Education
Now Reading
Evil Speculator 101
65

Evil Speculator 101

by The MoleFebruary 24, 2015

So I found myself waking up last night and habitually reached for my iPad to catch up on emails and check my systems. Of course I wound up peeking at the blog as well and then for some reason decided to head over to the Slope to see what those bears were up to these days. I have to concede that I don’t visit there often as I truly have my hands full with running my own blog, maintaining various automated systems, coding and bug fixing, attending customer support duties – and then there of course are my own trading activities. Not a weekend goes by where I do not spend a minimum of five hours working on various projects behind the scenes or am preparing for the week to come.

That doesn’t leave much time for virtual socializing as I barely manage to catch up with the comment stream over here at the lair. But I always had a soft spot for the Slopers as I used to be one way back in the early days. And for some reason that sentiment appears to be mutual as much to my surprise Tim actually mentioned me in the very post I was reading. And yes in case you wonder, it was a positive plug – deservedly so or not.

However more importantly – some of the various points Tim was highlighting as part of a rather candid self analysis really chimed with me as they outlined the very challenges we have worked very hard to address here at Evil Speculator. And I dare say issues we eventually managed to overcome in time with a lot of effort. So if I may be so bold to offer some assistance here – by offering solutions that you hopefully will not wind up ignoring. To quote Winston Churchill’s commentary on man: “Man will occasionally stumble over the truth, but most of the time he just picks himself up and stumbles on.”

I have been a financial blogger for over six years now and believe me – I know how how most of you guys think and operate as I have literally seen thousands of people come and go. Personally I myself have walked through the shadow of the valley of death on several occasions – not only in the course of my own trading endeavors but also in my interactions with my readers, critics, and followers. Because it turns out that the pursuit of what actually works, i.e. what makes you a consistently profitable trader, is not just one of the most difficult personal challenges you may face in your life, but also happens to be very unpopular. Which really is an interesting contradiction if you happen to run a trading blog as a side business. Of course you want to turn retail rats into winning traders but while readers may expect excitement and get rich quick systems, you offer nothing but hard work, sacrifice, and the discipline to show up every day and do the same boring thing over and over again. Not exactly a tantalizing recipe in the face of an audience with the average attention span shorter than that of a goldfish.

The sad truth that has to precede the remainder of this article is that most of you will fail in becoming successful traders on a long term basis. Yes, I just said that, and if you disagree with that, well then please stop reading right now and just move on, because I cannot help you. Now Tim is way too kind and jovial to be telling you this but fortunately for you I am not. There is a reason why I’m operating as Evil Speculator and it’s not just due to an admittedly dark sense of humor. Which helps but the real challenge lies in overcoming your personal daemons and implementing positive habits whilst at the same time suppressing a large portion of your most deep rooted human instincts.

Now telling all this will accomplish exactly nothing as most of you will simply move on to the next post and forget all about it within a matter of days. So instead I am offering to work together with Tim Knight and the rest of the Slopers to produce your own system. One that has a long term edge – and most importantly you are comfortable trading on a daily basis. But first things first – let’s take it from the top – I am going to compile a list of the personal hurdles that Tim has presented and will address them one by one:

  1. Inability to implement knowledge into action and personal change.
  2. Personal beliefs.
  3. Directional bias.
  4. System and/or market hopping.
  5. Overcoming emotions.
  6. Quantitative vs. qualitative aspects of trading.

Inability to implement knowledge into action and personal change.

How many of you have more than three trading books in your bookshelf? How many own more than 10? How many have more than 20? Have you read them all? Why aren’t you trading any of those systems? Because they don’t work or because you are unable to follow them? Are you attending trading seminars? How much have you invested into all that? $500 – $1000 – $10,000 – more? I think you get where I’m going with all this. Unless you are new to the trading game odds have it that you have already absorbed a mountain of knowledge and trading related information and most likely that learning curve will continue as long as you follow the markets.

