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Reducing Losses - Help needed!
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Reducing Losses - Help needed!

  #1 (permalink)
Trading Apprentice
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Reducing Losses - Help needed!

Hi

I've been doing this for just over a year, I'm starting to become profitable but I'm looking for some friendly advice on how to really limit those losing trades.

My system means I will get a mix of small wins and losses (mostly losses) and then a big win. Which works great, but I need to really limit the losers as most days the cumulative losses eat too far into the winning trades to make the day a really good one...

Obviously, I use stops. However, if I let my trades get stopped out, then I lose too much, If I tighten my stops then I'm just ensuring I'll get stopped out of what would have been a winning trade.

If I try to use my discretion and exit a losing trade before it gets stopped out then I could just be exiting an otherwise winning trade.

My positions almost always go into profit, but I don't take the profits as I am looking for the big winners.

So what are you supposed to do?

I trade Forex, mainly EUR-USD & GBP-USD. My trades usually last from 5 mins to 5 hours.

Any advice is much appreciated.

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  #2 (permalink)
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  #3 (permalink)
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You should not look for the big winners, this is the trap in my opinion :-)
Any gain is a good gain, you should remind yourself that gains also accumulate the same way your losses are.
If you have a set of solid and statistically valid rules, you should't even need to discretionally exit your trades before they hit the stop to remain profitable.

I personally follow these rules, and the stats work out fine for me:

1) I only risk 1% of my total portfolio on any position.
This is to say that if my account size is $250,000; I will be only ready to lose $2,500 per any trade I take. So I place my stops accordingly, depending on the number of shares, contracts, etc that I trade of course and my entry price.

2) I always use two targets to take profit.
At my first target I sell/cover half of my position and I then let the second half run to second target with a break-even stop on that second half. The break-even stop is obviously my original entry price.

Targets are determined by major support/resistance levels, etc...

Successful people will do what unsuccessful people won't or can't do!
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  #4 (permalink)
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It sounds like you want to tweak your method a little. For that I would suggest you journal all trade metrics. Once you have enough data it is quite easy to find ways to improve the method/setups. There is a journal tool herehttps://futures.io/psychology-money-management/4884-trading-metrics-journals-record-keeping.html#post53916.


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Last edited by vvhg; June 12th, 2012 at 06:16 PM.
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Systems that take to many trades can create draw down problems. You might look for ways to filter out the number of trades if you are running a system that takes alot of trades. Of course you will have to backtest and see how that affects things as that may not be your problem.

You might also look for ways to get a better win ratio. Being to highly dependent on a few big winners can wreak havoc if for some reason you miss those trades etc.... There are those who profit highly off big winners but there is not much room for error.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."

Last edited by liquidcci; June 12th, 2012 at 06:16 PM.
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Fadi View Post
You should not look for the big winners, this is the trap in my opinion :-)

It can also be a trap to not look for them.
Some of the most successful traders trade for few large winners.


Quoting 
Any gain is a good gain, you should remind yourself that gains also accumulate the same way your losses are.

i think that it is highly debatable if any gain is a good gain! If you always exit for a few crumbs you might set yourself up for failure. Gains have to be seen in the light of r/r, probability, drawdowns, expectancy etc.



Vvhg


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  #7 (permalink)
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StayOnTarget View Post
Hi

I've been doing this for just over a year, I'm starting to become profitable but I'm looking for some friendly advice on how to really limit those losing trades.

My system means I will get a mix of small wins and losses (mostly losses) and then a big win. Which works great, but I need to really limit the losers as most days the cumulative losses eat too far into the winning trades to make the day a really good one...

Obviously, I use stops. However, if I let my trades get stopped out, then I lose too much, If I tighten my stops then I'm just ensuring I'll get stopped out of what would have been a winning trade.

If I try to use my discretion and exit a losing trade before it gets stopped out then I could just be exiting an otherwise winning trade.

My positions almost always go into profit, but I don't take the profits as I am looking for the big winners.

So what are you supposed to do?

I trade Forex, mainly EUR-USD & GBP-USD. My trades usually last from 5 mins to 5 hours.

Any advice is much appreciated.

@StayOnTarget

I understand what you are asking ... but to be able to give you a useful reply would require a bit more information about your system.

Can you explain your system?

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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  #8 (permalink)
Trading Apprentice
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Thank you very much for the replies everyone.

All replies considered, I think it's fair to say that the space between eliminating losses and eliminating potentially winning trades is very thin.

I think the solution may be with how I develop the big winning trades. Currently I try to maximise those gains by adding to winning positions when I get the appropriate signal. Maybe I should consider adding more than I do?

But that could result in some seriously tough trades...

Also, thanks for the offer TMFT, but I wouldn't feel comfortable laying out my system on the internet...nothing personal of course...


Last edited by StayOnTarget; June 13th, 2012 at 08:08 AM.
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StayOnTarget View Post
Thank you very much for the replies everyone.

All replies considered, I think it's fair to say that the space between eliminating losses and eliminating potentially winning trades is very thin.

I think the solution may be with how I develop the big winning trades. Currently I try to maximise those gains by adding to winning positions when I get the appropriate signal. Maybe I should consider adding more than I do?

But that could result in some seriously tough trades...

Also, thanks for the offer TMFT, but I wouldn't feel comfortable laying out my system on the internet...nothing personal of course...

@StayOnTarget in my opinion if your system is not working while small I would not consider adding contracts to your winning positions to try and solve the problem. That could expose you to greater risk than you want and just make your losses worse. I would take a hard look at your ratios and stats and try to fix your problems before going that route. I am not saying for some strategies adding to winners is not valid. But I would not try and use that to fix what could be a larger problem. Just my two cents.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #10 (permalink)
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StayOnTarget View Post
Hi

I've been doing this for just over a year, I'm starting to become profitable but I'm looking for some friendly advice on how to really limit those losing trades.

My system means I will get a mix of small wins and losses (mostly losses) and then a big win. Which works great, but I need to really limit the losers as most days the cumulative losses eat too far into the winning trades to make the day a really good one...

Obviously, I use stops. However, if I let my trades get stopped out, then I lose too much, If I tighten my stops then I'm just ensuring I'll get stopped out of what would have been a winning trade.

If I try to use my discretion and exit a losing trade before it gets stopped out then I could just be exiting an otherwise winning trade.

My positions almost always go into profit, but I don't take the profits as I am looking for the big winners.

So what are you supposed to do?

I trade Forex, mainly EUR-USD & GBP-USD. My trades usually last from 5 mins to 5 hours.

Any advice is much appreciated.

Hello, StayOnTarget.
You may not like this but I am going to tell you my opinion. Simply my answer is this. Change your markets. Don't trade
forex. Just pick 1 legitimate market and trade it. What I mean by 'legitimate market' is any market that's not rigged. When you are trading forex you are trading against the bookies(forex dealers). It's a losing game. Have confidence in yourself. You may not be doing anything wrong. It's just that you may be one of the victims of classic 'bucket shop' drive.
Regards.

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