Mi estrategia de trading LongShot – Clase 03 – StopLoss


Financial Education Well, that’s how we come to the third class
of this trading strategy called LongShot. I want to emphasize that this
is a third class, okay? Before this there is a class two,
and before class two there is a class one. So, please,
before making a comment saying that it is necessary to explain
how is the set up of the moving averages, before asking if this can be use
in a temporality of 15 minutes, or if it can be used in temporality of one hour,
or if this is just to do Scalping. Before asking
how the entrance signs are… I advise you, please,
first review classes one and two, and then make your
comments. In addition, it is necessary to clarify
that this is not the last class either. So if the information you are looking for
is not in class two, is not in class one, and is not in this class, it is very
likely that it will come in the next classes. The strategy is not
ready yet. This is a strategy that is being
explained in weekly classes, which are published every Monday,
this is the third Monday… I started talking about
this in a first video where I commented that
I was going to publish this strategy, what is this strategy
about… So I’m going to leave
the cards up here and I’ll leave you down in the video
description the links to the previous classes. I’ll leave the link to class one,
I’ll leave the link class two, and I’ll leave the link to the initial
video where I mentioned what this strategy is, how it worked for me this strategy,
how long I used it, how much profit I got from
this strategy, and so on. It is important to note that
the Donchian channel, there are many people who have doubts
about the Donchian channel. I showed how the Donchian channel
is placed on C-Trader and showed how the Donchian channel
can be added to MetaTrader 4. There are some people who have tried
to replicate the procedure that I explained for MetaTrader 4 on MetaTrader 5,
it is not the same, Sirs. It will not work, I do not know,
and in this I have to be very honest, I do not know if there is a way to place
a Donchian channel in MetaTrader 5. Therefore, if you need to place a
Donchian channel in MetaTrader 5 I suggest you search in Google the way to do it,
or you ask your broker, or the manufacturer, how to place
a Donchian channel in MetaTrader 5. I have not seen it, I do not know how to do it,
so the way that I have published in the class above, in class one, is how to place the Donchian channel
in C-Trader and in MetaTrader 4. Any other platform that is not that
and that does not have the Donchian channel installed by default,
I do not know how to install it, you have to find out… There are
many platforms available in the market, I can not, of course, know them all,
nobody knows them all, I think… So for the specific platform that
you are using, you have to contact the technical service or the manufacturer
to tell them how to install a Donchian channel. Today we are going to talk about
how to place the first Stop-Loss. Now, I need to talk about what a
Stop Loss means to a trader. And I know that this
is certainly not a basic course, I’m not going to be talking about
the Stop Loss concept here, but more about the meaning
of Stop Loss for a trade. Gentlemen, the Stop Loss as you know,
or should know, and if you do not know it is necessary that before
trying to apply this strategy do a basic course, which can be mine, can be any other,
it is not mandatory that it be the my own. You can do any other
basic course of the millions found
on the Internet. Some are good,
some are bad… It is your responsibility
to get a good one. I can give guarantee and faith of mine, and of
the quality of the content of the course that I give, others, I do not know, if you do not want
to do mine, look for good information on the internet. But hey, the market has no way of putting
a brake on a fall in price… That’s the job of
the trader! You as a trader have basically
two responsibilities that you can not get
away from. The first, obviously,
is to open the trade. Identify when there is an opportunity
in which you can enter the market in the direction of least
resistance. That is your first
responsibility! Your second
responsibility is to put a brake on the trades
you have open. So, once you open a trade, let’s suppose
that you opened a long trade, the market does its job,
and the price starts to rise… But if for some reason the price starts
to go down and the trade moves against you, your second responsibility comes into
play and you have to activate yourself with your second responsibility,
which is to apply the hand brake on time. The way to make money in the financial
markets is very, very simple. You buy cheap, and you sell expensive, or the opposite
process you sell expensive and buy cheap. It’s that simple! Now, if the trade goes against you and
you start losing money, you have to apply
the hand brake. Obviously,
no strategy is 100% effective, no strategy can give you the guarantee
that whenever you enter long the price will rise, and whenever you enter short
the price will go down, that simply does not exist. What does have to exist is your responsibility
to apply Stop Loss when you have to apply it. And this, in spite of how simple it seems,
is not so easy to put into practice. Most traders lose money precisely
