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Doubling Down on TP

  • #1
  • First Post: Jan 8, 2007 9:34am Jan 8, 2007 9:34am
Hello everyone,

I've discussed Martingaling in the past and come to the conlusion that it isn't worth it since you can only risk so little on each trade. The account would grow too slowly for it to be worth it. I'm still thinking about other ways to reduce our chances of losing or minimizing losses.

My newest thought is doubling our TP. The idea came to me while discussing the weekly breakout strategy in the thread started by Tkimble. The potential profits for each week are extremely high. You could easily make over 200-300 a week if the week is strongly trending. What if we didn't care to take that many though?

I'm looking at the weekly breakouts to just make so many pips a week. Right now I'm looking for consistency and not volatility in my account. The idea is to have the breakout on the weekly candle. In the thread the straddle is 50 pips to either side. We can assume that nearly every weekly candle will eventually trend up or down considerably away from 50 pips considering the length of the candles on a weekly chart.

Anyways, I would be happy with 50 pips a week. This is not asking for much from a weekly candle. So set the straddle at 50 pips to either side. Have a TP of 50 and SL of 50. SL is not trailing, stepped, or anything. What happens if the TP is hit on the first trade? Be happy. Take the pips and have a nice week.

What if the SL is hit? We still want to make our 50 pips. If we believe there is a weekly range, just as there is a daily range, then if our first trade gets stopped out then momentum has changed and there is still a lot of movement left in the week. Thus, on the 2nd trade we increase our TP to 100, but keep the SL at 50.

If we win this trade then we profit 50 for the week and be happy. Considering the pips that are possible trading tkimble's original strategy, asking for 100 pips on the 2nd trade isn't asking for much from a weekly candle either. Therefore our chances are still good of banking 50 pips on the week. If the 2nd trade is stopped out then you can continue with 100 TP to break even, reduce to 50 TP to increase your chances to win some pips back, call it quits for the week, etc..

What does everyone think about that idea? You're not necessarily martingaling since you're not putting any more of your equity into the 2nd trade. You're not increasing the SL since 50 pips should be enough to allow the trade to move since it's not trailing, stepped, etc. You could maybe move to B/E on the 2nd trade once you're 50-70 pips positive.

This strategy wasn't possible in the daily range strategy since having a straddle large enough to make the trade important and a SL large enough to not whipsaw us really ate into a lot of the daily range. It would be asking a lot to have a trigger hit again and also double the TP. On the weekly candle I don't think this is asking much though.

Anyone else think this is a good strategy? Anyone want to try programming an EA to backtest? Thoughts? Opinions? Thanks. Matt
  • #2
  • Jan 8, 2007 10:42pm Jan 8, 2007 10:42pm
No one going to bite?

There are obviously more ways to analyze all of this. It's all about achieving a goal per week/month. How do we get there? If I'm happy with 200 pips a month do I only look for the 50 pips a week? How do I get that?

If I institute a system of 50 TP 50 SL on the first trade then 100 TP and 50 SL if the first is stopped out; am I better just looking for 100 TP on the first trade as well? Is it safe to expect to be able to get the 100 TP on the 2nd more than on the first?

What if the system was reversed and looked for 100 TP on the first trade. If that gets stopped out then only go for 50 TP on the second to increase the chances of breaking even on the week.

These are based around a breakout system such as sibkis or the variation tkimble presented. No indicators, no chart reading necessary. Set it and forget it.

I'm just trying to find new ways to get to where I want to be. With a 100 TP and 50 SL I only need to be 33% correct to B/E and 50% to profit. I know you guys hate it when people say things like that and your typical reply is, "What happens when you hit 10 losers in a row." From some of the results I've seen however, systems based on the weekly chart with larger SL and TP's tend to only reverse once. I've seen several people say they've never lost twice in a row. There will always be that one time though that I need to consider.