So the problem is not the quantity of information really – it’s being able to absorb useful information and to apply that to making successful trading decisions. In most cases less is actually more – back in 2012 I wrote a post on maintaining a strict information diet and I invite you all to read it. However whatever information you choose to absorb on a daily basis – ask yourself: Is this information useful to making successful trading decisions? If that answer is not a resounding yes then it’s nothing but noise that will distract you from your core mission (i.e. banking coin). So don’t make the mistake of equating information with knowledge.

Once you have found statistically verifiable information that you believe will lead to successful trading activities then you must take steps to implement them into your personal life. The fact is that over time you will come across many excellent systems that have a clear long term edge but which you are unable to pursue due to a variety of personal reasons. Perhaps the drawdown periods are too deep for you, maybe the entries happen too frequently during the day, the system doesn’t take enough trades for your taste (lack of opportunity), it works best in markets you are not comfortable trading (e.g. futures, forex, bonds), your account size does not permit proper position sizing. The list is long and it’s one only you can answer for yourself. Don’t expect to abide by even the best system in the world if the qualitative aspects of that system are incompatible with your personal beliefs, dispositions, and life style.

Personal beliefs.

You probably expect me to say that your personal beliefs do not matter but actually it’s the other way around. They matter the most as you will not be able to pursue a system that is not in line with your personal beliefs about the market and how to take advantage of opportunities on an ongoing basis. And I’m not talking about drawing lines on charts either. Look, I really don’t care about what anyone paints on any chart – if I am not able to turn that information into winning trades it’s just noise to me.

Most retail traders are focused on market analysis while professional traders are focused on developing a low risk idea.  To quote Van Tharp on the subject: Market analysis for most traders amounts to building a straw house. They collect data about the markets; they look at different patterns of charts and specific market indicators; and they even make predictions about the future direction of the market and then focus on trying to help those predictions come true. However they consider the probabilities of winning and losing or the amount that may be won or lost. In other words, what most traders do in terms of market analysis has nothing to do with making low risk trades. Hunters build straw houses, but that activity has nothing to do with catching prey.

So instead of ‘charting’ or ‘market analysis’ I simply think about developing low risk ideas. I start out with various ‘beliefs’ that I have developed over the years and then put them into context with the market. For instance I personally enjoy using Net-Lines, a price pattern technique I stole from Chris Carolan a few years ago. They work very well for me but they don’t mean zip to Scott – a fellow from Australia who I have been collaborating with over the past few years on automating various trading systems. Even if trading Net-Lines turns out to be a promising idea for taking entries Scott would never be able to trade them as the concept doesn’t chime with his particular market lens. We all have one by the way – a lens that is – a way of observing and processing information given to us on a chart. It’s all a matter of how we are wired mentally.

Some of us share a similar lens while others use one very alien to us. For instance 2sweeties from Italy (a contributor on the Slope) uses a sophisticated blend of statistics and fibbonaci retracements. Works very well for some – others will find it difficult to build a system around it. Most of you Slopers seem to enjoy bearish markets – I expect maybe also for a number of reasons beyond the scope of your trading activities, but also perhaps due to the inherent characteristics of bear markets. Meaning high volatility combined with directional trending tape. They are actually a lot more difficult to traverse then you would expect but that’s a different story. Bottom line is that you need to sit down and write down your personal beliefs about the market – where you believe opportunities can be found and how you plan to take advantage. Here’s an example using Net-Lines really quick off the cuff:

  1. I believe that Net-Lines produce statistically valid support and resistance levels.
  2. I believe that these levels grow exponentially weaker as time progresses.
  3. I believe that inverse entries prior to a breach and directional entries post breach should be taken.
  4. I believe that exits should be set at the opposing end of the trigger candle.
  5. I believe that entries should resolve into producing 1R within the following two candles or the odds for a reversal increase significantly.
  6. I believe that an accumulation of several Net-Lines of equal direction (i.e. sell or buy) increases significance.

And so on – I could probably list five six more and you may agree with some or none of them. But that’s not today’s exercise and it’s just an example and a first step in developing your own system. Once you have produced a set of beliefs about the market you start develop a system around it, which unfortunately is beyond the scope of today’s article. I merely attempted to demonstrate that personal beliefs are important and can actually be leveraged in developing a system that works for you personally. If there is any interest I would be happy to produce a pertinent series which covers this step by step. The offer stands Tim! 😉

Directional bias.

