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I Have a Problem

  • #1
  • First Post: Nov 4, 2019 1:21am Nov 4, 2019 1:21am
Have develop or lets say developing a very simple system for eurusd chart on the five minute chart with a stop loss of 50 pips on the five minute chart , am okay with my stop loss and i don't plan to adjust it
but my problem is the Take profit which i feel i should use 100 pips. i have look and did manual backtesting and found out that most of the time it gets to 70 pips and come back, and in a good market or i short move of 200 pips you can bank up to 6 trades then that 6 trades can be 70 pips * 6 = 420 or 100 pips * 6 = 600 but sometimes if you want to pick 100 pips per target you end picking little or nothing at all.
Looking at the ATR for eurusd in the past
Attached Image (click to enlarge)
Click to Enlarge Name: ATR.png Size: 49 KB


I Can't really explain this but for those who have been here then i guess you understand. The psychology playing on me right now is that i can't tell if is greed or mediocrity( were i can pick more and just want to go for less)
THE TRUTH IS SIMPLE,ACCEPTING THE SIMPLICITY OF THE TRUTH IS WHAT IS HARD
  • #2
  • Nov 4, 2019 2:36am Nov 4, 2019 2:36am
You need a large sample-size to see which approach is best but the most important factor in your choice of TP is your own psychological make up. By that I mean what sort of equity curve can you stand. A strategy with bigger wins might be really hard to stick to in practice because you would have to live through manny losses or break-even trades before netting a winner. Smaller but steadier wins make for a smoother equity curve but you'd miss out on the big wins. Which are you most comfortable with?

The most important thing imho is to keep it simple.The more complicated a strategy, the more likely I am to deviate from it in times of stress. Here's a great post about keeping things simple in trading:

https://www.thistradinglife.com/post...d-to-be-simple

Maybe choose one approach, stick with it for a decent amount of time, then review your results. The simpler it is, the more accurate the results of any sample size will be.

Hope that helps.

P.S. Love your signature, that says it all!
  • #3
  • Nov 4, 2019 7:54am Nov 4, 2019 7:54am
Quoting HairyHarley
You need a large sample-size to see which approach is best but the most important factor in your choice of TP is your own psychological make up. By that I mean what sort of equity curve can you stand. A strategy with bigger wins might be really hard to stick to in practice because you would have to live through manny losses or break-even trades before netting a winner. Smaller but steadier wins make for a smoother equity curve but you'd miss out on the big wins. Which are you most comfortable with? The most important thing imho is to keep it simple.The...
Thank you very much for this reply you made it more clearer for me, answering your question: really deep down side it seems am comfortable with "Smaller but steadier wins" for a smoother equity curve like you mention ........ one must admit that psychology is one other hardest part in trading
THE TRUTH IS SIMPLE,ACCEPTING THE SIMPLICITY OF THE TRUTH IS WHAT IS HARD
  • #4
  • Nov 4, 2019 10:51pm Nov 4, 2019 10:51pm
my suggestion is to automate (build an EA) and then do exhaustive back testing with a variety of settings.
I would also build the EA around a volatility measure as trading the M5 without an understanding of how the pair moves and trades, and with fixed stops, is fraught with risk.
" check out The Traders Outpost "
  • #5
  • Edited 12:57am Nov 5, 2019 12:22am | Edited 12:57am
Quoting RedLineFred
my suggestion is to automate (build an EA) and then do exhaustive back testing with a variety of settings. I would also build the EA around a volatility measure as trading the M5 without an understanding of how the pair moves and trades, and with fixed stops, is fraught with risk.
Yes, i agree with your point too and i thought of that too but is just that i can't afford to pay for that now.....
THE TRUTH IS SIMPLE,ACCEPTING THE SIMPLICITY OF THE TRUTH IS WHAT IS HARD
  • #6
  • Nov 5, 2019 1:28am Nov 5, 2019 1:28am
Quoting martinez1
Have develop or lets say developing a very simple system for eurusd chart on the five minute chart with a stop loss of 50 pips on the five minute chart , am okay with my stop loss and i don't plan to adjust it but my problem is the Take profit which i feel i should use 100 pips. i have look and did manual backtesting and found out that most of the time it gets to 70 pips and come back, and in a good market or i short move of 200 pips you can bank up to 6 trades then that 6 trades can be 70 pips * 6 = 420 or 100 pips * 6 = 600 but sometimes if you...
Hi Martinez, I am new to FF, and I couldn't resist replying when I saw your question. When you say you have a problem, perhaps the problem is you could be asking the wrong question of yourself? What I mean by that is, you are looking at the problem with the perspective of asking why the TP you have chosen (100 pips presumably based on a rational of being 2x the SL distance, and you are comfortable with a 50 pip SL) is not giving you an equity curve you are happy with. But perhaps you should be looking at the problem from the perspective of asking what TP will give you a equity curve you are happy with.