because of the impossibility of applying Stop Loss
on time. Your responsibility as a trader
is to cut losses. The market does only the job
of raising prices. And at the moment when
a trade is positive, it does not matter if you won
little or if you won a lot. Obviously the ideal ratio of losses
and gains is from 2 to 1. That is, for every dollar
you lose you gain $2. That would be the ideal
relationship. For every negative trade that
you lose from a dollar you have to close a
positive trade of 2 dollars. That is a healthy relationship
of profit and loss. From 2, you can close in 3, in 5,
in 10… It does not matter! As long as you are able
to always close above 2, and always close at least 1,
or less than that. That’s your responsibility,
you have to apply the hand brake. The financial market can not apply
the brake for you… That’s your responsibility! And you decide whether to let the losses run,
or stop them in time. Therefore, the location of the Stop Loss
is extremely fundamental in each and every one of the trades
that you run in the financial markets. Now, initially,
when you open a trade, you have to be clear that there are
two Stop Loss that you have to have. There is a technical Stop Loss,
and there is a Stop Loss for maximum loss. And this Stop Loss for
maximum loss always… Always, always, and I can not be
more emphatic in this, It is always much more important
than the technical Stop Loss. What does this mean? In this strategy as it was originally
published, the technical Stop Loss must be placed at 70 pips
of the entry price. Now, to me honestly that Stop Loss
is not so comfortable because, the truth is that not all
financial instruments move in the same way,
not all financial instruments have the same average size
of movement every day. Therefore a Stop Loss fixed at 70 pips
for all financial instruments is simply not realistic, it is not viable
and it is not safe. However, that is a Stop Loss technician,
that is a scientific Stop Loss, it has absolutely nothing subjective,
it is 70 pips from the entry price. What does it mean? That if you entered
long and bought at $1.70, your Stop Loss has
to be at $1. If you entered short, and entered $2,
your Stop Loss has to be at $2.70. As simple as that!
It’s 70 pips. Obviously,
I’m talking hypothetically about a financial instrument
with two digits. But that is another
matter. The point is that the technical,
scientific Stop Loss, without subjectivity, which is not susceptible of interpretations,
is 70 pips. That’s a technical Stop Loss, okay? There is no doubt there. They are 70 pips
whenever you enter from the entry point. Now, that fixed Stop Loss of 70 pips,
as I told you initially, I do not like it. In fact, it was not the Stop Loss that
I applied when I used this strategy, and this is one of the changes
that I made to this strategy, this is one of those condiments
that I spoke to you in that first video, that is nothing more than those slight modifications
that I did to this this strategy to be more like me, my way of trading,
my personality, my tastes. I never, or very rarely, perhaps,
applied the Stop to 70 fixed pips. Unless by chance the Stop
I started to apply, or the Stop method that
I started to apply were casually 70 pips.
But no more than that. So, the way I started applying this
Stop Loss was a couple of candles before the crossing point of
the moving averages. We know that the point of entry is
the moment in which the moving averages cross. So I placed the Stop two candles
before the crossing. So if we are talking about
a long trade, it has to be below the minimum of two candles
before the crossing. And if we are talking about a short trade,
it has to be above the maximum of two candles before
the moment of crossing. Let’s see it in
the graph. If we have this
trade, we see that the crossing point of
the moving averages is this, okay? Suppose we are entering
a long trade, this was the time when the fast moving average
crosses the slow moving average, from bottom to top,
this is the time of the crossing. And I have to find the minimum point
of two candles before the crossing, or the moment in which
the entry event occurred, okay? The Stop Loss would have
to be at point 1, okay? let’s call the zero point
the entry point, and point 1 would be the spot
to place the Stop Loss. Now, it is important to note that
the safest place to place the Stop Loss would always be below
the fast moving average. Therefore, if I see two candles
before the crossing point, I am still above
the fast moving average, I should look for a point before this
that is below the fast moving average. Let’s see an example
in short. If we go short in
this place… This was, the zero point
is the point of entry, it is the point at which the crossing
of moving averages occurs, okay? And two candles before,
is this place. However, as we are short, we now have
to look for a point above the fast moving
average. Therefore, two candles before,
we are still below the fast moving average. So we look for the previous point, that is,
this one here, and here should go the Stop Loss. I suggest that if you have not been clear
about this, you will repeat them again and again. In any case, at this moment
it is necessary to point out that later in the next
classes, after this strategy
has been fully explained, we are going to do some additional classes
