Cutting your losses early - Momentum based method

hi thanks for the thread first of all. I have some confusion.

1. do you always use 30 pips no matter what as 1 R or is it dynamically changed per trade situation? 30 pip means in 4 digits or 5 digits?
2. there are maybe situations that you may lose absolute 1R right? like simply reverse to sl due to news some unexpected move or whatever.
3. on what condition u switch from absolute 1R to relative 0.6R? like price hit a particular reward % or so?

I'm really interested in this thing as you said you can still make profits while the win rate is garbage. and sorry for asking many questions since I'm like a slow learner. Thanks for understanding..

Thanks for dropping by fsatrader.

To answer your questions first:
1. I don't use a fixed amount of pips for my stops. Generally, I place it a fair big before the swing highs/lows. I enter with momentum and my ideal scenario is a trade just following through on this momentum. If it retraces too much of the momentum I entered on, then in my mind my idea hasn't worked out. Again though, I don't think my method to enter is anything special. I just want to allow my trade to not travel too far to make positive average returns. Does this make sense? It can be 20 pips in one scenario, and 50 in the other.

2. Yep, that's totally possible. Usually when things go really south on a trade, I take it out for -0.7 or -0.8 R. Had only one occasion stop me for -0.9 in the last 3 months. I really try to avoid full stop outs. This means more losers but I'm not that concerned about the win rate.

3. That's a good one! I'd like to steer this entire thread into the direction of your third question. They matter way more than technical entries.
I try to switch it up depending on the momentum at the time. As a rule of thumb, once I'm up 0.4r ish absolutely on any given trade, I reduce my risk to -0.6. It can vary sometimes but I'm quite happy to reduce my stops quickly. I'm really more concerned about protecting the downside and then make positive average returns on the trades that work out. I hope this makes sense

Yep, you can definitely make money on bad win rates without massive winners. Also you can lose money on 75%ish win rates on (seemingly) 1-1R strategies. Been there a bunch of times lol.

Let me know if you give this a shot, I could make a sheet for you in this google sheet : https://docs.google.com/spreadsheets...it?usp=sharing

Imo, after 2-3 weeks of trying this you can tell that reducing your risk to achieve positive r2r is a lot more feasible than predicting 2, 3, 4 R absolute winners.
Good luck

Hello 99p, really long time I don't post here.
This seems interesting even thoug Is not really clear to me, lol. Apart relative risk is relative to what? Do you make more than one trade on different instruments on the that they are open in the same time?
How do you handle the trades apart reducing stop, but the exit the target that is really important, thought, when do you exit a positive trade?
What do you use to calculating positions size?
For your entry you can test it with random entry, on the long run random entry give in theory the 50% / %50. To do this and also to calculculate the reducing risk on a lot of trade it would be very helpful to test with an ea or bot to backtest.
Money Managemnt and trade handle it's really important!
Thanks for share!

Thanks for popping in, Lubo!
I'll try to answer your questions but let me know if it's still unclear. I'm not that great at explaining things.

My (absolute) initial risk when I enter a trade is $1. I aim to reduce my stops by 40% (on average) once I have entered the trade. My absolute risk is now $0.60. My relative risk is 0.6 of the initial 1 risk. If I return $1.20 on a trade, I have relatively made 2x my risk back. Absolutely. I have made 1.2x my risk. I'm only concerned about consistently reducing my stop, and relatively return positively (by a margin n that doesn't need to be that high - I want to make more money than I lose on moves that are considered pretty small by most traders).

I do not enter multiple trades at once. If I'm up significantly on a trade already, I might enter a second one if an opportunity comes up. Doubling down is risky and I try to consistently reduce my risk to make this logic viable in the very long run.

As a rule of thumb, once I'm up on a trade around 1 - 1.5R absolutely, I'm more than happy to take my trade off. If the momentum is very strong in my favor, I'm happy to trail my stop closely. I don't like giving back lol. It might restrict my profits but I care more about protecting the downside. That's just me though, and your approach might be better! I just want to be in a trade, make positive returns, and be out quickly. Ideally the trades work in my favor right away and I'm out quickly.

My bad maths. And a couple of entries when my math is off lol.

Have a go at it and let me know how it goes. I'm personally not a fan of EAs because I've never seen anyone consistently (over years) win with it but sky is the limit. For what it's worth, anything that is somewhat momentum oriented - if you reduce your stop consistently and are happy to let your ego out of it and make smaller returns absolutely, you can still have an average relative positive R2R and reduce your risk of ruin significantly.

Yes, money management and being disciplined about your stop reduction is definitely really important. Without it this method doesn't work. It's not what traders like to hear but smaller win rates with a positive risk/return framework will work in your favor a let better in the longer run.

Hope this helps

first trade of the week, lets see how that goes:

euro long

a little update:



the return exceeds > 1R relatively by quite a bit, so I'm happy w this trade.
@LuboLabo. You were asking about the trade management. I have instantly reduced my stop to -0.7R absolutely and with each push up even further. On the pic above the minimum relative return on this trade would be roughly 2R. As it pushes up a little more I'll keep the stop even closer. My goal is to not blow up my account so I'm really just trying to make positive relative returns on moves that aren't that big. If the momentum pushes it quickly and makes a bigger absolute winner out of it, that's perfect. But I don't plan/hope for it. I just protect the downside and aim to net positive relative returns. Hope this makes sense. I feel like I'm talking too much lol. Just reduce your stops consistently and don't swing for the fences but take trades off quickly. Entry methods barely matter. Just don't overtrade.

#2 of the week: ftse long

this one works faster than i can screen or type lol




edit: should've kept my mouth shut lol. stops reduced and all

First trade of the week and month - gold short

Reduced stops and all.



In case anyone new is peeping in: All I'm doing is to reduce my stop on every single trade to avoid full stop outs. That way I don't need to make large winners anymore to be consistently profitable, at roughly 40-50% win rates on average. No superstar trading on my end and I think using this method would help quite a few people who've been struggling with consistency over longer periods of time.

That's the whole method really.

Good luck

Risk & Return Results for May.
My first time ever being profitable for 3 months in a row and reaching my goals consistently (10R each month).



Link to the sheet : https://docs.google.com/spreadsheets...it?usp=sharing

If anyone wants to track their own results using this method, let me know and I can hook you up with a sheet. No strings attached obviously

I don't understand your spredsheet...there are some entry some not, there are no exit...etc..
How do you trail the stop of your position?
Thanks.