Trading Math

Trading math employed by assassinfx traders

Mathematics of trading is the core of trading psychology. Traders deal with numbers almost the entire session day in-day out therefore: they need a clear understanding of pips and costs, they need a plan for every mental situation i.e methods to distract negative thoughts while having a losing streak, they need a plan to execute trades and most importantly a plan to follow the trading plan.

Pips and budgeted costs

One pip costs $1 in a mini lot volume (10 000) and $10 in a standard lot *it may vary with some pairs. The maximum number of pips we are prepared to lose is no greater than 20 in any trade opportunity.

Assuming a $1 000.00 account

This means we accept that we will go broke in a 40 trades losing streak! If we are allowed to trade 10 trades per day, that’s only a four day survival. How can we extend our life in the game? We use leverage. Please note that traders with and account size of $1000 do not afford a mini lot, they get compensated by brokers with a 1:10 leverage.

We set our standard leverage to 1:20. Price action entries that normally cost 10-18 pips combined with our strict entry zones will decrease our risk while effectively increasing our buying power. We will survive longer because a 20 pip stop is the worst case scenario when basing trades on price action.

Mental Situations

I find it very difficult to accept a losing day and let go. I find it extremely difficult to wait for prices to go in support/resistance zones. Either I enter in a volatile pullback in the middle of a trading range (very expensive price) or execute prior a significant support/resistance zone. It’s only then that my anxiety starts boiling because:

  1. I clearly stated on my plan that I will not execute in the middle of the trading range, so the plan is violated and only me knows that (I trade alone nobody is spying).
  2. I clearly stated on the plan that I will not execute a trade prior a break out in a significant zone.

The brain loses trust when I ignored a rule and lost $20 in the way. Next trade I have to make 50 pips to compensate for my previous stupidity. Often enough that goes bad, I start doubling up the risk. That is a journey to a busted account. In reality, when running a system you are more like your own robot, thoughts outside your system (actions you programmed yourself to do regularly and consistently) do not matter in the trading session.

Expectancy of running a system and not personal opinions

Expectancy 1.png
Variant One
Expectancy 2.png
Variant Two
expectancy 4.png
Variant Three

On the above image we see a simulated expectancy graph of a 50% winning system. It loses 50% of its trades but still makes money long term. The formula used on this expectancy sheet assumes that a trader keeps risk percentage of total capital constant. This ensures maximum profits when a trader has a winning streak and minimum losses when experiencing a losing streak.

expectancy5
Variant Four

Variant four has changed parameters, the risk per trade is now 10%. The results of that twerk is a dramatic loss of funds. Add emotions on this precise sampling and the result is a broke account.

Execution plan

The foundation of our execution plan if found on the Home page. The main benefit of waiting for price to go in high probability areas is the volume of traders entering after you just after the zone has been tested, effectively taking your trade to profits. Please note that a 50% winning system means a load of losing trades to deal with and the best way to deal with them is to keep them small.

A plan to do the plan precisely

The best way to keep the mindset positive while employing a system of unknown future results is to keep records. Records help identify main reasons to argue with the system, helps identify what works often from what doesn’t work entirely, helps strengthen the personal growth trend.

Quick Links:

  • Join our IB group with Fibo Group INC here.
  • Join live mentor ship by Forex mentor here.
  • Explore automated trading with CM TRADING here.

Summary

We anticipated that it is not difficult to trade rationally, the main problem is accepting that trading is one hack of a long way to make money and actually start trading low building up equity. Traders&followers of assassinfx take advantage of this freely available information, we aim to profit from those who ignore the math when trading.

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