Smooth Equity Curve - How to maintain it



Do you want consistently smoothly rising equity curve?

If YEs, then you need to learn to use Risk Management technique. It should be  in line with your trading strategy and trading edge in the market. The First step towards a consistently growing and smoother equity curve is to  Define your Drawdown threshold.

The Higher the drawdown threshold the more bumpy and jerky your equity curve will be. To keep it smoother you should a lower max draw down limit.

Lets use an analogy of a car driving along a bumpy road like in the picture below. The car is travelling on bumpy road, it is by no means smooth and can never be smooth. Trading will always sustain losses. Every bump is a trading loss.


Image result for car on a bumpy road cartoon

Consistently Winning Trading is a result of using a strategy that has an edge in the market. It's a strategy that gives you a higher probability of winning over a set of trades over a longer period of time.

The successful application of the winning method determines what is the direction of the proverbial car journey, losing trades are the bumps in the road, risk per trade is highs/depth of the bump, the amount of pressure on the gas pedal i.e. the speed of the car will determine how bumpy the ride is going to be.  The bigger your risk per trade the more impact the bump/ditch will have on the quality of your ride. If you take too strong bumps along the road, too many times, it might shorten the health of your car.

An Acceptable Drawdown Limit - What is it? 

Most prop firms and professional traders would not want to go anything below 3-5%. But depending on their strategy a figure as big as 10% would still be acceptable but as said before, the higher the number the more "bumpy" it will be. 5% is a GOOD figure. It keeps the curve very smooth. So, e.g. if a method has 50% win rate there is an 80% chance of 5 consecutive losing trades.




There is a 50% chance of losing 6 trades consecutively. That means, within 50 trades there is a 50% chance that you might lose 6% of your account @1% risk per trade. I don't know how many times can this happen within one batch of 50 trades. 

Now, assume you want 5% max drawdown. This would mean there are quite high chances that your strategy might hit this "trip" wire within each batch of 50 trades.

AIMS Stress Free Trading The Setup 1 method is a strategy that gives you 65%% win rate (33% losers, 33% BE) that means the chances of 5 losing streak is lower than 40%. So that means 5% draw down limit with 1% risk per trade would suit this method.

What happens if I hit my Drawdown Limit? 

After the above you then have to assess, how many trades does your method generate per week. And then decide what would be your chances of blowing your max drawdown fuse? if you take 50 Trades a month, there is a reasonable chances that you might blow the fuse once or twice a month. Is that ok or do you want to avoid it? best be to avoid it.

How many trades do you expect for your method depends on how many markets you watch and trade and what time frame. 8 FX Pairs on an hourly chart can produce half of that per month. so 5% drawdown at 1% per trade is not bad if you trade 20-25 times a month. (assuming there are no DS0 trades). This will keep your equity curve smooth and rising steadily upwards. 

4 Step Process that Leads to More Winning Trades

That is a Fantastic 4 step process 

(Interesting Chat taken from AIMS Trading Room )

it can be applied to any trading strategy.

iMi [16:17]
When you get time can you Write down here. the 4 Questions. :)

Jasmien [03:20]
ALWAYS ASK YOURSELF
1. Directional Indication
2. Where is it coming from, where is it going.
3. Risk Reward
4. Entry setup


No. 2. often can let a trader understand the difference between when an "entry signal" is worth taking.  e.g. Where is it coming from? you see the market printed 7 big strong green candles and then there is this small tight IB. Where is it going from there? well probably breakouts and resumes, but most probably more pause(consolidation) or reversal. in either cases, Risk Reward and entry setup will always come after this assessment. (Risk Reward is a crucial step, often this decides whether trade will be taken or not)

You'd notice that most beginner traders  start at 4 without going through 1,2,3 [Big Mistake]

iMi [19:09]
Question: PB (Pin Bar) is a Direction Bar, OB is a Direction Indicator, but IB is not?  is there a way to decide the most probable direction breakout of an IB? How is it done?

Answer: the IB must have its high/low/open/close near each other. if Yes, the directional breakout probability will depend on the bar to left. If its a strong Bull Bar, higher chances that the IB will breakout UP.

iMi [19:59]
Also something to remind ourselves about is that an IB is not an IB if it has a good Healthy RANGE.

e.g. if its normal for a market to have 50 pips daily range. and you see an IB that has 40 Range it's not really telling us anything, in that case the direction of the IB will have information. a bear or a bull IB.

Is this a Bear candle or an IB?




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Pasted image at 2019-03-23, 8:01 PM


The Trend is a VERY subjective term

as @Snorm mentioned the other day. Not only can it be different per time frame it can differ per your METHOD of establishing the trend.

e..g a trend can be based on AIMS Gator, it can be price above or below the Purple trend, or any other means used, and all could lead to different trend indication.

Some people would define it with moving averages, other using swings on price charts, yet other using elliott wave. Some AIMSters use AIMS Box only.

But the WiPG method of @Jasmien, looks at 1-2 candle patterns. The method is based on our knowledge of trading patterns that we identified using indicators on several different time frames and markets. The patterns that gave us statistical advantage and high confidence. It involved years of studies. It created a fractal geometric pattern has lead to this 2 candle formation. Its highly probable and less time consuming.

The London Open Report 22 March 2019

Right, so today we had some European PMI news lined up. Not that I was actively waiting for it do something but news is one thing that's always on the agenda for a forex trader, specially intraday time frames.

So Dax started with an uptrend already, and there was no entry. I took a long of the overnight range knowing well ahead of time, that it was highly likely that it would turn into risk. But also knowing that possibility of breakout was also there.

Market is pessimistic these days so any bad news will attract more selling, with relatively much ease. 

Both German and French PMI came out negative, far worse than expected.  And that meant, SELL THE EUROS.

 Before the news, I saw a setup 1 on #USD/JPY. Love this setup 1. It was great looking setup to go short. PO was set well before the news.


Also Took a setup 0 on the EUR/GBP M15 chart

EUR/GBP a Setup 2 Pink Dot but a breakout entry overall. Working pretty nicely thanks to negative news for the euros

this is #gbpjpy it had a classic breakout setup, entered market order below box when it started to move after news

EUR/GBP M15 Out with 46 pips Profit 



USD/JPY H1 Setup 1 - SL to BreakEven. Going towards Target Zone 1 


The London AM Report 21 March 2019

Well I did not see anything setting up on the DAX M1 chart since it was already moving before LO. But then the open behaved quite ok and we got our first Cherry signal.

Took the cherry promptly and it hit 2R target. That's it. There was nothing after that.


So I switched my attention to FX Market. Specially because FOMC helped it move last night. We always look at the market on the M15 chart the following day to catch some #FamousSetup. Famous setup is a very unique AIMS Setup 1. Sam is the Master of Famous Setups.

But I did not catch any apart from EU long which was a RENT.

And then I found a nice cherry on GBP/USD. So a nice and easy 2R trade. Below, I share with you how a Cherry trade is taken from entry to exit with 2% profit.

Here you see the Yellow little square, Cherry signal. 

Stop Loss moved to BE (entry level) after 1R profit

A bit of anxiety for some people seeing it nearly missed the Take Profit level

Finally It HIts 2R. There was no drawdown on this trade. Very Easy. 

The DOW Report 20 March 2019

so, today was a blessed day. First day of Spring in the UK. The also sprung well during the late afternoon session in the UK.

Below you'd see a Class 1 Setup 1 and a combination of AIMS The Hunt Sell Signal which was also "fractal geometrically" correct and  in line with Setup 1 on the M1 chart.



Here we see a perfect Setup 1 Signal followed by a Cherry Signal within the Wave 5 

This chart has a perfect example of Setup 1 which was also a Cherry Signal on M5

THE DAX Report - 20 March 2019

The morning started with no real momentum.

There was no breakout, not that I'm a big fan of LO breakouts , not anymore. I wait for it to breakout. then I see if its time to trade

While chatting and making fun of @Tomi and @sam market finally started to move. I was aware of it, so was tomi right at the first 1 minute candle. that happened .. rest of the story on the chart below.



The Afternoon Session (NEO)

There was a lovely lovely Hunt Signal followed by a Setup 1 just before NEO

Below step by step picture sof Setup 1 Start to completion #LiveTrade

The arrow without a caption points to AIMS The HUNT Seed Sell Signal. So powerful 

DAX Setup 1 short SL moved to #BE and Trailing AIMS Boxes


DAX was not showing momentum. I was watching DOW and it was dropping but DAX was not. Meaning there was less interest. Exit after the bounce off the levels to the left. Turns out it was a good decision. 

THE DAX m5/M1 charts side by side. This is the AIMS method 



Why is The FX MARKET DEAD?

The Forex Market is definitely going through some low volume/volatility period. 

What we see on the Daily charts, or the hourly chart these days is not what is normal. 

The markets used to trend like this EUR/USD Chart below 



And the answer is, we don't know. 

Meanwhile what should we be doing? 

The simple answer is , to trade cautiously and trade the same setups over and over but taking profits at levels to the left at 1R or so. 

When the markets change, and they start to trend. we will then let some trades run. 

More focus will be given to Daily Charts overall in my trading. And I will discuss it here more and more. But still I'll continue to look for possible setups on the H1 time frame for major pairs. 

cheers

ps: meanwhile the indices still offer plenty of movement, as well as OIL and Gold. 

Was I lucky on this trade

Look at this Setup 1 short on The DAX30 M1 chart.

I had a 7 pips stop loss and grabbed 3x profit of 21 points?

Price hits my Target Point and immediately turns around?

Do You think I was lucky?


The fact of the matter is that I was not lucky. Not at all.
My Target or Take profit level was set on the pure AIMS concept of TZ1. (target zone 1)

So I set my take profit level a couple of points above the TZ1 indication.

To learn more about The Setup 1  Strategy, download FREE Ebook AIMS Stress Free Trading - The Setup using buttons above. 

This is Setup One by iTradeAIMS

Today I'd like to Share just one picture.

This is Our AIMS Setup One.

Truly a picture , specially this one, is worth a thousand words.

DJI One Minute Chart 30 SL Profit 80 Points