Post by traderAllen on May 17, 2015 23:27:06 GMT -5
Let's talk about correlations and how we use them to our advantage and disadvantage. I'm not talking about the euro dollar versus the pound dollar. I'm talking about the timeframe we trade, the profit targets, and the stop losses. And of course my favorite trading word volatility.
When you're trying to decide what time frame you want to trade you first have to look at how much time you have to devote to your trading method. If you work 9 to 5 you're probably better off using a daily timeframe and or a weekly timeframe. If you have the time to commit to trading throughout the day then you may choose a smaller intraday timeframe of this there are many to choose from.
No matter what time frame you choose volatility is always going to be there. It is going to be your friend and it's also going to be your enemy. Forget these methods that jokesters that say you can profit even if you only make money on 30% of your trades if you have the proper profit to loss ratio. That's a bunch of crap it works great for statistics. But falls apart miserably in the hands of a human. The only way to consistently make money is by profiting on more trades than your losing therefore you need a high win percentage. Who thinks that they can psychologically set through loss after loss after loss and not be affected.
If we want to consistently make money we have to understand volatility, get those profit targets out in front of price and keep those stop losses out of harms way, from the normal ebb and flow of the market. That is how you get a high win percentage. And how you make a profit month over month.
So back to our correlation. The shorter the time frame the narrower the profit target and stoploss is set, the larger the timeframe the larger the profit target and stoploss, the volatility of the market in the timeframe you choose to trade dictates this. This is why proper money management is now crucial, never risk more than 1% of your account on any trade. Therefore back to correlation the larger the timeframe, the larger the stoploss, the smaller the position size.
When you're trying to decide what time frame you want to trade you first have to look at how much time you have to devote to your trading method. If you work 9 to 5 you're probably better off using a daily timeframe and or a weekly timeframe. If you have the time to commit to trading throughout the day then you may choose a smaller intraday timeframe of this there are many to choose from.
No matter what time frame you choose volatility is always going to be there. It is going to be your friend and it's also going to be your enemy. Forget these methods that jokesters that say you can profit even if you only make money on 30% of your trades if you have the proper profit to loss ratio. That's a bunch of crap it works great for statistics. But falls apart miserably in the hands of a human. The only way to consistently make money is by profiting on more trades than your losing therefore you need a high win percentage. Who thinks that they can psychologically set through loss after loss after loss and not be affected.
If we want to consistently make money we have to understand volatility, get those profit targets out in front of price and keep those stop losses out of harms way, from the normal ebb and flow of the market. That is how you get a high win percentage. And how you make a profit month over month.
So back to our correlation. The shorter the time frame the narrower the profit target and stoploss is set, the larger the timeframe the larger the profit target and stoploss, the volatility of the market in the timeframe you choose to trade dictates this. This is why proper money management is now crucial, never risk more than 1% of your account on any trade. Therefore back to correlation the larger the timeframe, the larger the stoploss, the smaller the position size.