Just wondering what everyones thoughts are about this. Am I shooting myself in the foot for being content with X amount of pips a week? Matt
  • #3
  • Jan 8, 2007 11:20pm Jan 8, 2007 11:20pm
i feel we as traders try to impose a lot of expectations on the market rather than allowing the market dictates its own direction.
  • #4
  • Jan 8, 2007 11:27pm Jan 8, 2007 11:27pm
I've always felt like moving your stop or limit around like that makes little difference. In your case, you go from more chances to hit the TP with lower profit, to lower chances to hit the TP with higher profits. In the end, it would probably be a wash.
  • #5
  • Jan 8, 2007 11:37pm Jan 8, 2007 11:37pm
It's late here after watching the Gators take a bite out of the nuts, but it seems to me you are thinking way too much. First of all, you should start thinking in terms of $ and not pips. Secondly, you should spend your time, in my opinion, learning to code your systems, and have a computer optimize and strategize, rather than your brain (no offense). You can code a simple strategy like the one you speak of very quickly in a code such as EasyLanguage and you'd be able to tweak all your parameters in a couple minutes with your CPU at 100%.

It's great you are ambitious and arn't afraid to think. Now you just need to learn to allocate your time better.
  • #6
  • Jan 9, 2007 4:33am Jan 9, 2007 4:33am
Well, this pyramiding approach is better than Martingale, because you would be increasing your bet from winnings so you stand less of a chance of ruin. However, there is the possibility of losing the major part of profit. One thing you could do is modify the idea a little and take a series of doubles and then start the sequence over, s 1 bet then 2 then 4 then back to 1 the 2 then 4.

This way if it colapses you don't lose everything.

or

You could do what the Turtles did and move your stop to the level of the previous bet each time you add to the posistion thereby insuring the profit from the bet before. If I remember correctly, they used ATR to determine the distance and then I think they had a set of levels of betting based on the instrument they were trading. I think currencies was 4 levels.
I like this idea, because each bet beforepays for thenext one and so it does not take an increased capital to safely increase the postition in the currency.
  • #7
  • Jan 9, 2007 11:01am Jan 9, 2007 11:01am
Quoting twinchell
It's late here after watching the Gators take a bite out of the nuts, but it seems to me you are thinking way too much. First of all, you should start thinking in terms of $ and not pips. Secondly, you should spend your time, in my opinion, learning to code your systems, and have a computer optimize and strategize, rather than your brain (no offense). You can code a simple strategy like the one you speak of very quickly in a code such as EasyLanguage and you'd be able to tweak all your parameters in a couple minutes with your CPU at 100%.

It's great you are ambitious and arn't afraid to think. Now you just need to learn to allocate your time better.
Why should I think of $ and not pips? Thinking in $ gives way to the thought that you "only need 5 pips a day." When I begin to increase my lot size, yes I should consider the $, but without increasing lot sizes shouldn't I just focus on the pips I expect to profit and lose?
  • #8
  • Jan 9, 2007 11:48am Jan 9, 2007 11:48am
Quoting permanentjaun
Why should I think of $ and not pips? Thinking in $ gives way to the thought that you "only need 5 pips a day." When I begin to increase my lot size, yes I should consider the $, but without increasing lot sizes shouldn't I just focus on the pips I expect to profit and lose?
I didn't mean to suggest that lot size is the only thing that affects $. To be blunt, it just seems to me you are in that stage of not being able to take a loss. You either have to double your lot size trying to act like the loss never happened, or double your TP. I think you should just accept the loss and move on.
  • #9
  • Jan 9, 2007 12:14pm Jan 9, 2007 12:14pm
Trust me, I take losses.


Anyways, no. I'm not trying to eliminate losses. I know they'll come. I'm trying to minimize their affects on my account.

For example would I be better off going for the 100 TP on every trade and then minimizing to 50 TP after a loss? I would be trying to profit on several wins in a row.

Or would I be better off going for consistency at 50 TP? After a loss increase my TP to 100 for two trades to give myself the opportunity to profit and then just break even. Are the 50 TP's not enough and I should just let it always run to 100 TP?

Or is it better to do as you say and just accept the loss and move on? Well with a 50 TP 50 SL that would probably take away quite a bit of profit. With a 100 TP 50 SL is it reasonable to win more than 33% of the time if the system has good entries? Will it be enough to make it worth trading?