with practical examples of this strategy on real instruments,
real prices in a real trading account, okay? So if something has not been clear
to you here, and after seeing it many times it is still unclear, I suggest you wait
for those practical classes in which your doubts are sure to
be cleared in their entirety. Now, considering that Stop Loss does not always
go in the technical point defined by default, which is two candles before the crossing
because not always two candles before the crossing we will be below the fast
moving average, if we go long, or above the fast moving average,
if we go short, it means that I am going to be extending my Stop Loss
to points that are almost always subjective. And this is where Stop Loss comes
into play for maximum loss. It is important that you are very clear
about what a Stop Loss means by maximum loss. In my course 1, and also in course 2,
in the Advanced Level II Trading Course, I have commented that your maximum loss
has to represent a healthy percentage for the total of your
available capital. What does this mean? Normally a healthy loss
is between 2% and 5% of your total capital. There are some people a little more
reckless that take them to 10%. I think that 10% is quite high but it is a
decision of yours, it is a personal decision. I recommend between
2% and 5%, which means that for every $100
you have in the account, your maximum loss
should be $2. Therefore, if you have $1,000 in the account,
your maximum loss should be $20. If you have $ 10,000 in the account,
your maximum loss should be $200. And so on. We are talking about
between 2% and 5%. Separate 5%, obviously, from $100,
the maximum loss is $5. From $1,000 the maximum loss is $50,
from $10,000 the maximum loss is $500. As simple as that! Now this maximum loss
simply can not be the maximum loss for
each trade. Why? Because if my total daily maximum loss
is equal to the maximum loss per trade, I can only make a
mistake once a day, which is why I am being
unrealistic. It’s just not realistic to think that
in one day I’m going to make a mistake once. Maybe there are days when
that happens, and I’m wrong once. In fact, there are days when
I just do not make a mistake, and all the trades I do work out
very well, but that does not always happen. Therefore, I have to be more
flexible with myself and allow more than
one loss a day. So, if my capital is $10,000,
and my maximum daily loss is $500, it can not be that I am allowed
to lose $500 in a single trade. I have to divide that at least
between 3, or between 4, in order to have a loss
for healthy trade that allows me to make mistakes
at least 4 times a day, okay? So, let’s take it to a
simpler number to divide, and let’s say that your maximum
daily loss is $300, okay? Therefore, if I divide that by 3,
it means that I can lose maximum $100 per trade. As simple as that! If I am going to live between 5,
my maximum daily loss is $500, then I will be able to afford to lose
up to $100 in each of my trades, and I can make
a mistake 5 times. It’s that simple! Now, this is where it comes into
play where to put the Stop when the technical Stop represents a
loss greater than my maximum loss per trade. Let’s say that the Stop Loss
in this trade is here, I bought at this point
and it goes here. So, if I bought a whole
dollar/yen lot at this point, and placing the Stop
I realize that at this point, where the Stop goes,
I would be losing more than $100, if the trade is going
against me, I just can not take
the risk of this trade. Now, What do have I do? Do I have to
miss the opportunity? Not necessarily. What you have to do is reduce
the size of your trade. That means that I can not trade a whole lot,
I have to trade maybe half a lot, and with half a lot then
my maximum loss falls below $100, and I can afford
this trade. What can never happen,
never, never, is that your Stop Loss represents a loss
greater than your maximum loss per trade. Now, what does the maximum loss
per trade mean? It means that if my trade goes bad
and the loss totals more than $100, and I’m obviously talking about
a hypothetical example in which my maximum loss per trade,
after calculating it based on, either 2% or 5%, on the basis
of my total capital, means that my maximum loss
will be $100… I can not afford a trade
to fall below $100. When a trade approaches or
touches $100, that trade closes. It closes without
looking back! I do not care if the trade later
recovered and went well, I do not care if afterwards the trade
ended up falling much more. I simply can not
afford, I should not allow myself to lose more
than $100 in a single trade. If I lose the $100 maximum loss
in a trade it means that it has to be closed and
I have to look for another opportunity. If I make another mistake
and lose another $100, I carry 200 dollars in my accumulated
maximum daily loss, assuming that my total maximum
daily loss is 500 dollars, I have $ 200, I can still
make 3 more mistakes. Suppose my next trade went well,
and I earned $150, subtracted from my $200 that
I had already lost, and still have $50 as a total
cumulative total daily loss. Therefore, I can still
afford to lose 4 times and a half,
for example. But suppose I messed up
repeatedly 5 times, and I get and I hit the total maximum
daily loss, which is $500… That means, gentlemen, that I just have