You would be right in saying that it’s probably a bad thing. However it seems that many traders are unable to look in both directions and see the same amount of opportunities. Perhaps it’s because their mind is wired in a particular way – or it’s based on past experience. You can either fight it (my approach) or perhaps you can simply take advantage of it. Fine – you only like to take short trades – I bite! Then develop a system that only goes short – problem solved! What you should NOT ever do however is project your own directional biases onto any particular market. You want equities to crash and burn? That’s a rather perky disposition you got there tough guy – now see what happens over in reality. Mrs. Market is not kind to opinionated people – usually instant punishment is generously lavished.

System And/Or Market Hopping

Tim mentioned that he recently started trading binary options in collaboration with Dutch. Now there’s nothing wrong with exposing yourself to other markets and I encourage you look at all of them. However don’t expect any of them to be the answer to your personal limitations. They are not better or worse – simply different – that’s all. Forex trades differently than the futures – stocks are loosely tied to various market segment ETFs but the latter trade completely differently and have their advantages and disadvantages. Binary options sound like fun but require a win rate of over 50% for you to reach break/even. Futures offer leverage and require overnight margin – stock options are also highly leveraged but are what they call a wasting asset. All these different type of markets requires a different trading approach and it’s up to you to figure out which may work best for you. I personally like forex and the futures – but that’s me – I like things simple and I also enjoy trading 24×5.

The same applies to systems – many retail traders move from one system to the next – like nomads. They try their ‘luck’ with a promising one and at the first drawdown pull out and move on to the next system. Which is inherently the worst approach one could take as you keep taking drawdowns and then move on to another system, most likely during its earning period, which statistically speaking is prone to experience a drawdown in the near future.

Overcoming Emotions & Cognitive Biases

I have written about this subject in much detail in the past and if you’re familiar with my work you know that it’s an uphill battle. No matter how well you know yourself and how hard you work on it – you’re only one or two trades away from turning into an sobbing emotional wreck. It never ends and it’s a battle you will wage until the end of your days – and don’t believe for a minute that you are immune. The best thing you can do is to produce a system with iron clad rules and take yourself out of the equation as much as possible. Tim mentioned that he kept looking at gold and was happy that he ‘had dodged a bullet’.

That’s exactly the opposite of what you should be doing – sorry Tim. If you have a system then your entry happens in a very specific fashion and once you take that entry you already know when you will exit. I actually decided to not talk about stops anymore as they are an emotionally laden term. People equal them to ‘stop the bleeding’ or ‘stop the pain’. Which is another reason why I don’t talk about money or percentage even – I simply refer to ‘risk’ which is referred to as R – some trend traders call it N. You devote R (usually between 1% – 2% of your assets) to a position, set your stop (ahem) and then you walk away. Either it gets to target or it’ll exit at the point you require the campaign to end. If that sounds too complicated I can help – here’s a risk calculator for the futures and here’s one for you forex aficionados.

The rules are there to protect you from yourself. And that includes, me, you, Scott, Tim, Bill Dunn, Richard Dennis, William Eckhard, Ed Seykota, everyone. We are all flawed human beings and the less we are involved the better our systems are able to perform. In essence – give it enough time and we just mock it up.

Quantitative vs. Qualitative Aspects of Trading.

Nick Rage produced a great video that demonstrates how most people focus merely on the quantitative aspects of trading, meaning system development, campaign management, risk management, etc. As a matter of fact many of the views I present here are covered and I strongly suggest you watch it in its entirety. It also makes a point about trading systems on a long term basis which is another Achille’s heel of most retail traders.

This has turned into a rather lengthy post but believe me that I’ve only scratched the surface. Developing your system is actually the tiniest aspect of it all – the majority of your trading activities should actually revolve around managing yourself. Trading involves human performance and that performance can be objectively measured in terms of profit and loss. You cannot hide from your performance record, no matter how much you may want to mentally rationalize your losses. And since you are the most important factor in your performance, doesn’t it make sense to spend time analyzing yourself? The best traders do it constantly but subconsciously. So be one step ahead of everyone else and do it on a conscious level.

