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I Think It Finally Sunk In

 

I Think It Finally Sunk In

I achieved Gold 3 around Christmas. Since then, I’ve lost around $200 on a $2,500 account. I’ve always tried to keep my total losses for a day to 1% or less. I’ve not been able to trade much each week, especially since the Coronavirus outbreak, having to do 50-or-60-hour weeks with only one day off. However, I have done a lot of listening to professional traders and brokerage owners who hire traders.

What has been common with all these people is: never risk more than 2% per trade, have patience and use risk management.

What was always a problem for me was to have a winning average greater than a losing average. This is exceedingly difficult when you are scalping. However, if you employ patience, your emotional need to take a small profit but risk a slightly larger loss vaporized. Using risk management ensures that your average win rate will always be higher than your average loss rate.

A good place to start listening is below. You can then move on from there:

Chat with Traders

https://www.youtube.com/channel/UCdnzT5Tl6pAkATOiDsPhqcg

Wed, 06/17/2020 - 5:02am
 
robunited

"What was always a problem for me was to have a winning average greater than a losing average.
This is exceedingly difficult when you are scalping."

This is the nature of scalping. With scalping, you will always have a higher losing average than winning average.

I don't know if this is 'exceedingly' more difficult, it's just a fact of a scalping trading style.

If you scalp, you have to have a very high percentage of winning trades ... to off-set the losers.

 
FrankS

If I accept the definition that scalping is buying on a pullback after an initial up-move or selling on an upthrust after an initial down move, then I do not understand why the Win Avg % should be less than Loss Avg % by "nature." I would have thought that any Buy-stop and Sell-stop orders or even market orders would carry a heavier risk as any drawdowns from entry would likely be deeper.

However (and it's a big however), I have struggled with the same issue, but far more with forex than I ever have trading futures. I know my stops are tight and I have to adjust to balance that, but too wide of a stop has not worked either at least consistently, as any Crazy Ivan move can make the hole on average much deeper.

 
robunited

Because if you scalp for quick and small profits, i.e. 2 TP ... you are never going to have a smaller S/L
... by nature of that scalping method.

If you put in a 2 pip S/L, you are shaken out 90 times out of a 100 trades before you even start to trade. Maybe even more.

If you scalp, you will not have a positive R:R ... so you have to make this up with a much higher winning percentage.

At least, to start with (there are more things you can do and manage).

 
robunited

If you have a positive R:R, you don't need a higher win/loss percentage.

A 4 winners vs 6 losers will do, and with good risk management, you will get out in profit.

With scalping, that calculation is out of the window.
You need to have a lot of winners, to off-set the losers ... a high win/loss percentage.

In very simple words, with scalping, your aim is not to have a higher winning$ vs losing$ average.

Your aim is to have much more winners than losers. And you most likely will have a negative win$/loss$ statistic
most of the time, but are in profit regardless.

 
FrankS

Rob, I feel that success in any scalping strategy is likely the result of the point of entry relative to the average swing distance. In my opinion, that also qualifies as a key element of money management. So, if you manage to enter closer to the initiation of a swing, then smaller stops can surely be accommodated. However, it is not necessarily linear.

That is why I believe the point of entry is crucial. So, despite all the advice not to focus on tops and bottoms, picking near tops and bottom zones must be part of that evaluation; otherwise, you risk drawdown and are forced to use wider stops. And that sets a trader up in beeline for a tougher row to hoe.

And that's where scalping has to shift toward swing trading, which is why I see your own wobbling mod method making sense to me.