If the losers are eating you up, I would guess that it is due to your risk:reward being way out of whack.

Ideally, traders want a 2:1 ratio, where they are making double on their trades vs. what they are risking. With the trend following entry system I use, I have always found this to be difficult to achieve.

To compensate, I use an Excel spreadsheet formula to adjust my position size down on trades with low risk:reward ratios. I can do this because I trade mini lots and because I have planned profit targets to scale out of my trades in thirds (first target 1/3 of contracts traded, second target 1/3 of original contracts trades and move stop loss to breakeven, final target 1/3 of original contracts traded to close the trade.)

Let’s say for example my account size is $33,500 and I am planning to go short on the GBPUSD at 1.5940, with targets of 1.5915, 1.5879 and 1.5843, with a stop loss of 1.5979. If I am risking 3% of my account on this trade (which is the MAX I would risk on any trade) I can trade up to 17 contracts. I would not enter the trade with 17 contracts however. Typically, I would enter with 1/2 of the allowable contracts on the trade, and then add to my position at key numbers (1.5950, 1.5955, 1.5960) if the trade starts to go against me. I am averaging my entry price and remaining within my allowable risk on the trade, as long as I do not exceed the original total of allowable contracts to trade (17 in this example.)

I will send you a copy of the spreadsheet via email and you can play with it. It will work for you on EURUSD as well as GBPUSD as long as you are willing to scale out of your trade in thirds.

Let me know if it helps you. Thanks for your post.

~Jim

I found the TSI indicator a few years ago in FXCM’s retail trading platform. I noticed that price seemed to fall significantly when the TSI line fell below the zero level on the indicator, and conversely rise significantly when the TSI rose above the zero level.

TSI stands for True Strength Index.

I added a moving average “crossover” to the TSI line, and use that to provide me with entry points on my trades. The rule is to go long when the TSI line is aboe zero and it crosses above its moving average (14 period.) The opposite when going short.

The TSI works like the MACD, but I find it to be smoother. When I combine it with a leading indicator and price action interpretation, it does pretty good on both short term and longer term charts. Obviously the longer term the chart, the less choppy the price action is.

Hope that helps to explain. Thanks for the post.

~Jim

PS – I enjoy reading your blog!