Size matters.......

Hi Everybody

The 3min Dax this morning has just shown us a perfect example of why correct position sizing works and why it is so important to keep your losses small.

Here we had two losing DP sell’s as the DAX continued higher, but then on the 3rd sell the market collapsed. As you can see from the chart, this 3rd trade netted a massive profit of approx. +7R Profit (ignoring slippage and commission). Now compare that to the two losses earlier at only -1R each. So 3 trades, 2 losses and 1 profit but overall you ended up with a massive profit....

This is what amateur traders do not understand, they seem to only strive for a high % of winners, not understanding that you don’t have to win on all trades to make money overall. Here we had more losses than winners and still came out with a huge profit overall.

This is what separates the losing amateur with the successful professional, the understanding what is important in trading, and that is to keep losses small (not avoid them).

Steve

PS, this was taken using a Beta copy of the new MTPredictor v6.5 RT that has history trades shown by small triangles on the chart. Click here for a video on this new feature.

15min YM Wave C low

Here is the 15min YM chart. As you can see “at the time” of the 3min DP buy, the 15min chart was right at the minimum Wave C WPT support zone.

Thanks, Steve

3min YM DP buy

Hi Everybody,

Today I would like to remind you all to always keep an eye on the longer terms charts (15min for 3min entry). The DP buy on the 3min YM at 14:18 EST was a great example of this.

Normally we are cautious of DP’s because they can “creep”, but they are OK when they fall at “larger degree” support or resistance, so when this DP buy came up you should have had a quick look at the 15min chart. As you will see in the next post, the 15min “at the time” was right at the minimum Wave C WPT for a potential support, as such, the 3min DP was a good one to take....

As you can see, this nailed the very low of the day for you ! The YM then rallied nicely into the first projected profit target, but the STF was strong (exceeded the strength band) so it was time to swap to the ATRStop to look to run the trade. This held the long into the close for a very nice +6R Profit (ignoring slippage and commission).

So this is why I say to always keep and eye on the longer term charts for potential support / resistance zones.....

Thanks, Steve