A Holy Grail trading plan is one that only leads to profits, it never results in losses.
It is generally accepted in trading and it is proven over time that no-one has ever developed a Holy Grail.
However, in developing a trading plan, which is absolutely essential for trading, we have to aim to develop a Holy Grail on a demo account over a long period of time of plus or minus 10 000 hours.
Theoretically, our trading plan is a Holy Grail when we can explain every market reversal in terms of our trading plan in simple rules. Since this is theoretically clearly possible, it is proof that the basic concept of searching for a Holy Grail is the only correct approach for developing a trading plan.
Why is it so difficult to implement a Holy Grail trading plan? We fail to implement it correctly because of our many human weaknesses when we trade in a real account.
Our cars, planes and all devices in all spheres of technological development at all times were and are developed on the Holy Grail principle. The basic concept is a logical part of human technological development.
It is the only correct way to develop a trading plan. We generally try and do it that way.
Good luck in developing your Holy Grail.
Yes, you are right.
I admit the following five normal intra-day trading rules would not take care of a 3000 Pip drop. I could still end with a 10 Pip loss for the day if I were in a trade. Otherwise, I believe they would take care of most other situations.
1. Only start a new trade in a trending market less than 1 hour before the planned end of session.
2. Always start with a 10 Pip Stop Loss.
3. Never trade over the weekend.
4. Always get out before an important News Event.
5. Never trade an important News Event till a valid moving average cross indicates the trend after the news event.
To keep it in Holy Grail status, I would have to "overfit" the plan to span 6 trading days which would include a week-end. The very remote probability of a recurring 3000 Pip drop would not warrant such an overfit.
I am keeping my plan at its current one intra-day level including the above 5 rules.
3000 pips was just an extreme example that the market is unpredictable in order for you to claim "NO LOSS".Specially when you are with 10 pips stop loss (it depends also on the leverage - because 500 leverage with 10 pips stop is 50 pct of equity).
With 10 pips stop loss (average 8.5 stop loss + spread) is very low - you surely know there are many losses.
3000 pips was just an extreme example that the market is unpredictable in order for you to claim "NO LOSS".Specially when you are with 10 pips stop loss (it depends als oon the leverage - because 500 leverage with 10 pips stop is 50 pct of equity).
I only use 50 leverage and I only trade the Euro/Dollar. A 10 Pip Stop Loss is a 5 % risk for me.
When a trader has a very strong trading plan which includes a customized Stochastic or another good customized momentum indicator, he/she is basically always correct on the short term trading trend. A trader may be late, but the losses are small when they are taken quickly on an immediately subsequent adverse reversal as required by the trading rules. That is why a trader has to lengthen the entry time frame and/or get to understand the characteristics of the customized indicators used in the trading plan better and improve the rules till the trading plan gets to the Holy Grail level.
Yes, the market is sometimes unpredictable. It is not generally unpredictable. (I know Fama and two other economists got a Noble Prize a few years ago for their random walk theory. I totally disagree. I agree with those who state "The trend is your friend." That is why there is a market - because people disagree.) For trading purposes, this unpredictability is generally inverse to the length of the trader´s entry time frame.
10 pips is mere stupidity.
With 20 or even 30 you will gain more.
Statistics shows this.
I trade on the M3 as my start chart in the morning.
I only use 50 leverage and I only trade the Euro/Dollar. Have you ever traded on a three minute chart at 50 leverage for a long time? Say 6 months or so?
On long moves I often move from M3 all the way to M15 (M4, M5, M6, M10, M12 and M15) to stay with the long UP or long DOWN trend. By then my Stop Loss is way ahead of my entry level and it becomes my Take Profit level - in a trailing way. It could even go to M20 and M30.
20 Pips is a TEN PERCENT LOSS to me. I always trade 100% of my own capital, but only at 50 leverage. 30 Pips is a FIFTEEN PERCENT LOSS to me. With my present trading knowledge and experience, that is a hellavu lot to lose in one go. Now I could never trade like that taking such big losses at one go. Lately I never have 20 pip (10%) losses in my Demo trading. In the first year to year and a half of Demo trading, yes, but not in the last 4 months. I am now on 27 months trading on the Demo. Maybe 13 pips for a bad loss lately. Yes. Never 20, lately. Forget about 30, lately. That was a long time ago that I made those losses. I have always only traded with a 50 leverage.
