About adding a little bit of risk to bull spreads ~ forex trading optionshouse

11:54 PM in a, about, adding, bit, bull, double, e, Forex, h, happened, hockey, little, of, risk, spreads, sticks, the, to, today, what

Ok Clients, Remember...

This is a different way to trade so if you are not comfortable doing what I am getting ready to layout, you dont have to nor should you. Its all based on how you want to manage your account.

I see a lot of new traders averaging down to try to "BE RIGHT" on their trade. This method blew out 9 of my accounts in the past and I highly suggest NOT doing it with one exception. Bull Spreads. A trader can do this effectively on bull spreads because you know your max risk.

This is about the safest way to "Average Down" because you know what your max loss is. Still remember that averaging down is not for the low funded account. Try it on demo if you are inclined
------------------------------------------------------------------------------------------------------------

Everything I am going to talk about is based on the "Wally World 6 Million" trade below

Daily 415pm Expiration 16000-16400             16030  16036
Daily 415pm Expiration  15400-16200            16002  16007
Daily 415pm Expiration 15600-16000             15980  15985
Daily 415pm Expiration 15600-16400             15995  16000
----------------------------------------------------------------------------------------------------------

If I am going to buy 16000-16400 and sell the 15600-16000 then I want to get the closest price possible to the floor, right? well right now the price shows 16036 which is 30something points higher than the actual underlying price.

If you want to trade 7 contracts but you want to minimize your risk. You can place buy orders:

Buy 1 @ 16036 This will put you in the trade.
Buy 1 @ 16026
Buy 2 @16016
Buy 3 @ 16006

Your average price will be 16016.

Your max risk will be $112 for 7 contracts. You can know that you wil not lose any more than $112 if your trade fails.

Each point will be worth $7 so if price moves 50 points in your favor, then your profit will be sitting at a $280 profit. If price does what it did Thursday and over 300 points in your favor, you will be sitting on a profit of $2,100

If price falls 300 points against you, your max loss is $112.

forex trading optionshouse

Read more

How to calculate Take Profit Levels on Nadex Bull Spreads ~ forex trading or stock trading

11:05 PM in a, about, adding, bit, bull, calculate, Forex, how, levels, little, nadex, of, on, profit, risk, spreads, take, to

It is really simple. I will not over complicate it. There are several hour long webinars out there on the web that shows how to do this but I will tell you in a few short sentences. Nadex profit and loss is equal to $1 per tick. What is a tick? It is the LAST digit on any bull spread. If the Gold price is 1299.6, then that last digit (6) is what you want to look at. If the Wall Street 30 price is 16430, then the last digit (0) is the digit you want to watch. When calculating your TP, all you have to do is erase the point, if there is a point in the quote such as the one in the Gold price at 1299.6 If I want to calculate at what price a $30 profit means, lets pretend I am selling, then this is how you do it... 12996 (take out the point) MINUS 30 = 12966. Then add the point back in. 1296.6 1296.6 is the price you want to take profit at to make a potential $30 profit. Lets look at the Wall St 30 at a price of 16430. If you sold it at 16430 and wanted a $45 profit, where would you set your TP at? 16430 MINUS 45 EQUALS 16385. 16430-45= 16385 So 16385 is where you want to buy it back. So what about buying? how do I calculate buying? Answer... Just ADD instead of SUBTRACT If I want a profit of $30... 16430 PLUS 30 EQUALS 16460. 16460 is where you set your TP And on the Gold trade, if I want a $30 profit when buying... Remember to take out the decimal. 1299.6 will become 12996 12996 PLUS 30 EQUALS 13026. Add the decimal back in... 1302.6 is your TP price. Thats it.
forex trading or stock trading

Read more

Evaluating Trading Systems Characteristics and Quality ~ forex trading games online

4:16 PM in a, and, bit, characteristics, coming, ebook, evaluating, Forex, little, new, o, quality, restructuring, soon, systems, trading, update

The evaluation of trading strategies is certainly one of the most necessary processes in the trading of mechanical manual or automated systems. The value of evaluation is great since it allows traders to loose their irrational fear and greed emotions and gain a true understanding about the characteristics of the trading system they intend to trade. Part of the evaluation of trading systems involves the judging of different quality parameters to distinguish what makes a system better and what makes it worse, a process which although seemingly intuitive is not so straightforward. Adequate knowledge about the information pertaining to each parameter of the test and what it conveys the user is necessary to know what its consequences actually are in real trading and what their power is from a comparative standpoint. On todays post I am going to talk about how to look at a systems characteristics and what you should be looking for to judge the quality of a given strategy.