Let me conclude this with another Van Tharp quote (clearly I’m standing on the shoulders of giants today): Successful trading is 40% risk control and 60% self control. In turn the risk control portion is one half money management and one half market analysis (i.e. developing low risk ideas). Thus market analysis is only about 20% of successful trading. Yet most traders emphasize market analysis while avoiding self control and de-emphasizing risk control. To become successful, traders need to invert their priorities.

Happy hunting.

 


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • randomuser6789

    I have not finished reading this one yet, but it already belongs in your Goodies section. Please link to it there.

    I want to go through it slowly enough to digest it well.

  • captainboom

    “… overcoming personal daemons…” Excellent choice of words. For those not familiar with the term ‘daemon’ as used in computing, it’s “a background process that handles requests for services such as print spooling and file transfers, and is dormant when not required.”

    I think Mole’s use is appropriate, as we all have mental background processes that we may not be aware of.

  • http://evilspeculator.com molecool

    DONE!

  • http://evilspeculator.com molecool

    Hehehehe – I hoped someone would pick up on that 😉

  • M E

    All of us with CS background :)

  • mugabe

    Another killer is flitting from one system to another

  • mugabe

    Hey Mole, you might have a self -published book in you if so inclined,

    Also quite a good way of generating traffic to the site, too

  • http://evilspeculator.com molecool

    Maybe – if I ever find the time…

  • BKXtoZERO

    Good Morning. I am just getting into all of this and the most obvious to me is that it will take time to absorb and learn these concepts at my own pace and that trying a new system (or for me ANY system) will take time and should be implemented slowly. Right now my working plan is keeping things tight on intraday basis, then shifting working trades into daily “campains”. I will share the things I learned that have always killed me:
    1) Having a constant bearish bias in a world of money printing and trying to apply fundamentals for far too long. 2) position size and risk management (not honoring my stops) and not having a clear plan for an exit hurt me over and over, 3) upon success, and I had a lot of successful periods, I grew sloppy and it became easy come/easy go. I threw money at other trades with far less consideration than was needed.

  • http://evilspeculator.com molecool

    Happens to the best of them. Do you keep a personal trading log?

  • ridingwaves

    Reits whom led the bull charge in 09 are now starting to leak…about ready to start to scale into some long volatility campaign…as we are getting closer to that 2150 rubber meets mat area..

  • http://evilspeculator.com molecool

    You know how many years I have seen comments like that? Wouldn’t it have been easier to just trade the direction of the trend?

  • http://evilspeculator.com molecool

    If it’s any help for the immediate term:

  • ridingwaves

    does the comment go under top calling category? as I wasn’t trying to frame it like that, I believe 2150 area becomes very sticky….I’m eyeing a reversal in that area back to 2020 area..thus I’m scaling in now because I have no crystal ball…

  • Grant

    I seems that for most traders the time to quit is at the end of a nasty drawdown (right before the resumption of a trend). For the experts here, what is the cause of a drawdown in relalation to trend trading? I believe that knowing the causes can be a great way to overcome the emotional baggage that comes with trading a system.

  • mugabe

    no expert, but the answer is markets not trending on your system’s time frame ie system (temporarily) not in sync with the markets

  • BKXtoZERO

    I download my trades into excel and look them over to see which vehicles are statistically my best and worst. Now I stay away from one’s I am least successful at, for me that was TVIX. Best was TMV/UWTI/USLV/DSLV/DUST etc

  • BKXtoZERO

    So my “Low Risk” (LOL) idea for the day is long crude oil again. Last night the futures looked like they were going below my comfort zone. I don’t trade futures but this morning, if it was weak I would have been shorting oil 3X ETF but it held keeping alive my idea for a rip higher. So intraday, I am back loaded with long oil (UWTI) hoping to catch a reason to stay in a lot of it.

