The power of the close…worth waiting for?
Most of my trading signals are triggered at the close of a bar. I have also noticed that the close is an important factor that many successful traders insist upon before entering a trade.
Yet for most of us there is a real temptation to want to jump is as quickly as possible when we see a setup forming. This seems like the natural thing to do. After all we have been waiting all day perhaps for this moment, so we don’t want to miss it and why wait to enter at what will probably be a less good price by the time the bar actually closes. So let’s just jump straight in!
But hold on a minute. If the bar close is the official trigger to enter the trade, that was probably selected for very good reason, wasn’t it? If so than we need to be patient and control our urge to just get in.
What’s the big deal?
Instinctively we know about the importance of the bar close after years of observation. So what is it about the close that is such a big deal?
Well there are several reasons to consider using the bar close as an entry trigger. These include – noise, stops and sometimes volume.
Markets are full of noise these days. Quick sharp spikes that spontaneously reverse as price gets straight back to where is was a few minutes earlier. These can be caused by all sorts of factors – big orders exceeding available liquidity, reactions to news or rumours etc.
Think of stops as food!
Markets also thrive on volume. That is what they are always hunting for. That is what the industry relies upon. Obvious areas where people place stops are therefore targets. If the market can probe such an area stops get triggered and, well, that creates volume doesn’t it? Volume is how the market feeds itself!
So when traders always say that “they” are gunning for our stops, there is a degree of truth in that statement! It is also a reason why in my trading own I try to (a) identify those areas where the market is likely to be stop hunting and (b) not to place my own stops in obvious locations!
Gaining another little edge
Now if trade rules require entry on the close of a bar rather than just at an entry price, to some degree it is possible to avoid getting trapped by such spikes. For example imagine a quick spike that lasts for say one minute. By entering on the close of a five minute bar, rather than at a price level, the risk of entering on a spike rather than a valid trade is reduced. It is not eliminated, but the chance is reduced from 100% to 20% in this example. Its not perfect but if the price of avoiding 4 out of 5 such traps is a little patience, that might be a virtue worth developing?
In the case of daily bars there is an additional factor to consider. If a market is able to hold onto a price level attained during the day, after the heaviest volume of the day has already been transacted, the likelihood that that price level is significant is greatly increased, and this is important information (whether most traders are aware of it or not!).
These are just a few of the reasons why professionals often utilise bar closes when developing trading strategies. It isn’t some earth shattering revelation, but just one of the many tricks a trader can use when seeking an edge in the markets. Ultimately in a business where there is no certainty, no right and no wrong, gaining an edge in any and every way we can is a route to better performance.
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Copyright © Simon Townshend Ltd 2011, all rights reserved
Head & shoulders top…achieves minimum objective
Well it took a long time to form, but when it triggered boy did it run! Hmmm, but maybe there is more than just one force at work here?
George and I have been following the weekly chart of the S&P over the last few weeks, watching that classic head and shoulders pattern form. Yesterday the minimum downside objective was achieved. Pretty cool reaching a target of that magnitude within 2 bars eh?
Now classical chart patterns are not something I would claim to be any great expert in. But George likes the head and shoulders for the simple reason that it is about the most reliable of the “old school” pre-computer age setups.
The spice I would throw into the mix here, is my observation that the down move is a 1-sided market. Those who joined us for the seminar in Santa Monica a few weeks ago or who have worked with my behind the charts technique will know exactly what this means and its implication on the future.
So here is a great example unfolding where an age old technique and a modern day discovery are working hand in hand to create a really powerful combination.
If ever there was a certainty in trading it is this: After the dullest of dull starts to the year, exciting times lie ahead! Just remember that expanding volatility means much larger swings, which means much larger stops and much larger targets. In turn that means much smaller size so as not to increase your dollar risk per trade!
It is true that higher volatility means greater opportunity. But that greater opportunity should come from a greater number of trades and NOT from trading the same unit size with increased dollar risk per trade. Remember money management rules always take precedent over trading rules. So enjoy the great times ahead but keep a level head at all times!
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Copyright © Simon Townshend Ltd 2011, all rights reserved
The hidden power of writing…don’t underestimate it!
After my “Evolve or Die” webinar in March with Linda Raschke and FuturePath Trading, Linda mentioned something really interesting. She said that she often finds a real benefit of running such events is that it forces you (the speaker) to gather your thoughts and reinforces concepts for you personally as well as helping others with the insight provided.
