Hello, I started 'trading' around 5 months ago and have a bunch of faults/problems I'm trying to nut out and am looking for some advice/guidance/thoughts.
I've sorted some of my biggest mistakes, but the ones that are roasting me time over are the ones I can't seem to find an answer I'm happy with. To give you an idea of the last 5 months...
The last 5 months
My current performance:
Cycle 1 - ~ 2 weeks - $1k Open. ~$1.9k Peak. ~ $200 Close
Cycle 2 - ~ 3 weeks - $1k Open. ~$2.4k Peak. ~$200 Close
Cycle 3 - ~ 2 months - $1k Open. ~4.5K Peak. ~ $219 Close.
Cycle 4 - ~ Hasn't begun.
(P.S. Worth noting, in all cycles I never made the peak and slowly lost it, each time I was wiped out in 1 bad position. )
After each cycle I take a break to try and learn my errors and change my method to do better in the next cycle. (I started with 0 rules for trading, now I have 15!)
I don't mind losing the money (I do :P), as I am confident in my methods for analysing and buying into positions - it does work out for the most part, but my money management when I get it wrong leads me down the rabbit hole.
This only highlights to me that I have some explicit weaknesses, and I haven't found a reliable solution to them either, these being: how to manage my position sizes, take profit and contain losses.
Can anyone lend some insights from their experience, or even theory on my issues below? I outlined my main concerns and thoughts with each and why I find them difficult to tackle.
1. Stop Losses.
I don't use them because the market can spike stupid at times, I rather absorb the spike and move on, than have my contracts liquidated at an absurdly low level when it IS just a spike - I do set purchase positions and take profit levels at absurd prices, and every now and then they pay off.
You could argue to set the stop-losses ridiculously low, outside of expected spike ranges; then my argument is where is the point? If it is that low you need to be reassessing your position anyway.
Thus, I'm a bit lost as to how to use Stop Losses effectively...
2. Trade value as a percentage of your total account balance?
I started taking positions in Cycle 1 at 40% of my total account balance, I then revised to 20-25% in Cycle 2, and traded at ~5-10% of the total account balance in Cycle 3. Its quite evident through my cycles the diminishing returns, but it does provide its own form of insulation from short-term volatility. Do you have a set position size, or is it based on other factors?
3. When do you take profit?
What indicators do you find reliable? Or is it purely when you're happy with the profit you've made? I've had several scenarios where my contract reaches a Fib level or some other resistance point and doesn't break resistance, but often many other indicators say YES, STAY IN THE GAME! It then proceeds to fall again - it doesn't bother me a lot, I still profit, but I typically could have profited an additional 20-30% of the total profit that I take.
I learnt from Cycle 1 that I took profit too early, and was taking approximately 10-20% of the days swing, now I hold on longer, but I still struggle to identify good profit-taking levels. (I guess one could argue that taking 70-75% of a level is good, but to give you an idea of how retarded I am: over the last 3 days I've held GBP/CAD from virtually the lowest point it hit on Monday and had to watch it bounce up and down for three days before taking profit today at no more than I would have if I'd taken it on Monday.)