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    Thread: The Splitting lot size Method of Trading

    1. #1 Collapse Post
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      Default The Splitting lot size Method of Trading

      Please, i want to start by saying that what am about to describe would rather be considered as a METHOD Than a STRATEGY

      INTRODUCTION

      My method can only be adopted by those who are patient and would want to go on a very low risk trading

      THEORY

      My theory is based on the fact that you want to risk little and gain little. if you are that person contented with little profit then this method is for you.

      DEMONSTRATION

      Let's assume you have $10000 in your trading account and only want to risk just 1% of it in a trade
      this means you would be risking just 1% of $10000 = $100 in your trade

      from this, your stop loss has to be such that you can only loose $100
      You may decide to use a lot size of 0.1 ($1 per pip) and your stop loss would be 100pips OR

      You go by my method of splitting that lot size further. i may decide to split the lot size into four (4)
      that is 0.1/4 = 0-.025 (oops!!! most broker wouldn't support that for a standard account but if you are with instaforex, you can simply use 0.25 which is $0.25 per pip)

      NB: Lowering the risk means reducing the profit as well. if you are not okay with this then i think you should stop reading this thread from here because this method isn't for you.

      Oh!! your still reading?
      i have probably seen one person who would rather want to stay longer in this market

      Now instead of just using the $1 per pip lot size, i have decided to divide it into four more part of $0.25 per pip which means i need to have a stop loss of 100pip (maximum of $25 loss) for each division to give the maximum of $100 risk for my trade

      THE METHOD PROPER

      Now, let us assume you have done your analysis on probably Eur/USD per and want to go on a SELL at a price of 1.3000

      Remember that the maximum we wanna loose is $100 meaning that each of the four (4) sub divided lot size should have a stop loss of 100pips

      Since my entry point is 1.3000, i can further decide to break my entry point too into for different points as follows:

      POINT A at 1.3000

      POINT B at 1.3050

      POINT C at 1.3100

      POINT D at 1.3150

      Now let see how i would do it:

      At POINT A


      Market type: SELL ( Applicable to all the other entry points)

      Order: Instant sell at 1.3000

      SL : @ 1.3100

      TP: optional ( you decide that)

      Lot size: $0.25/pip ( applicable to all the other entry points)


      AT POINT B


      Order: Sell limit @ 1.3050

      SL: @ 1.3150

      AT POINT C


      Order: Sell Limit @ 1.3100

      SL : @ 1.3200

      AT POINT D


      Order: Sell Limit @ 1.3150

      SL @ 1.3250

      when you look at the points above, will find that:
      1. All the their entry points are of 50pips interval ( its not rigid. i choose this for my illustration)
      2. they have 100pips stop loss each

      EXPLANATION

      Now, if enter my first trade at POINT A and the market moves up against me and gets to POINT B, the POINT B market would be triggered but POINT A market will be on a loss of 50pips (-$12.50)

      if the market eventually returns to POINT A, then i POINT A market is on even meaning no profit and no loss but POINT B market would be on +50pips (+$12.50)

      If that is not the case but the market kept going against me and gets to POINT C then i will finally loose the market at POINT A ( because the market has moved 100pips already and the loss is -$25) and the POINT B market would equally be floating on a loss of -50pips ( -$12.50) while POINT C market is triggered.

      If the market eventually falls back to POINT B then my floating loss at POINT B is cancelled and i will be at +50pips profit from POINT C market.

      my net loss so far would be 50pips (gain from POINT C market)- 100pips ( loss made from loosing POINT A market) = -50pips ( -$12.50)

      If the market keeps moving again to fall back to POINT A, then my POINT B market would be on a profit of +50pips (+$12.50) while the POINT C market would be on 100pips($25) profit. that is to say that i would finally be on a net profit of 50pips ( 150pips made from POINT B and C market - 100pips loss from POINT A market)

      But if on the contrary the market kept going against me and reaches POINT D. this means that i would by now lost POINT B market ( SL will be hit which is -$25) while POINT C Market would be floating in a loss of -50pips (-$12.50)

      At this point, i have lost a total of -$50 from POINT A and POINT B markets while my final market at POINT D is triggered.

      If the market falls from POINT D to POINT C then the floating loss of POINT C market is cancelled while POINT D market would be up by 50pips ($12.5).

      If the market further falls down to POINT B, i will by now be making 100pips profit from POINT D market and 50pips from POINT C market.

      If the market further falls down to POINT A, I will be making 150pips profit ($37.5) from POINT D market and 100pips profit ($25 ) from POINT C Market.

      this means that by now i would be making a profit of +50pips after subtracting the total of 250pips from POINT D and POINT C market from the loss of 200pips i made from POINT A and POINT B markets.

