Right now I am 0.39 lots per $6466 which equates to 60% of my stated max open exposure.
Right now drawdown is 6% from the High Water Mark after already booking 2% profit in the month of January.
This drawdown, relatively speaking, is still within the bounds of my strategy, but the MOST IMPORTANT thing that Zulu investors need to understand that it is more a question of RISK MANAGEMENT.
The risk management depends much more highly on PERCENTAGES not PIPS.
And yet on Zulutrade everyone is talking about pips as their sole reference of the profitability of a strategy at all times during the execution of a given strategy. They don’t speak about the history of a strategy in terms of open exposure and PERCENTAGE DRAWDOWN of EQUITY at all times during the history of the track record.
If investors are copying my strategy with a different lot sizing than the proportions my master account is producing, then I have no control over the most important aspect of trading. I have stated what my max open exposure is (1 standard lot per 10,000 equity)
When investors choose to follow other strategies simultaneously, or they choose to use their own proportional lot sizing with my trades, then they are changing the low risk strategy that I have traded now for 22 months.
Recently I changed the way I have learned to trade by setting stop loss orders on my trades 24/7.
This was because ZuluTrade gives me a lower trading score if I do not utilise SL orders. Even when I know many other traders at top institutions and investment firms do not use them – only on rare instances.
This then backfired on me this week on the overnight “quiet hour” of low liquidity that many Liquidity Providers experience between 4:45 pm and 5:15 especially. The quote for AUDUSD widened by 35 pips at our LP, and the ask price hit the stop loss on one of my positions. This cannot be avoided unless you set stop losses very far from the current price, which then changes the risk/reward and statistics of my trade entries and frequency of finding those entries. So now once again I have taken SL’s off for more than this reason.
The main reason I do not trade with SL is because I must see the Corrrelated Cross Asset Patterns, the price action around a certain level (the velocity and volume of the price action movement). and whether stop losses had been hunted at the time where I know in my head the price is nearing where I would either like to hedge or to partially close a position. Until you have watched price action for 10 to 15 years you might not have this type of familiarity with how these things repeat themselves
The MFE/MAE on my trade history metrics point to the 125 to 150 pip per individual trade as the level at which I should re-consider my original trade idea for a particular setup. It is a consideration, not a command though. You must also consider what time it is, what deception tactics have been employed in the current session, and how other correlated assets like Gold, EURUSD, DAX, US30, xxxJPY, and cross pairs such as AUDNZD and EURAUD are behaving at that particular time.
This skill is not able to be written into code or law or rule.
This skill is not able to be automated.
The skill is better employed by a seasoned trader with a human mind, but the drawback is that this type of style presents challenges when you have to explain it to people who want to micro-analyze your day to day trading.
FX Viper said this. And eventually it drove him away from provision of trade copy strategies to small investors on ZuluTrade and also on ForexSignals. Now he manages his own private fund and makes good money on performance fees similar to the hedge funds and investment portfolio managers. And does not have to keep explaining his trading day in and day out to those who don’t understand as much or whose first reaction is to be critical or overly emotional because they are taking too much risk or have unreasonable expectations about the timing of how the Forex Markets work.
Many days in the past 22 months (and beforehand when I was trading off the record with smaller more experimental accounts) I have reflected about how to best approach the FX markets with an edge, with proper risk management, and with the right mindset and attitude.
Some days I just don’t have time to respond (nor should I) to the multiplicity of “immediate” concerns even though I would like to do so. I have answers and if you look back I have been very open and prompt with my responses all throughout other drawdown periods even when people have chosen to take a counterproductive, aggressive, and blaming position in a public forum where I have put myself out there under the spotlight of scrutiny.
I sit back and chat with other traders who’ve already travelled this path I am currently on. We talk about how to best handle our trading, analysis, keeping up on important ever-changing news events, data releases, managing risk — at the same time as attending to our daily family responsibilites, chores, and unexpected sickness, loss, and problems in our own personal lives.
The wisdom I have learnt is this:
1 - Until I had proven that I could be consistently profitable in my own trading, I really should not critique or bring shame on another trader without being tactful and polite. Considering what the effects of my public words would be on people involved other than myself. It takes humility, patience, and hard work.
2 - My strategy is not set in stone. I have covered this here before and have taken my share of accusations, only to keep profiting and keep recovering from the inevitable drawdowns. The is why I chose the name “Outside the Box”, because I saw that the chaotic and not-easily-predictable Forex Market had brought me more loss and failure for me personally if I approached it this way. Instead I have set down “usual” guidelines that help direct me in my thinking and these I have shared with others so they can at least begin to understand what I think and what I do.
** When my dad is driving, I sometimes wish I could be driving myself, but I know in the end it is pointless to claim that I have a better understanding and competence than someone who has driven quite successfully for many more years than I have. If I would like to drive, then I must buy my own car, take care of it, and drive for myself.
** My ex-wife also did not agree with my way of living and the goals I wanted to value and prioritise. Sadly this meant to her that we must separate and not collaborate or share life together anymore. Regardless of how much I wanted to continue collaborating.
3 - What is most important is OVERALL RISK. Taken as a percentage of average profit of my system over a longer period. My drawdown sits at about 6% after having booked 2% profit this month already. This is acceptable to me especially when my systems have all proven that they consistently make 5% per month – with medium risk and high risk 2x and 4x those figures. Even when people say I “violate” my own rules. They say “what?? you are crazy!” Well then why has it made me exceptional returns and interested high net worth individuals and institutions after a two year period? There are guidelines, not rules. If you want linear rules, with no flex or soft edges, then you may want to trade for yourself and please show me your track record over a 2 year period when you get there.
4 - Humility and vulnerability. I have accepted my “failures” as steps towards overall success. I am not perfect, but in Forex that doesn’t matter. As long as you make your successes longer and a more powerful compounding force than the tough times and the learning times.
5 - Keep going. No matter what. Find the inner strength to insulate yourself from what others say or do but instead do not be driven or manipulated by them. Live your life and accept the results that come from your own thinking and heart.