Because I now trade mainly on the M3 and M4, my Demo losses are very small. I spent the first two years trading the one minute chart. I learnt a lot about short term market behavior, but I found that I need too many rules to trade on the one minute chart. I cannot do that. Too many rules to remember.
I have to follow my indicators. When they - the two main ones, namely the customized Stochastic and customized MACD - turn I HAVE TO follow them. I have to reverse immediately. Obviously, the Stochastice is the leading indicator and the MACD confirms shortly afterwards - in a valid signal, first on the M3, then on a number of longer time frames - the one after the other.
If I were not to follow my indicators immediately, then I can give up on trying to develop a good trading plan. Then I would be wasting my time. Why have I spent more than 9000 hours over the last 27 months developing the rules to correctly trade the signals generated by those two indicators on the Demo platform, and then I don´t follow them? Then I better give up. I would be wasting my time.
I think you say what you say because you trade in a very different way. I don´t think you trade on the three minute chart. You are talking about something that you personally do not have much experience of. That is what I think. I may be wrong. Only you know the right answer.
Statistics for trading on a three minute chart? Statistics for trading on what time frame?
Remember I only trade the European and New York sessions as a one day session. I don´t trade into the second day. I stop with the New York close.
10 Pip Stop Loss is not set in stone. I normally place my Stop Loss 3 Pips away from the nearest Resistance or Support level. Often that is at 15 or 16 or 17 or 18 Pips, at the start. Then as the trend keeps on going in the direction I traded, I move my Stop Loss forward, but only once there is a good advance.
You are right that holding the Stop Loss back does result in better results. Maybe you are right about 20 Pips. But not at 30 Pips. That is not necessary when trading the 3 and 4 minute charts.
I think you are actually right about 20 Pips at the start of the trade in order to stay 3 Pips away from the nearest Support or Resistance level. But that is as high as it is generally necessary. Not 30 (15% loss) with 50 leverage in the Euro/Dollar market.
I don´t often get stopped out because I follow my indicators´reversal signals before I would be stopped out on my Stop Loss.
I am sure you realize by now that I trade 100% of my own capital - and only use 50 leverage. I do not follow the 2% rule. Why have I got a trading plan with good trading rules and then I only trade 2% of my own capital? I trade 100% of my own capital only at 50 leverage. I limit my losses with my Stop Loss rules.
I also do not have target Take Profit levels. My customized indicators show me when the move is over. I simply have to follow them. The formulas and default parameters for these indicators have been developed by other people over the last 70 or more years.
Thus, I never do any risk/reward calculations. I just need to follow my indicators correctly.
When my indicators turn, there generally will be a profit. How much no-one knows beforehand.
In the final analysis, what is necessary is that the signals will generate a trade-able profit taking into account the in and out spreads - the cost of getting in and the cost of getting out. For that reason a trader has to trade a long enough time frame which generally generates profitable signals at a time that gives us sufficient time to get in and out at a profit.
This has to be improved over time till the trading plan, theoretically, becomes a Holy Grail only giving profitable signals.
I totally agree with you that "The correct way is accepting that there are also losses in the trading plan." I have seen when one has good trading plan, which he/she can call "The perfect and ultimate strategy" there are time which you can not definitely tell where the market is going! example Friday the 15/12/2017 EUR/USD between 12am to 1am European time on H4, one could say that the market was definitely going down, by 7am you could see the candle cancel the down trend, in that case one will definitely close all the EUR/USD trades, then some how " news " may have change the trend late in the afternoon, the up trend into a down trend if I had break even that trade I could have got some good profit. But when the trade was in profit at target [1TP] i was reluctant to take the profit, I told myself "That is a small profit :-) leave it eventually it will go down" it ended up hitting my stop loss at 1.17997 and gave me too little profit, immediately after that it went down. that is what you call market unpredictable !
I trade on the M3 as my start chart in the morning.
Well there you have it.
I trade on a D1 chart and i would not even know how or why to trade M3 charts.
But i know the statistics, because i calculated them, and they do not lie.