      If on the contrary, instead of the market falling it went further up at 50pips above POINT D then i would finally loose POINT C market while POINT D Market would be on a floating loss of -50pips.

      If am still unfortunate and the market moves 50pips more ( oh!!! what a bad day). i will finally loose all the market but still the total loss would be $100 by the market moving by 250pips altogether

      ADVANTAGES OF MY METHOD

      1. You are loosing the stipulated amount ($100 for our case) by when the pips moves 2.5 times more than when you use a single lot size. if i had used $1/pip, i would be loosing the $100 by 100pips but for my method of four division, i would loose the same $100 by 250pips

      2[/COLOR]. in this method, you stand a chance of gaining something from the market than loosing all

      DISADVANTAGES OF MY METHOD


      1). If i open my first trade and the market kept going my way, my other pending order becomes useless and my profit would be divided by four (4) of what it should have been if i had used the whole lot size

      In conclusion, someone will assume my method as though am trading against the trend but you know what?!!! You are WRONG!!!

      Remember i did not specify any strategy but a method. you have to first use your strategy to determine your entry point point after which you can apply the POINT B, C and D
      Last edited by Toxic; 05-25-2014 at 03:02 PM. Reason: 1000 changed to 10000 on request
      IF YOU WANT TO LAST LONG IN THE MARKET THEN APPLY THIS SIMPLE METHOD

      https://forum.mt5.com/showthread.php?86700-The-Splitting-lot-size-Method-of-Trading


    2. #2 Collapse Post
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      Default

      This is indeed a great way to make lots of money in the market provided one can be discipline enough after been able to come up with a simple trading plan that works then within a decent number of years, profits and returns should be the return of such a trading method you have rightly highlighted above.


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      great strategy for sideways trend you have analyse good, in sideways sometimes it become difficult to make money but with this trading method we could make something instead of loose all,forex market have uptrend,downtrend and sideway, in any of this three trend if you have method for uptrend,method for downtrend and the method above which you have illustrated for sideways, we can make money in forex for number of years.


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      hello, thanks for your explanation of your strategy but i think this more better if you explain it by picture because i got difficult to understand what you write over there, so please if you read this comment you will continou with explain and put picture on it


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      systematicfx (05-27-2014)

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      i agree with other friend suggest, you need to put picture for explain this strategy
      i'm new on trading forex and this explanation all i cannot understand and maybe for some expert trader this easy to learn and use but for new trader like me it so difficult to understand
      Trading for fun and trading for Living


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      I also use strategies such as lot splitting your losses so I do not get too big. especially when I always assess if any trading system it certainly has its own advantages and disadvantages own so if we want to succeed then we should have or use a strategy that is more secure as the split lot size.


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      Quote Originally Posted by Jokampiun     
      i agree with other friend suggest, you need to put picture for explain this strategy
      i'm new on trading forex and this explanation all i cannot understand and maybe for some expert trader this easy to learn and use but for new trader like me it so difficult to understand
      My dear, this is not really a strategy. it is a method. it does not really require any chat to understand it. just take your time to read it over again and you would understand what am trying to communicate.
      it is easy to understand. i know where you are finding difficult is my POINT A, POINT B, POINT C and POINT D. they are just levels i chose for my illustration. i told you that POINT A SIMPLY Stands for price at 1.3000, POINT B stands for price at 1.3050, POINT C stands for price at 1.3100, POINT D stands for price at 1.3150.

      perhaps you do not understand how sell limit works. sell limit simply is a pending order placed at a certain price above the current price of the market in which the other is only executed as a sell when price gets to that level you specified
      IF YOU WANT TO LAST LONG IN THE MARKET THEN APPLY THIS SIMPLE METHOD

      https://forum.mt5.com/showthread.php?86700-The-Splitting-lot-size-Method-of-Trading


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      this really good strategy, why i said this good because you also make for money management in this strategy, most trading strategy that shared did not explain the money management and for how big lot that we have to use on trade and how big loss that we able to make
      Nekad Trading the best forex trading strategy


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      hellow sir
      your stratergy is very good but i think you have to have a system that you are following that will give you signal that can make you want to divide your risk into four parts in trading


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      Quote Originally Posted by shankees     
      hellow sir
      your stratergy is very good but i think you have to have a system that you are following that will give you signal that can make you want to divide your risk into four parts in trading
      yes you need to. what i have described here can be better described as a system rather than as a strategy. and if you read carefully through my thread you will find out that i clearly pointed it out.
      thanks for dropping by my thread mate
      Last edited by Toxic; 05-27-2014 at 05:38 PM. Reason: merged double post removed on request
      IF YOU WANT TO LAST LONG IN THE MARKET THEN APPLY THIS SIMPLE METHOD

      https://forum.mt5.com/showthread.php?86700-The-Splitting-lot-size-Method-of-Trading


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