Monday, March 17, 2008

Survival: Trading's First Rule-- IFCN Wk 15 -Mon- Equity: $623.73

Proof that survival is trading's first rule:

Bear Stearns.

Monday's trades:

The OneNightStand system works great! Too bad my account didn't jump like it could have. As you'll see in a bit, trading involves trade-offs.

I exited the short Usd/Chf (@1.0045) last surviving OneNightStand trade from Friday @ 97.41 on Monday morning 00:01 CST, for a total profit of 304 pips. The account then stood at $612.20. Better than Friday's total. The fact that if I didn't use stoplosses on the OneNightStand trades the figure would have been at $740.00+.

Factoring in the four 55 pip losses for the trades listed below, Friday's OneNightStand trades gained a total of 84 pips. Which sucks considering the huge moves that took place from Friday morning through the weekend.

Let me show the comparison after I make a statement about the OneNightStand method.

OneNightStand was discovered and initially implemented without consideration of an integral stoploss. Some traders used them and others didn't. I do. For money management and risk control.

A number of readers of the blog have tested ONS on their computer software and data and while finding it to be profitable, have found that using larger stops are often times much more profitable than using the smaller 55 pip stop. I completely agree, and that follows with my testing.

If you wish to use bigger stops, I think that is great and encourage you to do what is in your best interest. The only problem I can see is if you risk too much per trade.

Number one rule of trading is "survival".

If you traded this last week's ONS trades without stoplosses, as some choose to do, the following is the results you could have attained:
  • eur/usd: Bought @1.5646, exit 1.5842 ---196 pip profit
  • gbp/jpy: Sold @202.98, exit 195.45 ---753 pip profit
  • gbp/usd: Bought @2.0395, exit 2.0140 ---255 pip loss
  • usd/chf: Sold @1.0045, exit .9741 ---304 pip profit
  • usd/jpy: Sold @ 99.75, exit 97.08 ---267 pip profit
This would have resulted in a 1265 pip profit!!! That is 1181 pips more than using a 55 pip stop like I did. The account this morning after exit would have been over $740.00 a huge gain. I would have loved that!

If I used 150 pip stops on ONS this week, those extra gains would have been possible, but the size traded would have to be 1/3 of the size traded with 55 pip stops to maintain the same risk profile. With reduced position size and the large stops on ONS, the account would be standing at $655.00 or so.  

Still, that would have been a great gain.

The fact is: I used the 55 pip stops as usual and didn't make very much this time. Again, trading is a series of tradeoffs and this was a stark example.

The 55 pip stops I use on ONS is not magic or sent down from God, or just my curve-fitted preference. Just a current money management tool. I may change it in the future to a larger figure after informing everyone who subscribes to the IFC newsletter. Overall profits likely will increase, but so will drawdowns.

FirstStrike trades today:
  • eur/usd: Sold @ 1.5792, stop 1.5852.  Trade in progress---
  • gbp/jpy: Sold @ 194.95, stop 195.55.   60 pip loss
  • gbp/usd: Bought @ 2.0198, stop 2.0138.   60 pip loss
  • gbp/usd: Sold @ 2.0098, stop 2.0158.  Trade in progress---
  • usd/chf: Bought @ .9811, stop .9751.  Trade in progress---
  • usd/jpy: Bought @ 97.58, stop 96.98.  Trade in progress---
Notice: I took the short gbp/usd trade. I was busy following some bigger trades and didn't cancel the short in time. So far it is quite profitable.

That's it for now!

Could be an interesting week!

Joel Rensink

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to:
and tell me to which address you would like it sent.
PPS: Please do not use AOL or Yahoo addresses. Nothing personal, but they've been known to filter out more good mail than actual spam. Try a Gmail address. It's free, simple and perfect for traders!

No comments: