Determining Position Size and Entry Point

UpAgainToday

Hey guys I was just debating this is my mind last night while trading fx on the issues that actually cause me to ponder my size and entry levels

What systems do people use here to determine size and entry point?

Chrysostomos

Excellent thread idea.

Position Size: For me, position size is always %R, I always found %R to be the best method of position sizing. I have tried different systems of position sizing and I have always come back to %R.

The actual percentage I use is determined by account type, account objectives, %wins is probably the main one in determining it, my own risk appetite another one.

For example I have an intraday system which has between a 40-60% win rate, and an expectancy of around 146. With a win rate at that percentage I like to keep %R small to ensure the inevitable account drawdowns aren't too severe. I don't like risking more than 1% a trade usually. It's usually a half a percent.

Monte Carlo analysis I have found to be really good in helping understand this.

Theres actually a huge difference between even 2% Risk per trade and 1.5% risk per trade.

If I had a system with a %wins of say . . . 90% then of course I could increase percentage risk.

Keeping account drawdown relatively small and a smooth equity curve is paramount to me. always tend to look at the drawdown side of things rather than achieving profit side of things. It's all about capital preservation over the long term.


I also have a few funky things in other systems in smaller accounts, in a small purely mechanical automated account I have semi-martingale position sizing combined with a simple high RR trend trading system. Martingale is obviously account suicide over the long run, semi-martingale coupled with high RR is acceptable in my eyes.


Entry Point: I am strictly into technical analysis, I pay no attention to fundamentals or news except on NFP Fridays for the most part. I have a variety of systems, mostly intraday but some higher timeframe stuff. Mostly discretionary TA entries, although I have some automated mechanical trend trading systems running also.


Looking forward to the opinions of others on these points.

Bullish

Hi guys I hope I am not posting off topic.

I trade stocks and options and lately with the euro crisis I
Have been paying attention to EUR/USD for bottoming signals.
To confirm entry in Euro stocks that are beaten down on the NYSE.
Just playing the volitility.
I have noticed that the indicators and time frames I use work
With FX too.

I use RSI ADX and OBV on 1yr daily/weekly combined with 10 day 15 min
charts.
I watch for extreme top side and bottom side plays and divergance in
price indicators

As 90% of my trades are swing trades I normally scale into positions
In 3 buys capital protection is my number 1 focus.
Shorts I limit to Puts ( currently short VXX)
I do not use stops in stock trading as i like to trade high beta stocks.


I only trade on tech analysis and I try not to listen to news at all,



Can I ask as someone with no forex experience but an interest in it
do you guys see much difference to trading forex and trading stocks.
My platform has a forex side to it and the commissions
I pasted a sample below. Is this competitive and if not who would you recomend
for Forex trading

ISO Minimum Charge Per Lot (1,000)†
USD USD 1.000 USD 0.100
AED AED 3.700 AED 0.370
AUD AUD 1.090 AUD 0.109
CAD CAD 1.060 CAD 0.106

RoadKillTs

Position Size:

My position size can vary a lot depending where the price is at but I only ever risk 1% of trade capital per trade. I'd always be aware of S/R and base my position around that.

Entry Point:

I mainly use EMA's and MACD for signals. I use a prity basic system but it works.

Can I ask as someone with no forex experience but an interest in it
do you guys see much difference to trading forex and trading stocks

Well I'm only starting to learn Forex so I'm sure the other guys can give a better answer but the reasons I like it are;

1. The cost. All you pay is the spread and if you are based in Ireland you don't pay any tax. No set-up fees e.t.c.
2. Trends. The trends in FX are very strong and can last for years.
3. The analysis. I think its a lot easier to understand and to predict the movement of price action.


As for your second question, I trade with Oanda and their spread on EUR/USD is .9 of a pip. Most brokers are around the 2 pip mark for EUR/USD.

Have to say I love it. Its a huge market, extremely liquid.

Bullish

And there was me thinking this might actually turn into an interesting discussion :rolleyes:

Thanks for the response Roadkill....... Could I ask have you an open position in FX at the min
Just curious to take a look at it
Thanks
Top

Chrysostomos

I've tried to reply to this twice , the first time I was on a train and I tried to reply and my either my broadband or google chrome crapped out and I lose my message.

Second time was this morning, I had the message typed and then I made a fat finger mistake whilst trading and closed all internet windows out of rage

Anyway ! : (Apologies for the delay)



Hi guys I hope I am not posting off topic.