  • wandering196

    I have done these exact same things. My light bulb went on when I realized being bearish “all the time” only made me lose money. I still have trouble not wearing that outfit

  • http://evilspeculator.com molecool

    Grant – the underlying problem is that most people under estimate the statistical risk of consecutive losses (i.e. losing streaks) inherent in ANY system. This is the formula:

    N= log(1-DC) / log(1-PW)

    For example: 99.9% confidence with a win rate of 60%

    N=log(1-.999) / log(1-.6)

    N=7.5

    So for every 1000 trades you make, you would expect to hit at least 1 string of 7 or 8 consecutive losers. No way to know when this string will happen. Now if you take 5% position sizes like many people do out there then you would be down over 34%:

    Principal: $10k
    Risk: -5%
    Periods: 8
    End result: $6634.

    That’s actually assuming you are reducing your risk, which many do not do as they are desperately are trying to get back to where they came from. If you had traded 1% position sizes you are only down $772. That’s 7.7% and it hurts but it won’t wipe you out.

    Now after you learned your lesson or started visiting here you finally switched to 1% position sizes. Here’s how long it would take to get back to $10k, again assuming compounding:

    Principal: $6634
    Risk: 1%
    Periods: 42
    End result: $10.075.

    That’s assuming no losers – if you have losers it’ll take significantly longer.

    Get where this is going?

  • http://evilspeculator.com molecool

    oh sorry – I totally misread it – my bad.

  • http://evilspeculator.com molecool

    Start your personal trading log – you list your trades and your thinking at the time. Go back six months later and read them. It’ll make for some eye opening revelations.

  • http://evilspeculator.com molecool

    What is that idea based on? Empirical observation based on prior price patterns? Indicators? Statistical observation? It’s fine to have an idea but what makes it possibly low risk is that you have observed patterns you expect to repeat.

    Finally, are you prepared to be wrong? And if so – how many times on average? Do you know your hit/loss rate when it comes to taking discretionary trades? It’s fine if they’re 50/50 or less as long as your winners outrank your losers. What is your target – do you have one? If not then what is your system’s approach to trailing as the campaign goes in your favor? All this are questions related to campaign management. If you don’t have answers to those then you have nothing and you will blow up your account sooner or later – see my comment below regarding position sizing and consecutive losses.

  • http://evilspeculator.com molecool

    What is your ‘comfort zone’? That does not mean anything and suggests that you are winging it and exiting losing positions is based on your whims and mood of the day. You should know EXACTLY where you exit every time you enter a trade. If you fail to plan you plan to fail.

  • Grant

    Mole, thank you for the precise answer on will happen if I do not manage risk on every trade. This is a great example for all of us who are looking to get rich quick. Trading is a job “a business” just like any other. My question was “what is the cause of a drawdown or being out of sync with the market” in relation to my trading system?

  • Grant

    What causes my system to get out of sync?

  • BKXtoZERO

    sorry. I knew I should have been more specific (especially here!) OK, for me, it looks like a bona fide set up as you post them… above the high 50.25 crude I think it is off to the races, below 49.50 crude, most if not all of it comes off for me. Idea based on things you’ll pick on me for (probably) 1) fundamental value in oil, catalysts include reversal in dollar, geo political strife (LOVE making money on that right?) then there is my technical views which to some degree involve Elliott ideas and basic horizontal support ranges, the 50dma also plays in. re: wrong, yes I am prepared to be wrong and exit. It is a lot of churn but I had 2 30% gainers on this idea thus far so it is back to the well for me. With oil so far it is 80% success, no losses due to stops, probably 15 or so trades, in/out and a few BIG hits, the rest flatted.

  • BKXtoZERO

    will do.

  • http://evilspeculator.com molecool

    Slow and steady is the way. And you’re asking the wrong question. There is no ’cause’ for a drawdown – it just happens and it must happen. No system works the same during various market phases. Out of sync with the market refers to a particular strategy and it’s natural. Which is why institutional traders run concurrent systems against each other – over time they average out.

