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The law of the charts and the Trade risk

By JohnLast 3252 days ago
От 21 октомври 2011
От 21 октомври 2011

J.R.  has a special course for only Forex (Day Trading Forex). It looks like for Forex he uses somewhat different rules.

I agree with his idea to trade only the most volatile moments of the day. And it is very interesting the sliding use of the maximum ATR readings. So the maximum ATR readings would indicate what we would use for tomorrow. 

"My trading is done between
7:30am and 9:00am, U.S. Central Time. I don’t believe in sitting in front of
a screen trading all day. I want to have a life — time to pursue other things."

"Some traders are comfortable risking $100/contract. Others have no problem with $1,000, or $5,000, etc. For the examples that follow, I use $150/contract as the minimum I am willing to risk, and $210/contract as my maximum personal risk tolerance. The second kind of risk you must be aware of is the risk in the market. To assess that risk, I use an indicator called “Average True Range (ATR).”
There are a number of variations of ATR around, but the one I use is the original study developed by Welles Wilder. It has worked for me for years, and I’m not one to fix what “ain’t broke.” The number of bars I use for the ATR is 20. The ATR tells me how much money I can expect to get from a move in prices. It also dictates where I place my stop. Furthermore, ATR guides me in choosing the time frame from which I will trade EUR/USD. In summary, ATR is used to:

  • Set my stop
  • Set my objective (s)
  • Dictate my time frame

I set my objective and stop based on the highest ATR of the last 24 hours. I
will not trade any time frame over 15 minutes/bar.
I believe I have to see at least $150 of risk (volatility) in order to make my
minimum objective of $100/contract on 15 lots. If risk is higher than $200,
my objective will be ½ my risk."

citation from Joe Ross Trading Forex 

However the 15 lots seems too much for me.

For example if the higher reading of the ATR is .0016000.
Multiplying .0016000 by the size of the EUR/USD contract ($100,000), I get
$160.00. That amount fits within the Joe Ross risk tolerance. He will risk $160 on the
trade for 1 lot.