New traders are often confused when it comes to the evaluation of trading strategies something which is not surprising if you take into account the whole amount of information which can be derived for a given system. People new to trading first seem to focus on the absolute values of the profit and maximum draw down percentages but judging the quality of a trading system merely by looking at these two values without prior experience is very hard. It is also true that judging a system just through one of these two values is misleading in the sense that it doesnt represent a good overall picture of the strategys characteristics. For example, saying that a system makes 100% a year does not make any sense if the actual potential draw down is not known and even if it is, other characteristics need to be taken into account.

The most simple way to compare a trading system to another effectively is to use ratios of profit and draw down variables. The profit factor, which compares the gross profit against the gross losses of a strategy is an initial measure of system quality. However, although this type of ratios do give us some information about the past risk to reward long term expectation (especially when evaluated over 10 year periods) they do not talk a lot about the problems the strategy would run into with increases in future risk. For this reason I believe that although these ratios are useful to some extent to compare simulations they do not fully represent the inherent market exposure of the system in a way in which a true comparison is made.

System quality - without a doubt - needs to include an analysis of increases in risk over the projected values achieved in simulations to know the true problems that the user may be running into if - for example - risk in the future increases or the estimation of profit and draw down targets is not accurate. For this reason it seems better to evaluate strategies based on projections of increased risk to know the true quality of the system and how dependent it may be on small glitches in simulations.

In this case our best shot at accurate quality comparisons seems to be the average compounded yearly profit to worst case scenario ratio in which the average yearly profit (over a 10 year period) is compared to twice the maximum draw down of the strategy (worst case ratio). To add more meaning to this increased risk comparison a careful user might also want to test the average compounded yearly profit to double consecutive loses after maximum draw down ratio (worst streak ratio). In this ratio, the average compounded yearly profit is compared to the maximum draw down percentage plus a string of loses equal to twice the number of maximum consecutive losing trades. The idea here is to get an idea about the robustness of the strategy and how bad things can turn before a bad scenario is bound to happen.

Systems that are very sensitive to small changes in the number of consecutive loses will give very unfavorable ratios in both cases while systems that have less dependency on individual trades will get better results. This way of evaluating strategies eliminates by default a lot of systems that use unsound trading tactics such as martingales and systems with very bad risk to reward ratios due to the fact that this ratio comparison makes them show their flaws if increases in risk are presented. One thing all traders should understand is that in the future the risk of any given strategy is bound to increase to some extent and having systems that are able to handle this risk increase is not only vital but necessary for successful long term trading.

The above evaluation criteria also allows you to use systems that dont need to wipe accounts to demonstrate that the market has become too risky for them. For example, a strategy with a worst case ratio of 1:2 targeting a 20% yearly profit may be stopped from trading at a 40% draw down while a system that has a 1:5 ratio in the same situation would end up killing the account before we realize it has become to risky. It is also important here to note that sound systems will have a "worst case ratio" better or only slightly worse than their "worst streak ratio" while systems that use unsound techniques -which will be sensitive to small increases in consecutive loses - will have a much worse "worst streak ratio".

In summary my advice is that you focus on the profit to draw down ratios when evaluating trading strategies but -most importantly - that you evaluate ratios in which the maximum draw down and maximum number of consecutive loses are increased so that you get a true idea about your systems robustness. If you would like to learn more about automated trading and how you too can start designing your own likely long term profitable systems please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

forex trading games online

Read more