I have long been a believer in writing things down, as I have always found this does exactly the same thing that Linda was alluding to. It forces you to think things through in a very structured and rigorous fashion. It also makes you think through the finer details very carefully of what you are trying to communicate and these can often contain surprising revelations. Finally, the act of writing things down somehow seems to help commit them to memory much more fully than not doing so.
So you could say I am a believer in committing things to paper as there are often much deeper benefits to be had as a result, over and above the obvious purpose of simply capturing information.
My Eureka moment
Well this week something startling happened that I had never anticipated. I was working on my slides for our summer seminar. In one of my sessions I will be revealing all 6 of the trades in my behind the chart strategy. Previously I taught just 2 of these setups.
Anyway there I was marking up some charts with the entry points, initial stops etc. Suddenly something amazing just hit me as I was drawing on those charts. For years I have followed these trades and simply never noticed it before. Yet the simple act of preparing some slides suddenly opened my eyes to something quite incredible.
What did I discover?
Well, have you ever noticed how you always seem have your biggest positions on losing trades and conversely never seem to have enough on the best winners? For many traders this is in fact the case. But even for others who use a fixed unit size – this still feels like it is true!
OK so how would you like to turn that on its head? How about having only half as much on the losing trades as you have on the winners? Wouldn’t that be quite something?
Impossible you say? I hear you. In most cases I would agree with you. However what I discovered quite by accident really does allow you to have twice as many contracts on the good trades as you have on the bad ones!
I shared this with Professor Quinto later that day. He was stunned.
I shared this with some of the traders in my chat room this week and they thought this was really cool. We watched a real trade unfold in real time as I talked them through the strategy. It was spectacular.
Just to be clear what this profit magnifying technique does is to provide 2 units of your chosen trade size on the best winning trades, yet never to lose more than 1 unit on the losing trades!
I am really excited by this as it makes a massive difference to the overall performance of any system. You only need 33% winners like this to breakeven and let’s be honest even the crappiest of strategies can do better than that. We will be teaching setups that often deliver 70% to 80% winners where this can be applied. The only drawback is that I can’t apply this trick to every setup in my toolkit. But you can be sure from now on I will be applying it to every trade where it can be used.
Join in the fun
If you would like to take my newly discovered profit magnifier and apply it to all the setups I will be teaching or to apply it to many of your own trade setups, then do join me at the Century Of Trading seminar on June 25th.
This profit magnifier was never planned for the seminar, so I am really excited to be adding yet another amazing technique to the already bursting agenda. I am really excited to be sharing all of this, period. I do hope you can join us for what will be a spectacular event – the first live appearance I have made in 4½ years!
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Copyright © Simon Townshend Ltd 2011, all rights reserved
Expect the unexpected…as it will definitely arrive!
What are the odds of this?
I recently decided to change banks for a total of four business accounts. All went very smoothly until a week ago when one day four debit cards arrived. The following day four PIN codes arrived. As always the PIN’s were random numbers which I wanted to change to numbers I can remember. For obvious security reasons the PIN codes cannot be cross referenced to the debit cards. Not even the bank had a means of identifying which PIN was for which debit card. Their advice was to just guess and take my chance with fate!
Each card could be tried with a maximum of 3 PINs before being deactivated. So with the first card trying each of the 4 PIN’s at random would have a 75% chance of success before the card would be deactivated. If the first PIN did not work, I could try 2 more and at the end of the process I would know which one was correct for that first card – the only question was would I get lucky and pick the right code within the first 3 attempts?
After the first card there was a 100% certainty that the remaining 3 cards would be married up to the right PIN within 3 attempts.
So here’s what actually happened when I tried this morning…
- I put the first card in the machine and entered a randomly chosen PIN. I had a 1 in 4 chance of selecting the right one – and I did! The first attempt was right. Phew!
- Now I knew I could get through all of the other 3 cards without any being deactivated. So with the second card I had a 1 in 3 chance of picking the correct PIN on the first attempt – and I did! I couldn’t believe it.
- For the third card I now had a 1 in 2 chance of pick the right PIN from the remaining 2 on the first attempt. It happened again!
- The final card had just one remaining PIN and so that was 100% certain I would get that one right on the first attempt.
I was stunned to have been right on each one very much against the odds. Just to be clear the chances of getting all of these right on the first attempt was only 1 chance in 24 (4x3x2x1 = 24). In other words there was a 96% chance this would not happen.