No problem bro.

I trade stocks and options and lately with the euro crisis I
Have been paying attention to EUR/USD for bottoming signals.
To confirm entry in Euro stocks that are beaten down on the NYSE.
Just playing the volitility.
I have noticed that the indicators and time frames I use work
With FX too.

I like the use of correlations for trading, I use it a lot in my own trading.

I use RSI ADX and OBV on 1yr daily/weekly combined with 10 day 15 min
charts.
I watch for extreme top side and bottom side plays and divergance in
price indicators

As 90% of my trades are swing trades I normally scale into positions
In 3 buys capital protection is my number 1 focus.
Shorts I limit to Puts ( currently short VXX)
I do not use stops in stock trading as i like to trade high beta stocks.

I only trade on tech analysis and I try not to listen to news at all,

Sounds good, I especially like your use of higher timeframes. All in all your strategy sounds real solid, some demo forward testing for a few months would be the least I would need to put cash behind a strategy in a new market, or at least a backtest to say . . . 2003 at the least, to assess profitability various market conditions.

Can I ask as someone with no forex experience but an interest in it
do you guys see much difference to trading forex and trading stocks.

I personally see no difference, well . . There is a lot of obvious differences really but at the end of the day a chart is a chart in my opinion.


My platform has a forex side to it and the commissions
I pasted a sample below. Is this competitive and if not who would you recomend
for Forex trading

ISO Minimum Charge Per Lot (1,000)†
USD USD 1.000 USD 0.100
AED AED 3.700 AED 0.370
AUD AUD 1.090 AUD 0.109
CAD CAD 1.060 CAD 0.106

I assume that's somebody like Interactive brokers or Thinkorswim, I have no personal experience with forex trading specifically on these types of brokers, a friend of mine tried to trade forex on IB and said it was terrible.

Starting off FX trading . . .

On the retail side I would recommend Oanda, tight spreads, fills are generally good. Slippage is good. On the ECN side of things I would recommend MBTrading, The commissions you posted above are pretty competitive relative to other brokers, but I have had extensive experience with the above two over the years and found them both to be excellent :pac: Hope I addressed some of your questions adequately! Feel free to ask more questions or contact me via PM if you wish.

Chrysostomos

pirelli wrote: »

:rolleyes: Maybe it's just me.

I would have to stay with the mission.

What's the mission ?

UpAgainToday wrote: »

Awhhhh cute does the baba feel left out of the conversation since he doesnt understand day trading? Awhhh cute - go back to buying some equity stock once every few months while hoping it goes up a few % so you can tell all your mates in the pub about your big win

OP what's your own opinion on position size/entry/exit ?

RoadKillTs

Could I ask have you an open position in FX at the min

Hi Bullish,

Yes well I trade at least once a day. Wouldn't usually keep positions open over night.

I'm short EUR/USD at then moment from 1.2215 with my Target set at 1.2180 (previous level of support)

I have some good eBooks on FX if you want them.

Bullish

Roadkill That would be cool for the Ebooks
Much appreciated PM sent with my email address
I hope you got your short target in EUR/USD.Before it rallied.

I listen to some premium feeds during trading and they were
Commenting on the euro break out rally . I looked and saw a 2
cant rally.... Now this is a big difference to stocks
2 cents Pffft :-) I understand the leverage is different
so this is where the profit is made.
What is the normal leverage percentage on a forex trade

Chrysostomos thanks for the detailed response it cleared up
a lot of questions I had, as in a chart is a chart
Yes it is thinkorswim I use but I use a free chart service
for analysis on swing trades . BIGCHARTS.com I started using
this a few years back and i cant break the habit ;-)
the signals are different to any platform i have tried.

As I dont use automated software and i take my buy sell
indications from the 10 day 15 min charts after a confirmation
and use the 1 yr as a guide. I dont see how i could backtest
So i will start forward testing on a paper account and see
how i do. But paper trading can deceive also as there is no
slippage and your trades don't effect the real world.

Chrysostomos

I listen to some premium feeds during trading and they were
Commenting on the euro break out rally . I looked and saw a 2
cant rally.... Now this is a big difference to stocks
2 cents Pffft :-) I understand the leverage is different
so this is where the profit is made.
What is the normal leverage percentage on a forex trade

Hehe yeah it seems deceptive to a person who is coming from an equities backround. Oanda's leverage is 1:50, MB Trading offers 1:100, Alpari UK offers 1:500. It differs throughout the industry. Huge leverage really. So obviously you can quickly profit/lose out of small moves is one wished to trade that way.

