Trade setups I would take and how to manage risk
Diupdate
Just like this. Buy and sell limits above and below structure, as in the most recent highs/lows, with your TP in general being a return to structure. Brutally easy way to scalp and make money.
Few more examples...
This one shows where the stop loss might be. In general, I go with a 2/3 or 3/4 type rule, where I'll have a wide cluster of limits, then a gap, then a hard stop that closes all of them. Just in case. Your order clusters should be wide enough with this strategy that it almost never gets hit. Regular market movement should not be hitting your stop loss. That kind of behavior should generally be reserved for news events that catch you off guard.
Now as far as actual risk goes, this is entirely determined by you and no one else. There's no single correct way to do this. A lot of people are dead set on the idea that you should never risk 10% of your account, but how big is the account? Is it $10,000? Is it $100? If it's $100, why not risk $50+ when the odds of a loss are very low?
On EUR/USD, you might have a hard stop loss of 50 pips with 15 tickets separated by 2 pips each. Each ticket would be 1k (0.01 lots).
If 1 pip on a 1k is $0.10, then a 50 pip stop loss is $5.
Your second ticket is 2 pips away, so that loss would be $4.80. Third $4.60, and so on. It's doable, right?
Maybe the price dips 20 pips into your counter-trend limit cluster, eating 10 limits. Then the price returns to the support or resistance near your starting point, and you decide to close all of your tickets.
The profits from that would be $2.00, then $1.80, then $1.60, and so on. That might not seem like much in comparison to the stop loss, but consider this: your stop loss will have a 0-5% chance of ever getting hit. It's straight profit. And it's constant, and consistent. I cannot stress that enough! You can be doing this all day long.
So, what if you want to follow a trend in this manner? It's the same deal, really... just throw limit orders below (or above) trending wicks. Like this:
It's all just structure. You bet with structure, and you bet against structure. At all times.
You only require a 50% retracement from your starting ticket in order to break even. If you even feel uncomfortable with what's going on in front of you, it doesn't take much for you to get out safely and start over with a new cluster of limits. There is absolutely nothing wrong with closing out safely. You'll be trading so frequently you aren't even a little bit obligated to let things "play out".
Maybe you don't like how quickly the momentum built into your cluster, and it retraces down to the 50% area so you wanna break even, but then you start laying more limits above and below because you believe that momentum is likely to slow down.
I'm gonna tear down a phrase that I'm sick of hearing: the trend is your friend.
The trend could be the worst friend you've ever had. Sometimes he's really cool, and he's the life of the party. But he really likes hanging out with you, especially when nothing is going on. He really likes to wait! He doesn't exactly value your time, and he's perfectly content sitting in a chair next to you watching paint dry. He smacks the remote out of your hand when you try to turn on the TV. This trend guy can be a real jerk sometimes. You also suspect he might be bi-polar, because sometimes when you get excited to do things with him, his mood shifts the moment you open your mouth and suddenly the fun has been sucked out of the room.
That is the trend. On some pairs like USD/JPY, a trend can go on for a very long time, and there's a lot of money to be made. The problem is it is speculative. You don't know where that trend is going to end. Nobody is clairvoyant, and most people will make incorrect guesses. If you simply remove this requirement of speculation, where you have to be "correct" in your guesses in order to make money, you will do better in almost any market.
If your goal in trading is to make consistent money, then the trend is not your friend. He's an acquaintance at best. You have to associate with him in business and that's about it. You spend just as much time associating with the counter-trend, because you should be doing business with both of them constantly.
Now, on the other hand, if your goal is to invest (AKA gambling), that's a separate concept entirely. You're trying to grow a tree from a seed when you invest, and there's nothing wrong with that. But most people cannot live off of it. You can't even order pizza with your investments until they come to fruition.
A trader can make consistent money every single day, without knowing or caring where the market is going or what it's going to do. Price continues trend, price retests, trader makes money. Price reverses, price retests, trader makes money. That's it. No waiting for retarded "key support levels", no waiting for "confirmation", no speculation, no technical analysis. Just raw risk management, getting in and out of the market quickly and constantly.
Now, the one downside to being this kind of trader is you generally can't do this easily with the basic tools provided by your platform, meaning you would need scripts, EAs or whatever in order to quickly deploy limit clusters. The tool I'm working on allows me to drag a horizontal line on the screen, and I have a panel of buttons that do interesting things. I can click "Sell limits" and a whole bunch of sell limit orders appear just above the line. I can move that line again and click "Adjust TP", and the take profits for all of those orders will appear right below the structural retest point I'm targeting. I have buttons to close profits, to close pendings, close all tickets... it's just the bees knees. This is an MT5 EA, which most people won't be using, but I trade on CryptoAltum so that's what I use. I will leave it here for free.
Lastly, have some limit order porn. Every single rectangle is a place where you could've had limits that got filled and made money. On really strong trends, you might notice that the retracement only returns to around the 50% point of your limit cluster, but you'll notice how uncommon that is and how easily you could've gotten out with little to no loss.
A lot of the time, I won't even restrict myself to structure (swing highs and swing lows) even though that's the most reliable way to do it. I'll literally just put limits above and below any wick because I feel like it and I can make a profit in all likelihood.
