DislikedHe says he kept track on an excel sheet for several months of the trades he exited at breakeven to see if he would lose money or make money by trading that way. He said his results showed that it ended up costing him money. He said: "The reason why is that if you're getting in for nice reward to risk trades, where youre risking (for example) 2 points to make 6 points, fine its great when you save 2 (edit: keep in mind he is a Futures trader and not a forex trader. Thus, he trades "points" instead of "pips"). But when youre wrong, you miss out on...Ignored
He is looking at the market in a 'rigid' manner! You cannot do this. Well you can, but you will not be the one who outperforms.
Here's an example:
I'm trading long CL(crude oil futures) and i get filled at 51.05 (4 contracts)
Currently the buyers are lifting the offer and we trade out to 51.12 (+7) (i have a 'reward' at 51.25)
At this stage you could say that the buyers have the advantage and letting it run out is the higher probability play. This could hit target and on the other hand, it may not!
A few minutes pass and we are getting nowhere as the seller sits on the offer working ice at 12, capping market. The sellers are aggressive too at these prices and every now and then shift bid a tick or two lower.
If you are long from 05 and see a big seller capping trade at 12 coupled with aggressive sellers, why on earth would you let that come back through entry and stop you out?
The correct and only way to trade is to trade market feedback!
That means when you're getting data (DOM) that tells you someone large is standing in front of you, then you trim longs down or hit out!
To sit there dreaming about the 'reward' (i'll get to this terrible word in a moment) when you can literally see data that negates long trade and you hitting reward, is absolutely one of the most silliest things you can do!
The only thing you should define in 'hard' terms, is your RISK! This will also change during trade, but it will move closer to zero as you trade the position(s) out.
You 'can' define REWARD, but you are burning yourself at both ends by doing it!
Anyone who works reward out prior to entry and is taking that seriously as a hard definite doesn't know how to trade market feedback and they are in effect saying:
"I know where the market is going to go!"
Nobody knows for certain where the market will end up.
You are also crushing the..."Let winners run" axiom!
(By the way, when i trade intraday i do throw limit liquidation orders out at various prices i 'anticipate' money to work, but i will constantly shift them around as the market trades. I may get some hit, i may pull others, some i push back out further to run it).
If your risk is 10c on CL and you have reward at 30c, then that is an awesome risk : reward ratio right?
Well, it is actually shit! Because 60 min later CL has traded out higher by 2 big ones, yes 2 big fat US dollars! If you had of traded market feedback, you could have extended that reward of 30c by a whole lot more.
See how you are burning yourself at both ends here?
The market is fluid and ever changing and a trader needs to trade it that way.
Enter a trade with low risk and trade feedback and see how far you can trade it out! Your 'reward' will be your END result, it's what you end up with. What determines how big your reward will be, is how well you are keyed into the market as it 'talks' to you! If you are in your own fantasy world far from reality, then it'll be likely you won't make a career out of trading.
Obviously, if you lack skill to read market correctly then you'll struggle trading feedback, because to be able to trade feedback implies that you first know what is going on!
Anyway, that was a ramble and a half.
Simply, don't impose yourself and what you want onto the market. Be good enough to respond to changes as they take place!
Work with a pencil and not a pen.
Regards
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