I am still progressing, but slowly. This new week saw my trading account reaching a new high, hitting milestone 8 out of 88 in my quest to grow 1 million pound trading money. An improvement of two levels since my last update. However, the en route journey (so far) is a bumpy one. Nevertheless, I manage to gain some valuable lessons out of this experience.
I will try to sum up my points here:
1. In order to grow your account size comfortably, you need a trading method that can typically generate 1.5 - 2 R, and possibly 3 R in some of the best setup. (R being the reward-to-risk ratio). For example, in forex pips term, you are willing to risk 20 pips to gain 30 pips (1.5 R), 40 pips (2 R), 60 pips (3 R) and so on.
2. The strategy used must capture the essence of trading, i.e. buy low sell high. For swing trading, you are able to understand the swinging price action and hence allowing you to enter positions near the low or high of the day.
3. You have a detailed trade exit plan. In the case of trading multi-lot, you are willing to book partial profit as well as holding the rest of the position for a bigger profit. You give time for the target price to be developed.
4. You have the ability to minimise trading losses. Although you use a stop loss of 1 R, you are willing to cut your losses early as soon as you identify the price action is going against the initial trading plan.
5. The win/lose rate must be better than 50%. The 50% figure is already quite a conservative one. Your trading methodology must give you a real edge, therefore, you must understand where your edge lies.
6. Finally, it is about the trading capital preservation. You should not risk more than 8% on a single trade. My current affordable/emotional limit is a low conservative 5 -6%.
(1 Million Goal: 8/88)
2 comments:
Great post. Distiled explanation of ways to really grow your account. I would like to know how does 4 loses in the row affect you emotionally regarding about 5% loss in each of them. Your pain level is 10 time bigger than mine.
Basically, to be afford to risk 5% or more on each trade, first, you really need a trustable trading method and a detailed trading plan as I mentioned in this post. For example, your system must be able to generate more than 1R return and occasionally some big winners. You are also able to identify and cut your trading losses swiftly in order to keep them lower than 1R sometimes.
I can see that emotion is a real psychological barrier in trading. To effectively grow your account in stress-less manner, you should start with the smallest trading fund that you can even afford to lose it all. The objective is to familiarise with the trading system/plan and have a lot of practice. It is the trading skill which you are after, just like the sporting skill acquired by the top athletes. Once you have a winning formula, you just duplicate the trading routine day in day out.
In short, only system/skill guarantees the success, being emotional is only a part of the game.
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