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Trading: On the Long Way to Be a Successful Trader - The Two Very First Steps

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MetaQuotes Software Corp.
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MetaQuotes Software Corp. 2009.05.26 06:22 

New article On the Long Way to Be a Successful Trader - The Two Very First Steps has been published:

The main point of this article is to show a practical way to implement an effective MM. This can be achieved only by using a certain kind of strategies that we need to identify and describe first. In the following we’ll cover the basic concepts of how to build such a strategy and we’ll point out the common mistakes which always end up in draining a trader’s account.

Author: Andrea Bronzini

Giampiero Raschetti
63
Giampiero Raschetti 2009.05.27 12:16  

Nice article.

Sure it's not so easy to identify the proper SL.

I use ATR values and/or donchian's channel but, as usual, it's never the only rule.

Ciao

Giampiero Raschetti

Andrea Bronzini
106
Andrea Bronzini 2009.05.27 15:35  

Ciao Giampiero,
grazie per il commento ;)


I developed a simple system for identification of SL which I will describe in another article together with its indicator. Of course it does not offer 100% success... but having a systematic tool for placing SL is of great help in automated trading so it was one of my priorities to get it done :)


Andrea

MQL4 Comments
16319
MQL4 Comments 2009.05.28 02:54  
WOW! this is a lot to indigestion... but yeah one definitely needs to consider a reasonable sl.. without taking that into consideration and going strictly with risk percentage can get you into some deep doo-doo. we set an sl as a constant on a specific pair (say 600 for demonstrative purposes on 5 digit pricing) and it never changes. that way when we modify our risk percentage that becomes the only variable (besides available margin of course). thus we never need to be concerned about auto MM going amiss. therfore if one has a bot that trades up to 10 pair (like ours does) but only allows one coincident trade per pair (like ours does) and we go for 3% risk per pair we can NEVER get in over our heads on the downie side (Max is 30% drawdown even with 10 open positions at their max loss just prior to cover). of course one would not stay in business very long if one had consecutive issues like this! so its important that your bot is mostly in the green after covering the spread. if it ain't your bot is probably not gonna work and its as simple as that. fortunately NOW is the best time to check your bots as traditionally we aren't moving a lotta pips around the place this time of year.
Giampiero Raschetti
63
Giampiero Raschetti 2009.05.28 08:23  

That's sounds interesting to see your way to set SL.

I'll wait more tips.


Giampiero


p.s. Commento doveroso visto che fino ad ora siamo gli unici due italiani che hanno pubblicato un articolo su mql4.

Se usi skype fatti sentire. CIAO

MQL4 Comments
16319
MQL4 Comments 2009.05.28 13:36  

Good jobs pals! This is really great.

A lot of people think that trading forex is just trying to make money, without considering really what will happen if you fail to secure what you have made. I would like you to comment on the good strategies to adopt while scalping using the 5, 15 and 30 minutes chart window.

Keep moving.

TONY.

Andrea Bronzini
106
Andrea Bronzini 2009.05.28 14:43  
SEBAZ:

Good jobs pals! This is really great.

A lot of people think that trading forex is just trying to make money, without considering really what will happen if you fail to secure what you have made. I would like you to comment on the good strategies to adopt while scalping using the 5, 15 and 30 minutes chart window.

Keep moving.

TONY.


Tnx for your comment Tony.


Well, I'm really not a big fan of scalping cause I think it is "physiologically" dangerous on the Forex Market.
What I mean is that in live trading your plan of gaining i.e. 5 pips can be easily spoiled by a requote of the server.


I'll make you an example:
think you have in your hands the M5 chart of today (I mean actually all the bars that still have not come are already known to you) and you can open your orders knowing exactly every movement of the market.
Now, you want to get the most out of it and scalp on M5 to get profit from ALL the movements... after all you know them already, why you shoulndt get advantage of it? :)

When doing scalping in M5 it's fair to assume that your target are 5 to max 10 pips, right?
So now place your orders, chart in your hands, and let's see what happens.
Well... most likely many of your requests will be requoted, both in opening and closure of the trades and this will result in a disaster.
Remember you have 2 pips spread... add 2 pips requote on opening and 1 pip on closure and your 5 pips profit are gone already!!!
Do you get my point? :)


I think scalping works fine only on the strategy tester where no requote is applied and where transaction are made instantly. In the real world things are different.
One can overcome this with pending orders (which I consider a superior way of trading) and as a matter of fact if you set your openings and TP with a pending order you can be sure you'll get it right. Question is... without your magic chart of the future, do you have a system for scalping that gives you 5 pips of margin for placing a pending order? :)
You see that the question is still open.


