|Ultimate Trade Analyzer Discussion for Ultimate Trade Analyzer owners to share results, questions and other feedback.|
|03-27-2011, 02:43 PM||#1|
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1. Can you help me on what to input in the cell H1 if I'm using $800 capital with leverage of 50:1, and a .01 lot size? What value or point should I put using the EURGBP as the currency I'm trying to test?
For those of you who don't use or know the UTA, cell H1 is where you would determine the pip value for the trade data you log into the UTA.
In response to your questions, I would first advise you to never use 50:1 leverage. Just because your broker allows it, doesn't mean you should. In fact, in most cases, you should not. With that being said, try to always keep your position size around the 2% of your available capital range. So if you have $800, you would not want to put on a trade that risked more than $16. That might not sound like a lot, but it is all relative. As your account grows, so will the 2% risk level.There is a fine line between not enough risk and too much risk. Trading does involve risk. Without risk, we could never make money as a trader. Risk is an important part of trading, right? But how do we determine the appropriate amount of risk? This is always a question that befuddles traders. It's a razor's edge that doesn't stand still. One's risk exposure is as dynamic as the price movement itself.
The SST philosophy, which incidentally, was determined by extensive work with the UTA, is to cut risk as quickly as possible, while still giving a trade the space it needs to develop. In other words, it is handling risk in a dynamic way, constantly retuning its risk profile with the close of every new bar. Pretty cool, huh? Next, its goal is to eliminate risk altogether by getting our trade to a risk free position. In other words, at the strategic price level or strategic stage of the trade's development, it will move the stop to lock in a pip/tick or few. It is trying to mitigate risk by skirting the fickle razor's edge line between too much risk and not enough risk. It is not 100% perfect. Nothing is. But it definitely puts the statistical edge on our side and really, that's all we can ask for as traders. That IS, the holy grail, by the way.. Harnessing risk so that it works for you on most trades but also being able to control it, when it works against you.
While doing that, it also calculates a fixed target, dynamically based on the current trade setup, that has a high likelihood of being reached. Sometimes that fixed target is too small and would cut short the overall potential of the trade. The SST answers that problem by allowing us to keep a seperate position on, incorporating its trailing stop techniques. That way, we are able to strike a great balance between not enough risk, too much risk, and a great chance of having just the right amount of risk from a trade profile perspective. It elegantly takes into account the 7 keys to successful trading, or as we call it, the 7 summits, tying together dynamic trade profiles, the dynamic ability to apply the strategy on multiple markets and timeframes, the ability to scale position size in and out of trades, the ability to trail while also being able to exit at high percentage fixed targets that have been dynamically tuned to the current market condition, capital preservation and consistent profits.
As traders, the rest is up to us. It is the trader who shoots himself in the foot by putting on too much risk on any given trade. It is the trader who makes decisions that are outside the realm of the tradeplan or the methodology of the trade system. We have the tools. The UTA can be used to determine the 'soundness' of a tradeplan and to build your confidence to the point where your vision is broad enough to believe in the tradeplan and methodology. Once you have that belief, you can responsibly put on the proper risk, and trade the system as it is intended. Thus, you can achieve the statistical edge that the SST gives you and grow your account accordingly, as you facilitate the tradeplan with confidence and professionalism.
|08-07-2011, 09:54 AM||#2|
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Re: Risk Mitigation
Hi, TJ, one of your new students here - can you guess who?
Anyway, if my futures trading account is $3000, then my max risk is $60. Does that mean I only take the setups where the stop is less than $60? How will that affect the whole system?
|09-03-2011, 05:36 PM||#3|
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Re: Risk Mitigation
Sorry for the delay in responding to your question. I haven't visited TL in a while. The SST is so dynamic and one of the things that make it as effective as it is, is the ability to place the stops in locations that allow the trade the room necessary to develop the way it needs to. It then seeks to cut risk asap, and ultimately put you in a risk free position as soon as the price action permits. So.. with that in mind, I always look at the size of the avg losing trade to determine the correct position size, not the starting risk level. It is very rare that the SST will stop out with a full loss, although once in a while, it will happen. Remember though, the SST is quick to recover too.
It really pays to use the UTA and do a good amount of manual backtesting, so that you can develop a good win/loss column and experience the trades that way, first. You will then see the avg losing trade and it will help you determine the proper risk level for you. That's what I always call, the 'ditch digging' of trading. Those that take the time to go through such an excercise, will lay a good strong foundation that will help you succeed when you begin trading for rea.
Hope that helps.. Great question!
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