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I use a figure between 1% to 2% on my trades based on the duration of the
trend. When trend has just changed I will risk up to 2% of my account. Since I
never risk more than $500, unless gaps occur or trading coffee, ie. if trading
a $25,000 account, $500 is exactly 2%. All this means is if my setup requires
$500 risk, I can trade one contract, if my setup requires risk to be $160, I
can trade 3 contracts, if the setup requires a risk of $550 I will pass on the
trade or trade Mid-Am. Now let's say that 8 months go by and we are still into
the same trend, since I do not know when the trend will end, but since I have a
belief that trends only last about eight months, on any trade, I will reduce my
risk to half, meaning is the max. I will risk is $300 per contract. So if my
setup requires more risk than $300, I will pass on the trade. This keeps me
looking for only the best of setups. I have found that when volitility is up,
trading is rather wild and usually at market extremes, this occurence happens.
I do not take positions when the market is wild, I rather wait patiently till
it is more quiet and take my position at my price.
One of my better setups is when there is a reversal bar touching the 18
moving average, buy/sell above/below it 5-6 tics so as not to get caught buying
the high selling the low and using the extreme as my protective stop. This is a
great place to add on to a position is a good trending market. On February 11th
there was a reversal bar and touching the 18ma in May Wheat, the next day I
sold at 272.50 and made some good profit.
Many ask me what kind of a stop to use in long term trading, one method is
using last weeks extremes plus/minus a few ticks or a firm close beyond it
works very well.
Oat
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