What has this to do with trading you might ask? Well nothing really. Except it serves as a reminder that outliers DO happen however unlikely the statistics say they are. They do happen, therefore we have to plan for them and know how we are going to handle them when they occasionally show up.
The main outliers we have to be alert for in trading are:
- Exceptional losers – where we think we are risking $X for Y% of our capital and something goes wrong and we actually lose 2 or 3 times as much as intended. This might be an order placement error or maybe a series of locked limit moves, etc.
- Exceptional losing runs – if we have a 67% winning rate ideally we would have a nice simple sequence of 2 winners, 1 loser, 2 winners, 1 loser etc. But that doesn’t happen in real life. Long winning runs come around frequently as do losing runs.
Yes it is true that an exceptional winner and an exceptional winning run are the other type of outliers. But we DON’T have to concern ourselves with these. It is the negative outliers that have to condition our behaviour as these events can determine our ability to come back from the outlier or not.
This is why logical and realistic money management is essential to long term success. Get this right and you can guarantee you will be in the business for as long as you wish – however rough a time you have to endure. Get this wrong (as the majority of the rubbish published on the internet would lead you to) then you are guaranteed to blow out – its just a question of when!
It is also true that over the years I have been criticised in the past for being too conservative. Maybe, but I’m still here and have ridden out many a storm during my trading career. Whereas my critics are ancient history. Yes they had their great times outperforming me many times over. But when the outlier materialised – boom they blew up and were bust.
This is why the second of my two topics at Century Of Trading will be on this critical subject of money management. Most people spend their whole time developing entries and exits for their trading, even trying to take the subjectivity out of their trading by developing mechanical systems – which sadly always fail. Intriguingly money management can deliver much more long term profit than any system yet it CAN be implemented mechanically!
So do some research, read some books, better still join me in Los Angeles on June 25th. But whatever you do – please put money management at the heart of your trading plan and guarantee yourself a long term career in this business.
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Copyright © Simon Townshend Ltd 2011, all rights reserved
Bubbles always burst eventually
That bubbles eventually burst is as certain as the sun rising every morning. However timing the blowup is rather less easy than timing dawn breaking. But there are telltale signs to be on the lookout for.
Following yesterday’s article in which I included that rather hair raising chart of Silver’s recent collapse, I was reminded by a friend of an article I wrote a year or so back in which I spelt out the precursor to many such dramatic reversals. Therefore I decided to reprint that same article for you below.
First of all here is yesterday’s Silver chart overlaid with the same indicator discussed in the article below. Look familiar?
Spontaneous Reversals – Impossible to Predict?
In theory if something is spontaneous then by definition it is impossible to predict. But that doesn’t mean that we cannot spot the telltale signs that often precede “the unpredictable”. As always with the markets the key is in understanding what lies behind that which is visible on the surface.
So let’s look at a spontaneous reversal, or as most people refer to them – the V-reversal.
In Financial Physics we specify 3 ways in which a new trend may be born. Of these the least common (by far) is the V-reversal – where a market just spontaneously turns ending one trend and instantly starting a new one in the opposite direction.
As well as being rare such new trends are extremely difficult to anticipate. Difficult yes, but not totally impossible 
. That is why a few days ago I included the following excerpt in my daily update sent to members of my S-I-R service:
So we were all on notice that the stage was set for one of these unusual events and hence in our shorter term trading to switch to playing the short side of the market. I also promised to write an article explaining more about this situation. So, here I am going to show you how we knew to switch to the short side days in advance of this rather impressive, and theoretically unpredictable, spontaneous reversal:
The What, the Why and the How
I don’t have room here to explain why this works, but I will show you exactly what to look for – the telltale signs, so that you will know in future what to watch out for. My suggestion for how you might use this insight is mainly as a filter rather than as a trade setup. So next time you see this you will know NOT to consider buying pullbacks etc.
As well as knowing when not to buy pullbacks, there is also a way to use this to trade against the prevailing trend – shorting in this case. But this is only for those who are highly experienced with this technique and I am not able to share that here. It is extremely aggressive and you have to know exactly how to play it.
But if this insight just keeps you out of one losing trade in future than I will regard it as being worth my time writing this. (For my S-I-R members I will elaborate further next weekend on both why this works and how to actually trade it, as I promised you previously.)
