Practice Exercise #3 (Money Management Test on DEMO)


If you started this Practice Exercise #1 you probably notice that this isn't working on ranging market (we had some examples of 5% losses on the last couple of days, due to Cyprus situation).

Testing this, with a SL=30p, we notice that in a range market of let's say 50p, our profit target of 90p is almost impossible to reach even if our position run in profit, for a while. And the SL will be hit, eventually, unless the PA will break any side, to have that 50% to catch the new trend (based on flipping the coin math probabilities).

The first idea that we can think of, to improve the initial exercise, is to use the Position Management (to "lock the profits"). 

NEW:
The second idea that we can think of, is to use a double number of pips as SL = 60p. And of course to double the TP = 180p, as well.
The reasons behind this are described here.
In order to keep the same MM, we can't use 20 opened positions like in the Exercise #1 (since we've doubled the SL and we need to keep the same % of loss per trade ).
Then, we will have the next steps for this new exercise:

1. Open a DEMO account = $10,000 (or continue to use the old one)
2. Take a coin (yes a coin).
3. Establish which coin sides will give you the signals. E.q head = long, tail=short
4. Open 10 pairs on your platform (NEW)
(only pairs for not ruining the margins requirement. e.q no gold/silver/oil/indices, etc)
5. Flip the coin for first pair.
6. Enter (market order) using 0.01 lots (0.1 for $100,000 account), SL = 60p, TP =180p (NEW)
7. Go to the next pair and do the same entry technique, then the next...until 10 pairs (not 20 like in the previous exercise).
8. After having 10 opened positions, stop trading (NEW)
9. If any position run in profit, move the SL = Entry ± Spread ± few pips or use Trailing Stop
10. Let all the positions to run, until the new SL/TP hit.
11. If any position is closed (TP/SL hit), on the next day, open a new trade by flipping the coin, again (and move, the SL, for the profitable positions).


* Important note: Practice TEST on DEMO purpose, only!


As I expected, the last week exercise didn't offered us enough published results, due to the people lack of time (jobs, etc). As soon as I will have it, I will update it on the Exercise #2 post.

The result for this Exercise #3 will be published here, as soon as I will have it, as well. Probably this exercise will take us 2 weeks, since we've doubled the SL and TP levels (no of pips). If we will still have a range market, it will be hard to have sooner, some closed trades to count for it.


Best Regards,
^^_Lord_Ice_^^ 

6 comments:

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