Chrysostomos thanks for the detailed response it cleared up
a lot of questions I had, as in a chart is a chart
Yes it is thinkorswim I use but I use a free chart service
for analysis on swing trades . BIGCHARTS.com I started using
this a few years back and i cant break the habit ;-)
the signals are different to any platform i have tried.

No biggie,

A lot of people in including myself use MT4 for charting, open a demo with somebody like sig (have probably the widest range of markets, all available major currency crosses as well as a load of exotics) download is available at -http://www.liteforex.org/demoaccount.php . Have a try and see what you think of it, it's a 4digit broker, a lot of brokers are not 5digit now but I just can't break the old habit. That broker itself is as dodge as they come but their range of markets is awesome.

Why are the signals different to other platforms ? The actual charts look different or what ? That strikes me as kind of strange if that's the case :pac: I was unaware of bigcharts.com I will check it out. :pac:

As I dont use automated software and i take my buy sell
indications from the 10 day 15 min charts after a confirmation
and use the 1 yr as a guide. I dont see how i could backtest
So i will start forward testing on a paper account and see
how i do. But paper trading can deceive also as there is no
slippage and your trades don't effect the real world.

Sounds good, 1 Year is a helluva long timeframe to be looking at ! It's only on a rare occasion that I look at the monthly ones hehe :pac: . I agree with you with regards to paper trading, it's like the problem with backtesting also; a lot of people simply don't properly account for spread or slippage, always assuming spread on say the eurusd will be .09 pips or whatever and getting filled wherever they want, as much as I would like to be the case it's simply not

Hope your forward test goes well, keep my informed of the results bro :cool:

Chryso

Bullish

The reason the signals are different is on the 15 min chart it has 27 bars per day. I have looked into it and it appears to take the last 5 mins of pre market and first 10 mins of after hours into account. This changes RSI and ADX enough that my system doesn't work for swing trades on another platform. Although I am trying to re jig it on think or swim. Intraday trades are fine on TOS but the trend change signals I use don't register for swings.

So I take it you don't use Leverage ? I have a margin account but I never trade on margin and the leverage was kind of putting me off the FX

Chrysostomos

Bullish wrote: »

The reason the signals are different is on the 15 min chart it has 27 bars per day. I have looked into it and it appears to take the last 5 mins of pre market and first 10 mins of after hours into account. This changes RSI and ADX enough that my system doesn't work for swing trades on another platform. Although I am trying to re jig it on think or swim. Intraday trades are fine on TOS but the trend change signals I use don't register for swings.

So I take it you don't use Leverage ? I have a margin account but I never trade on margin and the leverage was kind of putting me off the FX

Hmmm interesting/strange thing about those 15min bars.

Oh I always use leverage, once you have SL's in place or some other form of risk management like hedging or whatever I find it to be fine. Any trades on FX so far this week ?

giannip

I have no idea what you're all talking about but it sounds super cool

Bullish

Hi Chrysos,
I have not had a chance to look at the FX this week as the Equity side is keeping me busy. Roadkill has kindly mailed me some e books on FX which I am about to read, So hopefully I can hopefully come back with some useful questions.
On the 10 day 15 min/ 1 day 1 min chart I use RSI and ADX for intraday trades. I use RSI for longs I like to see the RSI hit 20 and play the bounce from the oversold condition. I also use it for entry into swing trades i.e When the RSI 20 has been hit and the price bounces and drops again below the previous low with a higher RSI reading, I take this as a confirmation of the Low and will take an entry here Provided the ADX agrees that that the selling is done where the ADX is leading the DMI .
I find the above 90% reliable for entry to a trade.
What kind of signals do you guys use for entries in FX

RoadKillTs

What kind of signals do you guys use for entries in FX

Hey Bullish,

I use a very basic system based on one I read about on Babypips.
Details of system here

This system was designed for the pound but I use it on EUR/USD.

@ Chrysostomos

Is there any system you would recommend as a follow up to the one I mentioned.
Haven't really looked at many other ones yet.

Bullish

Road kill Try adding the RSI 20 rule and see if it works. I normally find by the time the RSI reaches 50 a lot of the percentage is already gone.