Right. What we need to look for is a market (any market and any timeframe) where a trend is underway that meets these criteria:
- A low volatility trend (lots of small overlapping bars moving strongly in one direction)
- No swings within the trend (just a single, painfully slow straight line crawl)
- The whole trend taking place displaced from its mean (see chart below)
Here we can see a simple Keltner channel added to the same S&P daily chart. (The parameters are largely irrelevant but as I know I will get asked – 21 period exponential moving average and 2.25 ATRs are the settings used here.)
Notice how this trend consisted of a single low volatility crawl along the outer band. This is not the usual series of swings and waves, but one single move. Note that moving along an outer band is critical here – this means that the move is displaced from its mean. If it was just a crawl along the moving average the situation would be totally different.
This action is rare, yet whenever you see it you will find that it very frequently ends with the hitherto totally unpredictable V-reversal – hence you don’t want to go buying pullbacks!
Have a rummage through your charts – look at different markets, various timeframes, etc. You won’t find many examples but you will be amazed at just how many of them end in a spontaneous reversal.
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Copyright © Simon Townshend Ltd 2010, all rights reserved
Great days ahead, but bide your time!
Did you watch the events of yesterday unfold in disbelief? Spectacular wasn’t it?
- Crude dropped almost $12 in one day to close back in double digits once again
- The Dollar Index made its biggest one day gain in months
- Silver extended its losses to close the week down a whopping 30%…
Dramatic moves, but this is wonderful news for traders as these events act as a stimulus to get things moving again, for new trends and new cycles of trade setup to develop. It is no secret that the start of 2011 has been marked by lots of chop and instant changes in sentiment. This is not uncommon at the end of trends and is a tricky environment to navigate.
But from this sort of action new trends can be born that provide new opportunities for many weeks and months to follow. So look forward to easier times ahead.
However, be careful for the next few days. We all have the urge to jump right in and want to make up for lost ground. It is difficult to be watching from the sidelines at these times. But there is no hurry! The opportunities will be abundant for a long time after the initial shock kick starts flaky markets. So there is no need to be in there fighting on day one.
The first 2 or 3 days after such an impulse can provide huge opportunity. But they are extremely difficult to navigate. New volatility levels have to be adjusted to and the markets always over react making short term sharp reversals likely. So the chances of getting into trouble are also much higher.
My advice is to let the dust settle before getting too actively involved. Play the long game. Make great use of the new cycle of clean swings that will unfold over the coming weeks and months and remember that Rome wasn’t built in a day! We have waited all year from some sort of impulse, so another day or two of playing it cautiously isnt going to hurt at all.
Then once the dust has settled that is the time to really set to work.
Disclaimer, risk warning and copyright notice apply to all articles published on this site.
Copyright © Simon Townshend Ltd 2011, all rights reserved
Combining Disparate Timeframes
A popular topic in trading circles is the use of multiple timeframes. Lots of traders like to use more than one timeframe to support their hypotheses and used properly such techniques can have considerable benefits.
However most proponents use relatively similar timeframes and in my opinion in doing so they are missing the true value of such an approach. I like to use truly disparate timeframes, ones that are radically different to each other.
Copper last week gave us a timely example of this, so let’s use a real life example to illustrate the power of this often misunderstood concept. We will start with a daily chart of copper…
Our strategy gave us a buy signal at 435 shown with the red arrow, which we duly entered and we are still holding the bulk of the open position. Actually our own buy signal was in fact supported by a more traditional technical feature on this same daily timeframe…
We can see an attempted downside break from the longer term chart formation a few weeks ago. A failed breakout can often lead to a much more impressive assault on the other side. So in this case the breakout to the upside which came the day after our buy signal could be expected to perform well.
So once we had a daily buy signal its next a case of trying to limbo in at the best possible price. To see this we drop down to an hourly chart, obviously a much smaller timeframe…
After the daily buy signal we actually entered overnight with a resting order as shown by the red arrow. What can we see here on this hourly chart? Here we have a simple little bull flag providing a nice lower timeframe entry into our main daily setup.
Sadly these things don’t set up perfectly as frequently as we would all like, but we are regularly talking in the chat room about looking for hourly entries into longer term positions. Why? Think about it from a Risk/Reward perspective. If you can occasionally combine the risk of an hourly trade with the reward of a daily trade – this is something to be played for any time such an opportunity shows its face!
Finally let’s look at the weekly copper chart…
Oooh! Now we have a weekly bull flag and with a little luck this may be ready to start kicking in for us. Only time will tell. But what I do know at this early stage is that an hourly entry into a daily set up with even the faintest possibility of capturing a weekly move – this is trading utopia and is the sort of thing that all professional traders should always be on the lookout for.