Put another way. You have decided that a 50 pip SL is a per trade risk level you are comfortable with (very sensible imo starting with deciding what you are prepared to risk). Now having decided that you wish to obtain a 2:1 reward:risk on a per trade basis, so you have chosen a 100 pip TP. No doubt there will be times when the market gives you a 100 pip TP, but the other times it will give you a 50 pip SL. If a 100 pip TP is simply not suited to the typical price action of a given market (all markets having their unique price action characteristics), and it doesn't happen very often (as you've suggested for the EU in your post) then perhaps you will get less 50 pip SL's and more TP's and therefore a better equity curve if you choose a different TP - so now you are looking at the problem from a equity curve perspective, not a individual trade perspective.

Hope the above helps.

Cheers, Sharks
  • #7
  • Nov 5, 2019 3:55am Nov 5, 2019 3:55am
You may need to revisit a basic rule of trading: Take what the market offers you. In this regatd, a good steategy is to have more than one tps; the first being a 1:1 r/r.

Trade safe.

KP
Do your homework, follow the footprints of smart money
  • #8
  • Nov 5, 2019 4:21am Nov 5, 2019 4:21am
Quoting martinez1
Have develop or lets say developing a very simple system for eurusd chart on the five minute chart with a stop loss of 50 pips on the five minute chart , am okay with my stop loss and i don't plan to adjust it but my problem is the Take profit which i feel i should use 100 pips. i have look and did manual backtesting and found out that most of the time it gets to 70 pips and come back, and in a good market or i short move of 200 pips you can bank up to 6 trades then that 6 trades can be 70 pips * 6 = 420 or 100 pips * 6 = 600 but sometimes if you...
Dear martinez1,

I don't think it is greed or mediocrity. What it sounds like is you are trying fit your expectation of how the market should move by fixing your stop. Why not take a step back and look at the quality of your entries. Then you may get a clearer picture of exits.

That may be the average range for the movement, but let us not forget it is average over 200+ days. Some it can move more, some less. What you could try is work out the average negative movement from your entry and approach it that way to see if your 50 pips is justified. Then you could do the same for positive direction.

The beauty about ea systems is that they can position size the entries very easy, so maybe do not discount that approach too early by fixing risk at 50 pips.

Best Regards,
K
"Work hard, put in the effort, and follow your dreams..." -Me
  • #9
  • Last Post: Nov 5, 2019 5:08am Nov 5, 2019 5:08am
Quoting tzamo
{quote} Dear martinez1, I don't think it is greed or mediocrity. What it sounds like is you are trying fit your expectation of how the market should move by fixing your stop. Why not take a step back and look at the quality of your entries. Then you may get a clearer picture of exits. That may be the average range for the movement, but let us not forget it is average over 200+ days. Some it can move more, some less. What you could try is work out the average negative movement from your entry and approach it that way to see if your 50 pips is justified....
Okay, Yes you are right when we look at it from this angle, initially i intended to trade this on EURUSD without bringing in strength and weakness of currencies to trade all pairs into play focusing on only EURUSD due to low spread and the stress of watching so many currencies at the same time
but i found out that is more difficult trading in a market that has no momentum, and low spread does not really make any sense in a dead market so am bringing the idea of weak and strong currencies in which i will trading any pair with a better momentum at that time instead of only EURUSD and it's looking better with more room for pips
THE TRUTH IS SIMPLE,ACCEPTING THE SIMPLICITY OF THE TRUTH IS WHAT IS HARD
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