I am trying to find the best possible route to approach trading. I have been trading for almost 8 years now and doing fairly good, but still full of dilemmas, full of ideas.
So I thought of starting this thread to brain storm with people with similar thoughts.
For example:
Every trader uses some kind of filter or filters to keep themselves out of bad trades. I will give the basic filter of 200 period moving average as an example.
So in this case, logic states that go long above ma(200), go short below ma(200). But sometimes you see a big move which you missed because of your filter.
And generally big moves like this happens when you least expect them (I am not talking about news times).
So I devised an plan for this situation.
Why not reduce the risk when the filter shows the opposite trade?
To make it clear here is the explanation:
Price above moving average, short signal came along, we reduce our risk and take the short.
Price below moving average, long signal came along, we reduce our risk and take the long.
The ratio of reduction in risk is subjective of course, but I would suggest half of regular risk or less.
During other scenarios we use our regular risk (price above ma go long, price below ma go short with regular risk).
I have been trying this method for the last 3 days and it seems to catch nice moves, with lower risk as I mentioned before. The MA filter I mentioned in this thread is just for illustrative purposes, it could be any kind of filter.
Any ideas or comments?
Thanks
So I thought of starting this thread to brain storm with people with similar thoughts.
For example:
Every trader uses some kind of filter or filters to keep themselves out of bad trades. I will give the basic filter of 200 period moving average as an example.
So in this case, logic states that go long above ma(200), go short below ma(200). But sometimes you see a big move which you missed because of your filter.
And generally big moves like this happens when you least expect them (I am not talking about news times).
So I devised an plan for this situation.
Why not reduce the risk when the filter shows the opposite trade?
To make it clear here is the explanation:
Price above moving average, short signal came along, we reduce our risk and take the short.
Price below moving average, long signal came along, we reduce our risk and take the long.
The ratio of reduction in risk is subjective of course, but I would suggest half of regular risk or less.
During other scenarios we use our regular risk (price above ma go long, price below ma go short with regular risk).
I have been trying this method for the last 3 days and it seems to catch nice moves, with lower risk as I mentioned before. The MA filter I mentioned in this thread is just for illustrative purposes, it could be any kind of filter.
Any ideas or comments?
Thanks