I know many traders like to use combinations of 5 minute and 15 minute charts, or hourly and 120 minute charts, etc. While there is nothing wrong with that per se, the real advantage of multiple timeframes is to be gained from the correct use of radically different timeframes.
We will be exploring the power of disparate timeframes at our seminar this summer. Are you ready to put a range of clear cut, logical and practical techniques to use in your trading? If so be sure to join me, George Kleinman and Jeff Quinto for this one time, one day event as we share the secrets gained from 100 years experience in the markets.
A maximum of 50 people worldwide may join our private clients at this exclusive event. If you are ready to take your trading to the next level, please reserve your place before this event is advertised to the general public. I hope you can join us for a truly revolutionary day… www.CenturyOfTrading.com
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Copyright © Simon Townshend Ltd 2011, all rights reserved
“Evolve or Die” – LBR webinar replay
I was swamped with feedback after the webinar I recently gave with Linda Raschke and have tried (!) to respond to everyone in the days since this took place. Thank you to everyone who took part and I’m delighted so many people found it so thought provoking.
If you missed the live event or would like to watch the replay, here is a link to the video archive. Just click on the picture below…
Enjoy it, let it percolate in your mind for a few days and see how you start to think differently about the markets and start to find ways to simplify what you yourself are doing each day!
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Copyright © Simon Townshend Ltd 2011, all rights reserved
A Century of Trading – June 25th
Jeff Quinto, George Kleinman and Simon Townshend together have over 100 years of experience in the markets! That’s somewhat alarming to them but great news for you.
Call upon a century of experience and learn 6 trading techniques and money management strategies that these 3 traders use in the markets today.
At this one time, one day seminar in Los Angeles, Jeff, George and Simon will teach you techniques that have stood the test of time and that they personally use today. These are all straight forward, based upon sound logic and a century of experience in the markets.
Each of these 6 individual techniques can be used on its own and each one is more than capable of boosting your bottom line. Better still use them together as a powerful solution to long term trading success.
The 6 techniques you will learn are as follows (full details on the other 3 pages of this website):
- George’s Secret Indicator (and a complete strategy for using it)
- Behind the Chart (basic & advanced use in trend following and reversal trading)
- Don’t be Afraid of the Money (how professionals handle their capital)
- The Power of Natural Numbers (a breakthrough strategy for capturing profits)
- The Keys to the Kingdom (the much overlooked power of trade sizing)
- Overcoming Fear and Programming Confidence (turning a new trader into a survivor)
Best of all you can take any or all of these and start using them yourself straightaway on Monday morning.
To find out more, please visit: www.CenturyOfTrading.com
Disclaimer, risk warning and copyright notice apply to all articles published on this site.
Copyright © Simon Townshend Ltd 2011, all rights reserved
“Greed is good”…except when is blows you out!
In Gordon Gekko’s universe greed may be good. Alas in my more modest little world greed is usually the end of many trading careers. Greed often manifests itself as trading with unrealistic size and that can be a time bomb!
One of the most frequent questions I get asked is “how much should I risk on each trade?” The irony here is that such an important question is one that I have to steer very clear of, as in my country that is a question I would need to be licenced to answer!!!
However that doesn’t stop me sharing my thoughts on the subject generally, nor does it prevent me revealing what I personally do, so let’s get on with it!
Mr 10%
First I want to tell you a quick story about a guy who has come to be known as “Mr 10%” among my circle of friends. I don’t know who he is, nor can I actually find him anymore. But Mr 10% was someone I found on the internet a few weeks ago who was urging traders “to risk no more than 10% of their capital on each trade”!
My guess is this is someone who has never traded in his life. Or if he has I am quite sure that just a few weeks on from seeing his ridiculous video, he is no longer trading. Risking 10% is an express ticket to the poor house and it is beyond my comprehension why anyone would be so foolish to even attempt such an idiotic thing.
Of course just to be clear throughout this article I am referring to trading capital and not just the balance in any particular brokerage account. Sure you can risk 10% of the $25k you have in an account if the other $250k of your trading capital is sitting the bank or in other accounts. I don’t have a problem with that at all. But if that $25k is your trading capital in its entirety…that is another matter altogether!
How about 0.1%?
At the other extreme, let’s say we are risking an incredibly small percentage of our capital on each trade, what then?
Well for most traders that would probably not be appropriate either as you are unlikely to make any money over the long run. So why bother?
There is however one situation where such a tiny stake would be the right answer and this is in a situation where the strategy being traded has a very low percentage of winning trades. This is not my scene at all, but I know of people who play for huge amounts on their successful trades at the expense of being paid regularly. Perhaps only 1 in 10 trades is a winner, but when they come around the winners are 20 or 30 times the size of the losers.
Even though I couldn’t live with those sorts of numbers, that is still a profitable strategy. But it will have huge losing runs! Huge! 50 to 100 losers on the trot are quite feasible in this scenario, so you would have to trade such an ugly system with tiny leverage in order to trade through the almost constant drawdowns.
The middle ground
Clearly in between these two fairly ludicrous extremes there lies a middle ground containing the right answer for most of us. What that right answer is depends on many different factors:
- Strategy winning percentage
- Relative size of average winners and average losers
- Capital preservation plan
- Personal risk tolerance
- Overall trading objectives
Every one of these factors varies between individuals, which is one of the reasons I cannot give a simple answer to this question I get asked so frequently, even if I was allowed to give personal advice.
Most of the professional traders I know regularly speak in terms of 0.5% to 2% being the “right” amount for them personally. Most of traders I know also work with similar sorts of statistics, i.e. 50%-75% winning trades and average winners being greater than or equal to average losers. So with a strategy with that sort of edge 0.5% to 2% seems to be a well-accepted order of magnitude.
Mr 1%
For me personally 1% is a comfortable place to be. I’ll never win trading competitions with this relatively conservative size, nor will I get blown out. It is a simple fact of life that if 2 out of 3 trades are winners and 1 out of 3 are losers, these will not materialise in a convenient win, win, lose, win, win, lose pattern. There will be long winning runs and clusters of losers. That is just how it is. So you have to be willing and able to trade through the drawdown periods. That means understanding the importance of your unit size and how dangerous greed in this area can be to your survival.
Any fool can make money during the easy times. But only those with commitment and sensible conservative leverage will survive the rough patches.
Yesterday I was doing some work with one of my partners on trade sizing. We have been slowly increasing our unit size and are still below this 1% level, but are homing in on that as the place we want to reach and then maintain.
We looked at the real time results since launch using a fixed but modest 1% risk per trade and a maximum loss per month capped at 5%. We can live with that and so can our investors. We can absorb a few losers here and there and not have to panic or worry about being blown out. This business is hard enough without having to endure stress that it completely avoidable.
At 1% risk this is the P/L since the strategy went live. You can see it still makes decent returns at this nice safe level of leverage:
Now let’s consider these other two extremes we discussed. At 0.1% risk we would be looking at a total return of 9.1% compared to the 136% we see above. At something less than 5% per year this is simply not enough to make the exercise worthwhile.
At 10% the numbers would be huge, too silly to quote. However even with a strategy this consistent those tiny little dips would have more than halved the capital – not quite a blowout but very close indeed and not something that many traders would live through.
Conclusion
I hope this illustrates the importance of finding an answer to this question that so many people ask, yet to which there is no “one size fits all” solution.
What I do know from my experience is that it is easy to start too low and slowly work upwards, whereas starting too high is likely to be fatal. In fact I strongly recommend to all of my clients that they start so low that they are paper trading. Only with some experience and confidence should they then venture to trading a single contract. Then over time slowly build up to whatever percentage of capital they have decided is right for them.
This way time is on your side and everyone who has followed that advice has ultimately thanked me for it and told me they have learned how to ride both the financial and emotional dips without ever risking being blow out before hardly starting. Every one of those that followed that advice remain with me today and their confidence levels remain resolutely high when handed a fistful of losers. Whereas sadly there have been others who are gone at the first little set back. I don’t know, but would be willing to bet that in every case these folk have been using too much leverage.
So if in doubt about the trade size you should be using – make the most balanced judgement you can and then halve it!
As a final thought on this topic – no trade should matter to you. It is just one of a long series.
As one of my friends likes to say “It is just one of 10,000 trades you will be taking. We are the house, we have the edge. Its just our job to keep taking the trades.” So if the next trade matters to you, or the next 2, or next 3…you know you are trading too big, so you need to work on this area of your trading plan.
Disclaimer, risk warning and copyright notice apply to all articles published on this site.
Copyright © Simon Townshend Ltd 2011, all rights reserved
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