...Anyway. I hope you enjoyed this write-up. Leave a comment if you did, or have any questions!
Few more examples...
This one shows where the stop loss might be. In general, I go with a 2/3 or 3/4 type rule, where I'll have a wide cluster of limits, then a gap, then a hard stop that closes all of them. Just in case. Your order clusters should be wide enough with this strategy that it almost never gets hit. Regular market movement should not be hitting your stop loss. That kind of behavior should generally be reserved for news events that catch you off guard.
Now as far as actual risk goes, this is entirely determined by you and no one else. There's no single correct way to do this. A lot of people are dead set on the idea that you should never risk 10% of your account, but how big is the account? Is it $10,000? Is it $100? If it's $100, why not risk $50+ when the odds of a loss are very low?
On EUR/USD, you might have a hard stop loss of 50 pips with 15 tickets separated by 2 pips each. Each ticket would be 1k (0.01 lots).
If 1 pip on a 1k is $0.10, then a 50 pip stop loss is $5.
Your second ticket is 2 pips away, so that loss would be $4.80. Third $4.60, and so on. It's doable, right?
Maybe the price dips 20 pips into your counter-trend limit cluster, eating 10 limits. Then the price returns to the support or resistance near your starting point, and you decide to close all of your tickets.
The profits from that would be $2.00, then $1.80, then $1.60, and so on. That might not seem like much in comparison to the stop loss, but consider this: your stop loss will have a 0-5% chance of ever getting hit. It's straight profit. And it's constant, and consistent. I cannot stress that enough! You can be doing this all day long.
So, what if you want to follow a trend in this manner? It's the same deal, really... just throw limit orders below (or above) trending wicks. Like this:
It's all just structure. You bet with structure, and you bet against structure. At all times.
You only require a 50% retracement from your starting ticket in order to break even. If you even feel uncomfortable with what's going on in front of you, it doesn't take much for you to get out safely and start over with a new cluster of limits. There is absolutely nothing wrong with closing out safely. You'll be trading so frequently you aren't even a little bit obligated to let things "play out".
Maybe you don't like how quickly the momentum built into your cluster, and it retraces down to the 50% area so you wanna break even, but then you start laying more limits above and below because you believe that momentum is likely to slow down.
I'm gonna tear down a phrase that I'm sick of hearing: the trend is your friend.
The trend could be the worst friend you've ever had. Sometimes he's really cool, and he's the life of the party. But he really likes hanging out with you, especially when nothing is going on. He really likes to wait! He doesn't exactly value your time, and he's perfectly content sitting in a chair next to you watching paint dry. He smacks the remote out of your hand when you try to turn on the TV. This trend guy can be a real jerk sometimes. You also suspect he might be bi-polar, because sometimes when you get excited to do things with him, his mood shifts the moment you open your mouth and suddenly the fun has been sucked out of the room.
That is the trend. On some pairs like USD/JPY, a trend can go on for a very long time, and there's a lot of money to be made. The problem is it is speculative. You don't know where that trend is going to end. Nobody is clairvoyant, and most people will make incorrect guesses. If you simply remove this requirement of speculation, where you have to be "correct" in your guesses in order to make money, you will do better in almost any market.
If your goal in trading is to make consistent money, then the trend is not your friend. He's an acquaintance at best. You have to associate with him in business and that's about it. You spend just as much time associating with the counter-trend, because you should be doing business with both of them constantly.
Now, on the other hand, if your goal is to invest (AKA gambling), that's a separate concept entirely. You're trying to grow a tree from a seed when you invest, and there's nothing wrong with that. But most people cannot live off of it. You can't even order pizza with your investments until they come to fruition.
A trader can make consistent money every single day, without knowing or caring where the market is going or what it's going to do. Price continues trend, price retests, trader makes money. Price reverses, price retests, trader makes money. That's it. No waiting for retarded "key support levels", no waiting for "confirmation", no speculation, no technical analysis. Just raw risk management, getting in and out of the market quickly and constantly.
Now, the one downside to being this kind of trader is you generally can't do this easily with the basic tools provided by your platform, meaning you would need scripts, EAs or whatever in order to quickly deploy limit clusters. The tool I'm working on allows me to drag a horizontal line on the screen, and I have a panel of buttons that do interesting things. I can click "Sell limits" and a whole bunch of sell limit orders appear just above the line. I can move that line again and click "Adjust TP", and the take profits for all of those orders will appear right below the structural retest point I'm targeting. I have buttons to close profits, to close pendings, close all tickets... it's just the bees knees. This is an MT5 EA, which most people won't be using, but I trade on CryptoAltum so that's what I use. I will leave it here for free.
Lastly, have some limit order porn. Every single rectangle is a place where you could've had limits that got filled and made money. On really strong trends, you might notice that the retracement only returns to around the 50% point of your limit cluster, but you'll notice how uncommon that is and how easily you could've gotten out with little to no loss.
A lot of the time, I won't even restrict myself to structure (swing highs and swing lows) even though that's the most reliable way to do it. I'll literally just put limits above and below any wick because I feel like it and I can make a profit in all likelihood.
...Anyway. I hope you enjoyed this write-up. Leave a comment if you did, or have any questions!
Catatan
Oh, also. Message me for a discord link if you want to join my channel.
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