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Traders,
Before I think about taking a position, I need to know three bits of
information.
a) How much to risk, I always calculate first how much I will risk before
where I will
enter.
b) Reward to risk, this must be either a $2000 or the very least have a 4
to 1
reward to risk.
bc) Where will I enter.
How much to risk:
I never risk more than $500 except when I trade coffee, my research and
profitable trading for 6 years have shown me that I want to enter
trades that go
profitable right from the start. My forte' is long term breakouts,
i.e., Dec Wheat,
the lows were made Sept 1, and the market kept making higher 5x3 swing
lows
( 5x3 swing low is where the 5 bars to left and 3 bars to right have
higher lows),
10/1, 10/21, 11/4, 11/16 lows were higher, but because I use weekly
bars for
long term trend - it was still down. One of my favorite protective
stops is 2 tics
above the yesterdays' high if I'm selling today. Since I have a sell
setup for
11/20 and 11/19 high is 294.00, my protective stop will be 294.50
Reward to Risk:
If I must risk $500, my reward must be capable of achieving $2000, how
do I
determine that? Two ways, Where is the lowest low, that was 10/1 at
251.00,
forty cents above this as my entry would net me $2000, but my entry
would be
below
this, this means that I will have to reduce my risk to achieve a min. 4
to 1
reward to risk. If I use the intraday highs +2 tics (11/20) my stop
would be
291.00 and with the breakout of 11/16 lows, I would be selling at
285.00 risking
6 cents that means at least 24 cents reward is necessary ( 285.00 minus
251.00 = 34.00), so I can take this trade.
Where to enter:
As you can tell, there is the least of my concerns.
I like using swing highs, divergence and inside bars to name a few of
the
reasons to trail my stop. Do I change my stop everyday, no I do not,
only when
the market tells me there is a reason to do so, for me - trailing
stops everyday
gets me stopped out of good trades prematurely. I let my profits run
and allow
the market to show where it wants to go, otherwise by taking profits,
one can
never get a home run.
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