I have done quite a few intraday trades and have well noticed that Capitalisation Matters.Here is an instance:
I had sold the EUR/USD pair at 1.2994 after it was overbrought with RSI at 80 and a bearish divergence on the RSI. The pair was at an area of resistance and was very likely that it will come down.
But after I entered the price reverted back fast and so I liquidated my position to prevent further loss (my loss 27 pips). The price went up by more than 30+ pips before coming back down.
From my analysis I have noticed two factors for the price to revert (1) Price was above the moving averages and (2) Draghi of ECB was about to make comments sometime later.
But whatever be the factors, if I had a larger capital, I would have kept the trade open and instead of suffering a loss, I would have made a profit of around 20 pips as price went down later.(not shown in this chart).

What would experienced traders say about the matter about traders with low capital? What moving averages to use in time frames of 10 min and below?

I would be very thankful to you all as I am still learning.

Regards,

Surjya

Views: 299

Comment by Alan Hill From Sarrafx Trading on December 1, 2012 at 10:04am

Using a smaller leverage and smaller trade size would have the same effect. It is a case of utilizing your existing capital more effectively rather than lamenting a lack of further capital

Comment by Oasis on December 1, 2012 at 1:23pm

Hi Surjiya, You must heard that beginners should not risk more than 1% of capital in a single trade. Even experienced ones are advised to limit themselves to 3%. I think the key is not to get carried away by our analysis and keep strict money management rules as no one knows what the market will do.

All the best.

Comment by talisman on December 2, 2012 at 5:16am

i could be argued that you traded correctly and this is just one of them things.  having said that i would point out that risking a few more pips so you could make 20 total is not good logic unless you re very confident that over time your win percentage is 60 percent or better since your rr is less than 1:1.  you may want to consider sitting out on fridays,  they tend to have a few odd moves that can throw a loop into things.  leave fridays for the pros and the wannabes, theres plenty of opportunity from monday to friday until you become very seasoned.

i ll close by saying alan gave the best advice, utilize your capital more effectively.

Comment by Surjya on December 2, 2012 at 7:37pm

Thank you all for reading my post, having a look at my chart and giving feedback on it.

I am in forex trading (micro lots) for around 1 and a half year and am still learning and have yet to learn a lot. As you have all mentioned, I really need to check my charts more meticulously before jumping into the trade.


When I started forex trading with a demo account having a capital of $50,000, I didn't know much about forex trading, the indicators, the fundamentals news, chart patterns, etc. The only technical indicator that I understood a little bit was RSI with its overbought and oversold rules. In the demo account I sold when RSI was OB and bought when RSI was OS after checking the currency pairs. In a month I made $10,000 in the demo account. I thought wow…..so easy. Among those trades, if a trade did not go in my favour I used to keep it open and the price would somehow come back to the breakeven, may be even after 10 days or so. I traded all the currencies & commodities which were available with the broker, regardless of the margin required or the spread. With the same attitude I opened a live account with a $1000 capital and use the same style of trading and the inevitable that had to happen, happened. I lost all my money.

I again funded my account after some more studying of forex trading and as trades went on I realized that there is still a lot to be learned.

With my present account, I do not leverage and used small stops as my capital was getting smaller. So, Alan with my small account I do not leverage but I should have used my capital more effectively initially when I started out.

Peter, thanks a lot for your analysis of my chart. When I said capitalization matters, I meant that if I had a large capital in my account I would have kept the trade open and my trade would not have been a losing one. I had read during my forex studies, how unlike the stock market where a large trade by a single trader can move a stock, the $ 4 trillion forex market cannot be moved like that. As for your questions responses:

1) Since I trade intraday with small targets and am still in the learning curve, I usually put a stop loss of 30 pips. I hardly calculate % of my capital, one of the things that I have to learn well. In this particular trade, I was kind of very confident that the trade would go my way, but when it spiked up, I closed my deal fearing it would go further up. Because in another instance with the EUR/USD pair, around 1 and a half or 2 months ago, Draghi of ECB was about to comment on something and the pair went bullish by more than 60 pips very quickly.

2) I usually look at different time frames when I want to trade. I look at the larger time frames of 4 hour and 1 hour to find out which way the pair is moving and for major supports and resistances. Then I come down to the 10 min, 5 min and 1 min charts to enter a trade. I finally take into consideration the 1 min chart to enter a trade. In this particular trade, the 1 min chart was kind of volatile in a range but on checking with the 10 min and 5 min charts, I found it to be a good trade and so I entered it. I don’t usually change much of the settings of the indicators because sometimes they seem to be giving proper signals with the default settings and I myself am yet to figure out what periods to use in my time frame in the MAs and so I use the popular ones like 20, 55, 100.

3) What to say Peter, I draw only one resistance line and one support line for my trades in a chart. For this trade I figured the price would go down to 1.2970 and would move much above the resistance which was above 1.3000. Then after price moves in my favour by say 5-6 pips, I usually move my stop loss to 1 pip profit, which in this case would have been 1.2995 and watch the price movement.

4) Since the RSI was at 80 and there was a bearish divergence, I thought price would go down as sometimes price would tend to break through supports and resistances.

5) As I was also looking at the other smaller time frames, I though price would go down. I simply didn't notice the support so close by in the 10 min chart.

6) My RSI had a setting of “14 close”. From my studies, 14 seems to be the standard setting and so, I use 14 period.

7, 8, 9) I need to refine my technical analysis a lot more.

10) The MAs, I used are SMAs. Since my trades are intraday with small trades, the SMAs tend to give a signal quite late while the EMAs tend to give false signals. So, in this particular trade, I entered the trade without heeding the MAs. Is the periods that I am using not proper for my charts in the smaller time frames.
What do you suggest? Kindly correct me if I am wrong somewhere.

Talisman, Oasis and Leon (thanks for your link, I have seen the homepage and will go through it), thanks for your comments. I didn't expect price to move about my resistance which was above 1.3000. But anything can happen in the market as I realize.

The forum had really made me aware of things which I myself did not notice at all.

Regards,

Surjya

Comment by Oasis on December 2, 2012 at 11:05pm

Fantastic advice RM, pity there is no way to put a "Like". The best one is #14.

Comment by Surjya on December 3, 2012 at 11:28am

Thanks Peter, I will work on my technical indicators and improve them. Will change the setting of the indicators and do some trades in my demo account before trading on my live account again. I still have a long way to go and acquire the 10,000 hours level, which I have read in some posts, on this site, is the amount of time required to be highly competent.  

Hi, Repeatable, I liked your comments and my pulse really rises when I am about to take a trade. I will go on refining my strategies as long as needed, which seems to be as long as I am a trader.

Regards,

Surjya

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