to turn off my computer, okay? And I do not trade anymore all day,
that day is over for me, I can not continue
trading that day. As simple as that! Tomorrow will be another day,
tomorrow I will have another $500 to make a mistake
5 times more. But today it’s over,
today I can not trade anymore. And that rule you have to apply as
if your life depended on that, because the truth is that your
financial life depends on that, and in this world we know that money
is important to survive. So it’s almost as if your life
really went away in that. Now, in addition to
the maximum daily loss, you have to have a
maximum weekly loss. And the maximum weekly loss can not exceed
two days of maximum daily loss. Which means that if
your maximum daily loss was $500, your maximum weekly loss
must be $1,000. If your maximum daily
loss was $300, your maximum weekly
loss is $600. If your maximum daily
loss was $100, your maximum weekly
loss is $200, It means that if you lose up
to 200 or more, hopefully never again, but up to $200 in
a same week… Again, you have to
turn off your computer and not return it
to use to trade in the rest of that week,
even if it’s Tuesday, I do not trade again
on Wednesday, Thursday or Friday. I go back to trade on Monday
of the following week. This is how strict you have to be when it
comes to controlling your capital, controlling the losses of your capital,
that is called trading management. Some people call it capital
management or risk management. The correct name is
trading management. But that’s how strict you have to be
with your trading management. Always the maximum losses are going to be
above the technical Stop. Never a technical stop can be above
the maximum loss per transaction, not to mention the maximum daily loss,
much less the maximum weekly loss. That simply can not exist
in your way of executing or in your methodology
to execute your transactions. You have to have a maximum loss per
transaction, a maximum daily loss, a maximum weekly loss and you have to respect
them as you respect your mother. And I guarantee that if the traders apply only
this rule of having well defined maximum losses and respect them, all those traders
would be successful no matter the strategy. The management of trading is in fact
more important than the strategy if you have a good
trading management, you can apply a strategy based
on the flight of a coin, you take a coin out of your pocket,
you throw it into the air, if it is head, you go long,
if it goes cross, you go short. Apply a good trading management to that
and you are on the other side. You will be able to run
successful trades because you will always be
earning more than you lose. Control losses and not allow yourself
to lose more than you can lose healthily is the most important part
of any trading strategy, no matter what,
no matter what is based, it does not matter if they are fundamental,
it does not matter if it is technical, it does not matter
if it is by price action, it does not matter if they are divergences, if they are
oscillators, if they are moving averages, whatever. Good trading management guarantees
the success of any strategy you apply in the financial markets. So learn these rules as
if they were your name, apply them as if
your life depended on it, review this video as many times as necessary,
and keep an eye on upcoming classes. Remember that my trading courses are in
www.tradingefectivo.com, here I’ll leave you
the link in the cards, I’ll leave you down in
the description of the video too. I have my basic beginner
investment course where you learn absolutely from scratch
how to trade the financial markets. It is oriented to Forex, but once again,
it is necessary to clarify that all the tools and knowledge that
you will learn in the course apply to any
financial instrument. It does not matter if it is Forex,
it does not matter if they are shares, if they are cryptocurrencies,
if they are futures, if they are CFDs, if they are indexes,
if they are commodities, whatever. Apply for everything. The basic investment course
for beginners for $49 at www.tradingefectivo.com Is it necessary to understand
this strategy? No. You can do another course that you get there,
there are many free courses. I can not attest to the quality of
the courses you get, from mine yes, it costs $49, if you want, you do it, it’s your decision,
you’re free to take it. Advanced Trading Course
Level II for $499, contains a specific
trading strategy, based on price action,
indicators, is the strategy that I am currently
using to trade in Scalping. I trade every day from Monday to Friday and
stock shares of the New York Stock Exchange, I trade between 30 minutes, one hour,
one hour and a half, every day, and that’s what my trading life is based on,
and I do it with that strategy that is in the Advanced Level II
Trading Course. And finally Oliver Velez’s
funded account program called iFT
Self Start Trader, which can now be purchased for a
promotional price on my page, okay? Cordially invited to
the next class, cordially invited to follow me
on social networks. I’m like @tradingefectivo
on Facebook, Twitter and Instagram. If you liked this video give me a like,
share it with who you think can be useful and see you
in the next class. Financial Education

Leave a Reply

Your email address will not be published. Required fields are marked *