Anyway, I strongly recommend not to trade on any timeframe lower than M15 cause this is the minimum for proper selection of SL. I hope I can explain this better in another article. Also movements on M15 are a bit wider and this will allow you coping with requotes most of the time.


Hope this short answer gave you some good idea :)



Cheers,
Andrea

Bert
6
Bert 2009.05.29 15:21  

Hello Andrea,


really nice article you wrote, and I appreciate very you took so much time to let us know, what is going on in your brains ;-)

I hope to find more articles from you in the future.


One question came to my mind, when I read that article: Isn't it, that you have to have a good idea, when and how you should place your order, before you can think about the S/L? In your example you showed the resistance level and then the last two bars, which seem to continue their increasement. But I think, the resistance level as shown in your example does not come very often - I rather think, this is a very rare situation, having such a beautiful resistance level. But the resistance level is very essential for defining the correct S/L. So I would say, it is very hard to define the correct S/L. So, this is true, obviously (making good E/As and defining S/Ls is definitely not easy ;-), but I really have a problem to put your thoughts into codelines for an EA.


So I really hope to read from you soon to clarify my little comprehension problem.


Cheers, Bert

Andrea Bronzini
106
Andrea Bronzini 2009.05.29 18:45  

One question came to my mind, when I read that article: Isn't it, that you have to have a good idea, when and how you should place your order, before you can think about the S/L?


He he he... you raise a really good point but I dont feel like saying you are right.
As you read in my article I made of SL and MM kind of philosophy by now and when I trade I look for my openings with this in mind.
I know it may sound like a riddle because you wont read anything like this anywhere on the forums... there is a particular aproach which just pop into my head and I'm trying to make a sense of it :)



...the resistance level as shown in your example does not come very often - I rather think, this is a very rare situation, having such a beautiful resistance level. But the resistance level is very essential for defining the correct S/L. So I would say, it is very hard to define the correct S/L.


Yes, that example is remarkable... but I didnt chose it on purpose... it was just one of the first I found... so maybe it is not so rare case :)
However, placing your SL is definitely linked to S/R levels but they do not have to be so sharply defined to make it work.
I can guarantee that you can always find a good SL in a range of 70-150 pips. If you are lucky even less.
...and if you dont find it? well... easy, it means U'd be better not to trade :)
In fact if you find your optimum SL some 200 pips far then your moment is gone, it's simply to late to take that trade... dont you think?
Why on the earth you should use a smaller SL introducing the risk of losing the trade??? ...you should have opened your position earlier and since you didnt then you wait... another better chance will come. Forex is gonna be there for a long time.


Hope you get my point :)


I dont want to add more here, I'm working on this second article which is just about placing SL and coding an indicator/EA which recognize the proper SL level according latest price action. I didnt see anything like this around... so maybe it will be a bulshit or a big step ahead... I guess we'll see :)



Cheers,
Andrea ;)

lee
191
lee 2009.06.02 09:16  

HOW EVER THE REALITY tell me that fixed SL distance is better, you can see the top 3 EA of ATC 2008, also using same SL distance

Andrea Bronzini
106
Andrea Bronzini 2009.06.02 09:33  
chiwing:

HOW EVER THE REALITY tell me that fixed SL distance is better, you can see the top 3 EA of ATC 2008, also using same SL distance


Got your point but I'm damn curious to see how those EAs would be doing right now :)


You are basing your judgment on a reality which is 3 months long.
No need to add anything else.
Heve you ever thought that out of more 700 EA there are for sure some that fit the Market behavior for a short given time???
This doesnt mean they are better than others... they are only a lucky match to the current Market's conditions.
... at least until it is proven that that kind of result can keep going for long long time.


However, this is not the point one should look at.
SL is seldom reason for which a strategy wins... but it can be reason for which a strategy loses!
SL comes handy only when the position is a loosing one... so if your strategy is so good that position always go in profit shortly you could use no SL at all. But we all know that there is no such strategy and that's why we have to keep using SL.


A good idea to check effect of fixed SL on ATC EAs would be to look among the loosing EA and see how many implements fixed SL or no SL and how many variable SL. I expect that you can find in percentage more EAs with variable SL among those in profit than among those in loss.


Anyway, successful EAs are those who can produce a constant profit on the long run, no matter how small/big it is.
When I trade I want to be able to gain profit continuously... not make money today and go bankrupt tomorrow.
That's why one thinks through what he is doing and tries to use some logic. Fixed SL has no logic at all.


A.

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