Changes in position sizing depending on instrument
Recall that I measure my overall performance in terms of units of risk. Currently one unit of risk equals £75 – this is meant to increase over time assuming that trading results are generally positive. A lot of retail traders are advised to risk 1% of their trading per bankroll per trade. Thus if one has a bankroll of £10,000, then they should risk no more than £100 per trade. In my book, this would mean that one unit of risk is equal to £100. Obviously, right now these figures are rather laughable. I would think making a steady 5R per month (before overheads – computers, office rent, subscriptions) would be very respectable – well in London you would not be able to survive on £500. Regardless I am still following this strictly.
I am keeping my standard unit of risk at £75. However, from today I will risk 1.33R per trade (i.e. £100) on DAX and GBPUSD trades because I have been doing good on those. And I will risk only 0.67R (i.e. £50) on Oil trades, because those trades have been worse than DAX/GBPUSD.
Charts for today’s trades
Here’s the trades I took today – unfortunately there were no winning trades today.
Key points: Judgement in setting stop-entry levels, assessing daily volatility levels, Over-aggression, missing setups
- For each completed trade, who was in control? Was it the proficient trader inside me? Or was it the destructive George? What picture or image is evolving for both of these traders?
- How much of the trading session was spent “trading well”, and how much of the trading session was spent “trading badly”?
- How could I have increased the amount of impact that the proficient trader inside of me, had on the trading session?
- List and describe specific examples of good and bad trading from the day’s session.
- Why did I do the “bad trading”? What, such as specific events, or patterns of thought, caused it?
- What other observations, in the context of Chapter1, can I make?
1. For Cable-1 the proficient trader was in charge of the entry and the management. Good trading. Unfortunately price didn’t push through to the target, however tightening of the stop allowed me to get out for only a small loss. For Cable-2, the proficient trader was also in charge of the entry – a fair amount of patience was displayed. It seems that the destructive and proficient trader are trying to find a middle ground, by entering 1/2 using stop orders and 1/2 on a confirmed breakout. This worked ok for Cable-2.
The 1/2 on stop-entry, and 1/2 on confirmation ended up killing me on the DAX trade – it seems that the stop-entry was too aggressive given that price had earlier made a low at 10,617 (my stop-entry was at 10,625) and given the instrument’s volatility this day.
Thus it’s more likely that the destructive trader had some play in setting the very aggressive stop-entry level (I wasn’t even really thinking about it at that time – but now it suddenly seems clear).
2. The majority of the session was spent trading well. The setups I took were okay – it just didn’t work out today because price movement on Cable was muted. The trading on the DAX could have been better.
3. The proficient trader can be more in charge by exercising additional judgement in setting the exact level of the stop-entry. In the DAX trade a stop-entry below the previous low of the day, thus 10,615 for example would have been more appropriate – the session’s volatility for the instrument also needs to be taken into account. Note that the volatility in the DAX was fairly high.
Another manner in giving more weight to the proficient trader is to be aware of the overall volatility in the market. Giving the absence of Tier-1 news during the session, the likelihood of muted price movement would be higher. This needs to be taking into account when judging a setup that requires movement in order to succeed. The volatility level should also be taken into account in adjusting the stop loss levels throughout the trade.
A 3rd way to be more in charge is to be more attentive to the 3 key charts – a valid short setup was missed on the DAX around 8am in the morning. The proficient trader shouldn’t miss any valid setups.
4. Good trading: All of Cable-1 trade. Using stop-levels for half the positions for getting into the trades. Risk Management.
Bad trading: Over-aggressive stop-entry on the DAX trade. Questionable stop management on Cable-2 – should have considered stop-tightening after price rallied 30 pips from just above the stop level. Missed DAX setup early in the morning (8am).
5. Over-aggression in stop-entry level: Wanting to get into a trade? Greed for wanting to get profits. Fear of missing out on the next move? Am I more likely to enter into a new trade if I already am in an existing position?
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