been tested. Same thing with the other probability you mentioned - 10% chance of taking 100 ticks. What is the other 90%? Losing 1 tick? Losing 10? As you can see, throwing around arbitrary statistical values is simply a waste of time, and does nothing for you. It's a mental exercise that leads nowhere.
Last edited by mangolassi; July 27th, 2015 at 11:31 PM.
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There is nothing abnormal about those sorts of price movements. Use stop-losses religiously; not just mentally. I set them before I even place a trade. I think you will find that the larger the time frame, the more reliable and less sporadic the price movement. I'm going to assume that you're making trades based on one visible screen worth of chart data. In that case, it's near impossible to determine where you are in the bigger scheme of things, and movements like that are sometimes quite predictable on a larger time frame where it would be a clear break of structure (support/resistance) for example.
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