Isnt 2% per trade massively flawed?

[meuxi9]

Hi all,

Just a thought:

People all over the web say just risk 2% per commerce which although sounds great, surly is massively flawed, for instance:

I enter extended with a 20 pip SL, risking 2% of my account. There's a black swan event/caught in news event causing slippage (which do, and will happen)
I get slid for lets say... 200 pips (nothing in comparison to EURCHF recently)

And today, 20 percent of my account is gone?
Or even worse, even in EURCHF case, you are currently in enormous negative equity.

Would not a better strategy to designate a'realistic worst outcome' state of 2000 pips, and then figure out how much equity you need in your account to sustain this type of reduction?

As an instance, $20000 per 1 lot traded (meaning even in the worst case scenario and you are slipped 2000 pips, you would be in a far better financial position to handle the reduction )... or at least, wouldn't enter negative?

Surely risking 2% each transaction fluctuates a LOT predicated on SL size (10 pips off vs 300 pips off ) in regards to market exposure and risk?

[Solaycelade]

quote LOL. I agree that place FX trading is playing with fire. The only way to eliminate the risk of the SNB like black swan events is not to exchange spot FX. I would recommend Currency futures options where you can actually quantify your risk and also eliminate the possibility.

Just never pay back your broker for a negative loss too, they have ceased losses and prevent outs to stop these matters, if they can't honor them they shouldn't be offering them along with the risk is theirs when they can't!

[Solaycelade]

quote #8203;I agree with all your suggestions. I think it's noteworthy not to completely rely on balance protection. . Balance protection was offered by FXCM up until they suffered and attempted to collect it. Might even be worth asking a professional to check over your broker conditions to make sure they don't have hiding off. . I think (for me anyhow ) It's going to be vitally important not to over leverage myself... I am not confident trading 2% of my account each commerce since it is much too much in my opinion (incase...

I thought FXCM took a loan to cover everybody with negative accounts and to honor stop-losses?

[merxxxeee]

I exchange at 400:1 leverage. I exchange at that leverage at 2.5 lots per $1,000 in my account. I utilize brokers that do charge for balances. These brokers also permit hedging, and that I hedge -11 pips, before transaction expenses. When I screw the pooch on a transaction, I am down less 30%, BUT since my system of trade entries is quite accurate, getting out of a hedge to me is the next trade entrance. That said, these ways I exchange do NOT talk with your question. I'm up $88,000,000 so it is easy for me to talk. I advise that you trade large lots per...

Thanks for the advice I have been seeing your threads trying to find out what amount you used as a hedge quit. As a hedge trader myself I know the merits of utilizing them instead of the usual stop loss but very few men and women recognise the value of them. Your method is quite good although somewhat unorthodox. That's the reason you have been able to do as well as you've done.

[oxnucoxn]

quote Thank you for the info I have been watching your threads trying to find out which level you employed as a hedge stop. As a hedge trader myself I understand the merits of using them rather however not a lot of men and women recognise the worth of them. Your method is very good although somewhat unorthodox. Why you have been able to do as well as you've 15, that is.

Hi there, do you mind telling us what exactly are you hedging in the forex market?

For the remainder out there, many broker out there allows you to have a buy order and sell order done and show you two positions in your own system without netting off them. This is NOT hedging. 1) you have no position 2) you incurred 2x commissions 3) you incurred swap price for holding the two standing

You have no net position and you continue to incurred side price for keeping the two positions open. In this manner, your broker continues to earn money off you. So beware.

[lauraoxrtnwz90]

quote As I said, to prevent swans/stock halts, don't trade around news releases. All inventory halts are because of News that is sketchy and it that they are extremely easy to predict, just as most Currency Swans are if Monetary Policy change is announced during its scheduled news release. AVOID THE SWAN:HOW TO GUIDE image STEP 1: Close All Trades BEFORE news is out. STEP 2: Don't Open Any Trades BEFORE news is out. Your Done! I wasn't influenced by CHF as I don't trade if there's large red news anticipated within 4-24 Hours(Depending on trading egy)...

really this CHF drop was not from the news on FF calendar. If you start to observe the details, you will see that they added it afterwards, it was an crisis meeting. Which sounds shady to me, but it is what it is.

