Dear SeekingLight,
Thanks, you make many good points. This is a subject I am contemplating alot. The bending of the rules we refered previously is not adjusting the stop but that we entered trades at the wrong point. Adjusting the stop is really not something we have really got a policy on that we are satisfied with. What is generally the cause of the problem is errors in applying the system of determing the entry price, or errors in calculating the stop position, or errors in counting the Elliott Wave, which causes the need to adjust the stops. If we entered at the correct price, then usually there is no need to adjust the stop, and if so, the stop adjustment is quite small, and thus the deterioration of the reward:risk ratio is much less.
If the currency price double-tops, or if we miscounted the wave and it is going up one more time, then sometimes it is best to exit a trade and re-enter at a more favorable price rather than just move the stop. In some cases a modest adjustment to the stop is more advantageous. In practise, there is alot of complex management and strategising that can occur around the entrance to a trade that involves monitoring the trade ongoingly, adjusting the stop, or exiting at a strategic moment and re-entering at a better price, or aborting the trade altogether.
We are trying to keep this experiment simple, though, and are focussing on learning how to get the formula right at the start so that it doesn't need any adjustment. However, if every once in a blue moon we have to modify the stop because we made a gross error in the original entry price so that the reward : risk ratio becomes closer to 1:1, we are simply reducing our occasional worst trade to the typical norm of most professional traders. Which isn't that bad.
Thanks for your comments. This is a complex issue. Fixed stops is one option. Or limiting the adjustments on stops to a small amount is another. The real problem is that the possible maximum stop size adjustment amount has to be factored into the Risk Factor and Lot Size calculations at the time that the trade is entered, which degrades the return on capital.
Right now, however, the focus is on getting the method, skill and consistency in getting the entry price right at the start, so that the problem doesn't arise ever, or at least not frequently.
Thanks, you make many good points. This is a subject I am contemplating alot. The bending of the rules we refered previously is not adjusting the stop but that we entered trades at the wrong point. Adjusting the stop is really not something we have really got a policy on that we are satisfied with. What is generally the cause of the problem is errors in applying the system of determing the entry price, or errors in calculating the stop position, or errors in counting the Elliott Wave, which causes the need to adjust the stops. If we entered at the correct price, then usually there is no need to adjust the stop, and if so, the stop adjustment is quite small, and thus the deterioration of the reward:risk ratio is much less.
If the currency price double-tops, or if we miscounted the wave and it is going up one more time, then sometimes it is best to exit a trade and re-enter at a more favorable price rather than just move the stop. In some cases a modest adjustment to the stop is more advantageous. In practise, there is alot of complex management and strategising that can occur around the entrance to a trade that involves monitoring the trade ongoingly, adjusting the stop, or exiting at a strategic moment and re-entering at a better price, or aborting the trade altogether.
We are trying to keep this experiment simple, though, and are focussing on learning how to get the formula right at the start so that it doesn't need any adjustment. However, if every once in a blue moon we have to modify the stop because we made a gross error in the original entry price so that the reward : risk ratio becomes closer to 1:1, we are simply reducing our occasional worst trade to the typical norm of most professional traders. Which isn't that bad.
Thanks for your comments. This is a complex issue. Fixed stops is one option. Or limiting the adjustments on stops to a small amount is another. The real problem is that the possible maximum stop size adjustment amount has to be factored into the Risk Factor and Lot Size calculations at the time that the trade is entered, which degrades the return on capital.
Right now, however, the focus is on getting the method, skill and consistency in getting the entry price right at the start, so that the problem doesn't arise ever, or at least not frequently.