  • http://evilspeculator.com molecool

    See above. Being out of sync with a particular market phase. Clearly a trending system will perform poorly during a sideways low volatility phase. Now I know your next question – HOW do I know? Well, you don’t until you’re already way in it. In CrazyIvan I am using an equity curve filter which basically shuts the system down once the unadjusted curve drops below a moving average of the P&L curve. And then turns it back on – it would net more without the filter but you would have to sweat through deeper draw downs. PLUS given the number of trades you may actually be worse off – that depends on the ratio of your b/a spread and commission in relation to your R size. If you trade a 20 pip risk (which is what your 1% is based on) and your lose 1 pip in and out then that’s 10% you’re leaving on the table (plus there is commission). That by the way may turn a 20 pip risk into 22 pips and a 20 pip winner into an 18 pip winner.

    Yeah, trading is all about bean counting – hehehe

  • RacerXX

    Old habits die hard eh?

  • RacerXX

    AWESOME POST Mole! Going to take a few readings for it all to sink in.

    And I’m with you on the Slope. I was active during the meltdown.. but not so much since 09-10. Tim is a great guy tho. Cool he gave you a plug. Well deserved tho..

  • Grant

    Great stuff! Now this is the “inside baseball” info. that will help many of the traders that are new and regular to your site.

  • BKXtoZERO

    as for target, when I am right, I have ideas and target zones. For me, oil at 60-70 looks like a reasonable target if I am right. I generally use Elliott at least as a guide to judge if a move looks fleshed out, I also look for divergences and signs of weakening. I usually pull half off at what look like peaks to me. The other half I keep a close eye on and see what the nature of the pullback and recovery looks like before I close out entirely.

  • ridingwaves

    apologies never needed..were not dating…”as mole says where are the charts” the red circle is kind of what I was thinking, an overthrow would be even better….

    http://s24.postimg.org/q6tl15151/sp500_channel.jpg

  • http://evilspeculator.com molecool

    Thanks Racer – it was quite a coincidence as I haven’t read a post over there in weeks. I thought I should respond in kind and perhaps offer what little I have learned over the years.

  • BKXtoZERO

    I am finally reading the main post in it’s entirety now (lunch time) as it is hard for me in the morning w/ kid/job etc. Thanks for spending time chatting w/ me as you say you have very little time. I will try hard not to be one of those traders who fail. I stopped out of half of my position (again).

  • Billabong

    Mole, ES 101 is an incredible piece. Reading through it and the comment section below, offered new ideas. I thought your discussion on position sizing was excellent. It took me a long time to switch from total amount thrown at a position to understanding the need to understand the amount I would accept at risk. Also the discussion on staying with a system is a tough sell when folks are losing money and all they want to do is run away. There are too many great points above and below to discuss each one, but I really appreciate reading an experienced pro opening the door to reality … thanks.

  • BobbyLow

    Thanks for the great post Mole. I’ve had company visiting all day so I just had a chance to read it. This is the kind of stuff that’s worth its weight in gold. I’ll make sure to copy and paste it to a word document so I can read it again from time to time. IMO, pieces like this need to be read over and over again because of my own personal demons which include a built in forgettor that tries to take me off plan.

    Well done!

  • Scott Phillips

    May I offer some (constructive) criticism :-) This all sounds very subjective, and most often when we have a lot of latitude in our trading we use that to “see what we believe” rather than “believe what we see”. It seems like you have a view on crude, and are seeing the evidence you need to justify this as a low risk idea.

    Right now crude has 3 daily lower closes in a row. That is categorically NOT a market in an uptrend. It has 3 failed attempts to break out to the upside of it’s month long trading range.

    Have you measured, objectively, how often divergences in a trend result in trend change? I have, and there is a categorical negative edge there. All the belief in the world won’t change a negative expectancy setup into a positive expectancy, which explains why you don’t see many books on the “mental game” of surgery.

    Also, most beginning traders are magnetically attracted to wave theory, which promises to solve one of the most enduring dilemmas of all traders (I don’t know what happens next). Sadly, it is impossible to know the future, and most often we use wave theory and the like to avoid the emotional pain of making bad trades. This is a method which should only be used by the very very best traders.

  • Scott Phillips

    Traders assume that distribution of wins and losses follows a bell curve. It doesn’t. There are times when your system is perfectly matched with the market. It kills it. Other times you couldn’t buy a win.

    There are workarounds, and position sizing alteration in drawdowns is a very effective way of containing losses.