[lauraoxrtnwz90]

And, flinx, trading TF would help you a lot. If you exchange the daily for example, with this CHF fall you would lose like 30 percent of your account, something like that.
But trading a TF like the 4H or above would reduce the risk at a quite considerable manner, I believe.

quote Is there a documented instance of a client made to pay? (there could be but I have;t heard). Just go with ones that do offer protection against neg balance. And frankly SNB wasn't a black swan occasion. A terrorist attack or an earth quake is a black swan occasion and those slide you enjoy 200-300 pips in most. You'd ECB constantly pushing the euro down and declaring QE in following week, you knew SNB's programs speech time, you knew that shorting chf wasn't worth it interms of Risk:reward ratio. If anyone was long any chf pairs in...

really, fine reasoning

I shall study more about currencies to understand more and know about these things.

[merxxxeee]

quote Hi there, do you mind telling us what exactly are you hedging in the FX market? For the remainder out here broker out there allows you to have a buy order and sell order done without netting off them, and show you two positions on your own system. This is NOT hedging. 1) you don't have any place 2) you incurred 2x commissions 3) you incurred swap price for holding the two position You don't have any web position and you continue to incurred negative cost for maintaining the two places open. This way, your broker continues to earn money off you....

Well you are probably technically appropriate, but in the context of not having a stop loss then everything you try and do is:

When the price has gone from the position then you put a trade of at least the same value in the opposite direction. This locks your drop in equity momentary because possible trade and try your way from this reduction in equity. A reduction only becomes as in the situation using a stop loss, a loss once you shut the trade.

[oxnucoxn]

quote Well you are probably technically right, but in the context of not using a stop loss then everything you try and do is: When the price goes against your position then you put a trade of at least the same value from the contrary direction. This locks your fall in equity momentary as you then try and trade your way out of this reduction in equity. A reduction only becomes a reduction when you shut the commerce, as if with a stop loss.

Hi HungryHound, thanks for highlighting. However, I would like to point out the fallacy in your respond which I coloured red. It's a very dangerous misconception which only serves to improve your broker with no net benefit to yourself.

First, when you place the reverse commerce, you have effectively locked in your own loss. It HAS become a loss. Tell me what's the gap between the two:

Case 1: Broker that allows you maintain opposing commerce open on your platform:

Current price = $8
a. Bought 1 unit at $10, unrealized PL = -$2
b. Sold 1 unit a $8, unrealized PL = $0

Assume no other position traded for the day and so realized PL for the day = $0

unrealized realized PL = $-2 $0 $0 =$-2


Case 2: Broker does not allow opposing commerce on the system and so nets off them

Current price = $8
a. Bought 1 unit in $10
b. Sold 1 unit in $8
Web position = no position.

Assume no other position traded for the day and so unrealized PL = 0

unrealized realized PL = $0 - $ two -$2


Do not kid yourself thinking there's a difference. There's not one, and when we put to the example, the swap price and 2x commissions, compared to those are the gap and is a penalty for you. I sincerely hope you see it.

[merxxxeee]

quote Hello, thanks for highlighting. However, I would like to point out the fallacy on your response which I coloured red. It is a really dangerous misconception which only serves to improve your broker with no advantage to your own. First, when you set the opposite trade, you have effectively locked on your loss. It HAS become a loss. Tell me what is the difference between the two: Case 1: Broker that permits you keep opposing commerce open on your system: Current price = $8 a. Bought 1 device at $10, unrealized PL = -$2 b. Sold 1 unit per $1 8,...

I dont dispute your logic or your own maths, however there is one slight difference in the appliion when we trade.


Every single time you cash in your equity loss position you then decrease your balance, you generally take your have made a trade which has gone against you and then start again. Using a balance.

When you put a hedge trade set up, generally its because you believe your trade remains a valid but you wish to contain your drawback. And remain in the trade.

If you take that the only was to exchange would be to put in stop losses you then restrict your trading options.

I am stating that there are alternativesup it to the trader to decide if they are suited to themselves.