I am new to trading, in fact I haven't traded my system in the live market because I know it has glaring faults and that it why I would like to get opinions as to what the biggest mistakes in my system are and if there are any positives about it that I should keep going forward.
In a nutshell these are the details of my system:
- Trading CFDs, leveraging 3-5%
- 1R = 2% of capital (so a risk of $400 per trade on a $20,000 account)
- Stop losses varying between 1.25% and 2.50% from current price
- Trailing stop: close below the low of the previous 2 days
- Aim to stay in a trade circa 3-10 trading days
- Technical analysis (on my chart is 15EMA, 30EMA, Volume, Volume 14 day EMA). These are used to confirm entry signals (support/resistance/patterns). I like price to be above EMA and volume above its EMA.
Glaring faults that I can see:
1. Putting a stop 1.25% below price will see me stopped out in one day and if the price gaps I could suffer a loss bigger than 1R
2. Trailing stop will exit me out of a position fairly quickly
3. Leverage of 3-5% maybe too high?
My thinking behind what I've got so far:
1. Aim for an expectancy of 35%, avg winner 1.75R, avg loser 0.75R (expectancy 0.125)
2. Get out of losing trades quickly and trail stops in a way that will exit at sign of weakness.
3. Hit a few really big wins if a company moves up 4-5 days in a row.
Now I know this system isn't the one I will use in the market. I am still learning and have very little idea about system development. Please feel free to tear this to shreds and help me get on the right track. I want to learn more, I am open, I am willing. I will take any advice constructively. I will but aside having to 'be right' and listen to the wisdom of more experienced and knowledable traders.
Thanks you very much,