I kind of went on tilt yesterday. I blew two PAs, but kept one alive with a loss of $1200.
I find I tend to do this when things just don’t go as they should. For example, when there’s a solid support level and the price blows through it. I know, it was probably a gotcha level. That’s why the reasonable thing to do is place stops just below that level in case it doesn’t hold. That’s what I do, but after many failures, I tend to get stubborn and move my stops. I know better, but I do it anyway.
But this got me to testing out a new theory. One which saved my last account and made significant gains, today. I call it my Big Picture Strategy. The idea is to determine the larger targets within the current trend and to enter multiple small trades at price pullbacks with large stops and reachable targets. Even as price moves away from the target. If the larger target is correct – or in the correct direction, it will eventually result in significant profits. If it’s wrong, I will hit my daily max loss.
The key is to place small trades that will cumulatively add up to a larger trade. This helps remove paralysis when trading with larger trade sizes which addresses my lack of discipline when encountering repeated losing trades.
I think building an account to a level where withdrawals are possible is psychologically valuable. So, I am OK with taking risks to get there. After all, what I’m really risking is the cost of the PA evaluation along with the cost of the eval. At worst, this is $125 + $75 = $200 (assuming 50/50 on passing eval). But, if there’s a 50/50 chance I can get the account to withdrawal, then the risk is good. Assuming withdrawal size is $500, then 50/50 would result in a net of $300 – for the FIRST withdrawal. Nothing but profit on subsequent withdrawals.
After an account has reached the payout stage, I think it makes sense to scale back trade size and take smaller risks. I’ve been pondering trading just one micro contract to check this box. At this level, a max daily loss of $250 would be palatable. My daily profit target would be $150. Each trade would win $12 (25 ticks). So, I’d need a net number of trades to be 14 (13×12 = 156). Seriously doable! (rough math).
I think this system can have a daily win rate of 80%. That means in five days I’d win $600 and lose $250 = net $350. That’s on one account. Since Apex pays every eight days, that would result in average gains of $960 – $400 = $560. Can I win at 80%? I’m sure sometimes it is possible. But as long as I don’t have a win rate of less that x%, I’ll be able to weather the down times.
Another way to look at it is, at $250 max daily loss, I’d be able to weather ten consecutive losing days. I know I’m arrogant, but this style of trading might just work for my personality.
Another issue to address is Apex’s restrictions on max daily loss and risk ratio limits.
I think it is ridiculous that they consider a trade is bad when the ultimate result was an RR of less than 1:5. I’m not saying that it isn’t a good limit. I’m saying that having a trade go against you and then recover to the point of break even is a bad thing when you decide, because market conditions have changed since the original entry, you exit the trade at break even. Or the other way around, price moves against you, but then recovers and is close to target. So moving the stop to break even would also break the rules because the ultimate RR ended up exceeding the 1:5 limit.
That being said, I think there is a window where breaking the rules to get the account to withdrawal is a reasonable thing to do. That is, expect to be denied on the first withdrawal request. Then, trade another eight days staying within the rules and you should be approved.
To ensure rules are not broken, I’m thinking of creating an indicator that shows the stop loss and profit levels on the current bar. This would make it easy to see price based on structure at that point. I’ll also set up trading price based on 4.99:1 RR and just never again move a stop. (with my current target at 26, that would mean a stop of 129).
But what about moving the target? Let’s say my target is 26 ticks. What happens when I move my target to 13 because something changed – and it was down 70 ticks at one point? This would also violate the RR rule. I guess that means I need another dynamic level that is based on the max trade loss. This level would show minimum profit in order to stay in the rules.
Since taking a small loss after a larger loss is NOT a violation of the rules, it should also indicate the exit level of one tick below entry. This could be useful to move the take profit to this level when confidence has been lost in the trade. That is, when one doesn’t think it’ll get to target based on current action.
So, two indicators are needed. One to visually show limits on potential trades and the other to show levels on active trades. And, I guess a third indicator to show daily max loss level. This would need to be dynamic based on active trades.
I just realized my mindset typically includes the attitude that stops don’t really matter when using the daily loss limit as a stop…. This can factor into the indicator development.