    Look at the most successful traders long term. They know all this and still take their drawdowns and keep trading.

  • Scott Phillips

    You seem to be looking for the solution to a problem with no answer.

    Put together a string of 3 winning years in a row with the same method. Make tiny tiny incremental changes to a winning formula. Settle in for the long haul. Get rich slowly.

  • Scott Phillips

    Whether a trade was successful or not has NOTHING to do with whether it was a good trade. If you had a losing trade or a winning trade there are many lessons to learn.

    It took Schumaker 10,000 hrs to learn to drive. Taxi drivers drive 20,000 hours and still suck. It is because they never treat driving like a performance activity with focused practice and review.

    Trading is the same. Be Schumaker

  • Scott Phillips

    Great post mate :-)

  • Scott Phillips

    The bottom line on position sizing. If your system is good should be traded in the range .75% – 1.5%. If your system is average it should be traded .25-.75% and .5% is a good place to start. Only the best exceptional systems should be traded at 2% or above. With any system you start to encounter very real risk of ruin at 3% and above

  • http://evilspeculator.com molecool

    Thanks Scott.

  • http://evilspeculator.com molecool

    If you can make EW work for you all the power to you, mate. Whatever you do – keep a trading log and read it at the end of each week. It’s surprising what you can teach yourself about yourself just by writing things down.

  • http://evilspeculator.com molecool

    Yeah, but that’s so boring! We want to double our account every three months – without risk! 😉

  • Billabong

    I keep mine in the 0.70 to 1.10 range … it also fits my personality. At 3% with 10 losses in a row, you’re severely damaged.

  • Scott Phillips

    and that WILL happen eventually

  • BKXtoZERO

    Thanks. Well taken.

  • http://evilspeculator.com molecool
  • http://evilspeculator.com molecool

    I just realized that Scott is most likely not going to get that joke.

  • http://evilspeculator.com molecool

    Which makes me wonder how many years it’ll take for me to get out of touch with U.S. public culture. I do watch a lot of U.S. series on Netflix but haven’t watched a single commercial in years. Let me guess – I’m not missing much….

  • http://evilspeculator.com molecool

    Good man.

  • http://evilspeculator.com molecool

    It was more of an intentional typo 😉

  • newbfxtrader

    Ha yeah. Is he a suit guy though?

  • http://evilspeculator.com molecool

    You better – he isn’t that gentle usually 😉

  • http://evilspeculator.com molecool
  • Grant

    Your not missing much. I essentially dropped out of tv viewing 10 years ago. It is geared to an 8th grade education. Need I say more? I do catch sporting events occasionally and what little I do see resembles a turd swirling the toilet bowl.

  • BKXtoZERO

    He has a lot of them saved in the “Goodies” section already.

  • Bernie

    Great article! Would definitely recommend it to mates

  • BKXtoZERO

    I’m good Thanks for checking. I am apprehensive though about showing up here period. I plan to do a lot more listening than talking for a while, nothing to do with this. I already realized that I was going to stick up like a nail making any comments in a forum full of far more disciplined traders. When I was young I played a LOT of pool in a big time type pool hall w/ sharks and was very serious. I had kind of lifted the “stroke” of some other guy as I was coming up. One day I was on one of the front tables where good players see you and they were not shy about critiquing me in Philadelphia flair and fashion. It was tough and humbling but I learned and moved on.
    I have already learned a lot here in a few days, especially about position size. You guys are VERY different than I thought you were. Basically I was taking far larger risks almost all the time. I really don’t know if I am going to be one of you, but so far I have taken a HUGE amount of info and applied it to my “very loose” system/methodology. I’ll see how far I can go with time and patience. Thanks again! BK

  • http://evilspeculator.com molecool

    Please do.

  • http://evilspeculator.com molecool

    _______ _____________ __ __________________ ____________________._.
    _ _____/ / ______ _____ / _____/__ ___/| |
    / | | __)_ // / | ___// | _____ | | | |
    / | | \ / | | / | / | | |
    ____|__ /_______ / __/ / |____| _______ /_______ / |____| __
    / / / / / /