Monday, April 27, 2009

GBP USD- Sunday 26th, 10:17ET

Continuing to trade the spot forex market as it enables me to control my risk (of course, you can control your risk with contracts in the futures market too but the minimum, 1 contract, size is already large for my appetite for risk) whilst still participating in trade.

The downside is, whilst trading smaller size, my risk vs reward ratio is being drastically skewed. Commissions are fixed, irrespective of trade size. Using this trade as an example....

11 tick gain with a 9 tick stop= 1.22R (gross)
11 tick gain(-comm) with a 9 tick stop(+comm)=0.56R (net)!

The system needs to either run winners longer relative to losers (which effectively destroys the statistical viability of the system) or be used with larger size to reduce the effect of the fixed commission on risk to reward

The latter is the direction I'll be going in once I'm satisfied I'm trading objectively again.

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