Keeping losses under control

[Steve Griffiths]

Hi Everybody,

On of the most important aspects in an succesful approach to trading is to keep the losses small. Most people do not like to talk about losses, but how you deal with them is vitally impostant.

The chart below show a loss after what appeard th be a perfect TS3 sell set-ups. Losses can and do unfold, the trick is to keep the loss small when it does. Here the close stops restricted the loss to only a small $ value.

Kepping the losses small, and the profits large is the real holy grail of trading and why Position sizing is so vitally impotanat.

Thanks

Steve

[Steve Griffiths]

Hi Everybody,

Here is a link to a Position Sizing doc that will help:

http://www.mtpredictor.com/pricing/documents/PositionSizingHelpFile-180106.pdf

This helps with the tick sizes and point values for Futures as well :)

Thanks

Steve

[alan4]

Steve,

I sort of understand your explanation of position sizing, but there is something I'm not clear about.

Let's say I have been taking some trades, on say daily charts, with R:R 3X. Let's also say that I have made some profit from these trades which in turn increased my account size.

Now with a greater account size, say I find a good set up on a weekly chart. The R:R is on the trade is also 3X. Because the initial risk is greater in dollar terms (than the trades taken on the daily charts), if I am stopped out I could possibly lose all the profit from the previous trades.

So, is there some money management rule or guidelines regarding jumping from a shorter timeframe to a longer timeframe?

Thanks
Alan

[Steve Griffiths]

Hi Alan,

That is EXACTLY the point of correct position sizing and why so many people do not understand it therefore they enter trades with too big a risk, and as a result can get wiped out by one large loss.

If you re-read your question I belive that you have the answer yourslef - in that if the initial risk is too big on your weekly set-up what should you do ??

Excactly - pass on the trade :)

I hope this helps ?

Steve