I'm just trying to attack some problems differently. Martingaling doesn't work. What else can we change? A static TP may not be the answer. Matt
  • #10
  • Jan 9, 2007 12:19pm Jan 9, 2007 12:19pm
Quoting permanentjaun
Trust me, I take losses.


Anyways, no. I'm not trying to eliminate losses. I know they'll come. I'm trying to minimize their affects on my account.

For example would I be better off going for the 100 TP on every trade and then minimizing to 50 TP after a loss? I would be trying to profit on several wins in a row.

Or would I be better off going for consistency at 50 TP? After a loss increase my TP to 100 for two trades to give myself the opportunity to profit and then just break even. Are the 50 TP's not enough and I should just let it always run to 100 TP?

Or is it better to do as you say and just accept the loss and move on? Well with a 50 TP 50 SL that would probably take away quite a bit of profit. With a 100 TP 50 SL is it reasonable to win more than 33% of the time if the system has good entries? Will it be enough to make it worth trading?

I'm just trying to attack some problems differently. Martingaling doesn't work. What else can we change? A static TP may not be the answer. Matt
What is martingale again? I still can't understand why you won't double-up? Even if failing once, you double your position for the next trade. You are not buying again to average. The s/l is still the same, so if the next trade fails you lose twice as much. If you are on a micro account, 2 lots isn't much, and neither is 4 or 8.
  • #11
  • Jan 9, 2007 12:44pm Jan 9, 2007 12:44pm
Yes it works, but for it to work you need to risk very small lot sizes on the initial trade to be able survive several losses in a row. Do you want to trade micro lots for the rest of your life? How much do you need to just trade 1 mini lot. You'd need to risk 1 - 1 - 2 - 4 - 8 - 16 - 32 for the bare minimum and that is just to break even. So you're risking almost a standard lot on the 5th trade after you've already lost 8 minilots worth of trading. It's not worth it. In this case I would agree with twinchell to "accept the loss and move on."

I'm trying to attack it differently though. Change the TP. Perhaps we can get a 50 TP 50 SL to increase our chances of winning. When we lose we institute a 100 TP 50 SL to get back the loss without increasing our risk, lot size, etc.. We could also institute a stepped trailing SL so once it does hit+50 on the 2nd trade we move the SL to B/E so we don't lose anything. If it doesn't hit +50 then we would have lost anyways just taking 50 TP. Moving to B/E would nullify the trade if it turns sour such that we get another chance on the next trade with 100 TP 50 SL.
  • #12
  • Jan 9, 2007 12:49pm Jan 9, 2007 12:49pm
And the reason we'd look for only 50 TP on the first and not try for 100 every time is because we want to take the pips when we can. We'd rather not waste our time with trades that end in B/E. I'd rather have 4 +50 winners than 4 B/E trades that went for 100. Take the 50 pips and be happy. When you get the loss, then try to do what you can to mitigate it.
  • #13
  • Jan 9, 2007 1:16pm Jan 9, 2007 1:16pm
Quoting permanentjaun
Yes it works, but for it to work you need to risk very small lot sizes on the initial trade to be able survive several losses in a row. Do you want to trade micro lots for the rest of your life? How much do you need to just trade 1 mini lot. You'd need to risk 1 - 1 - 2 - 4 - 8 - 16 - 32 for the bare minimum and that is just to break even. So you're risking almost a standard lot on the 5th trade after you've already lost 8 minilots worth of trading. It's not worth it. In this case I would agree with twinchell to "accept the loss and move on."

I'm trying to attack it differently though. Change the TP. Perhaps we can get a 50 TP 50 SL to increase our chances of winning. When we lose we institute a 100 TP 50 SL to get back the loss without increasing our risk, lot size, etc.. We could also institute a stepped trailing SL so once it does hit+50 on the 2nd trade we move the SL to B/E so we don't lose anything. If it doesn't hit +50 then we would have lost anyways just taking 50 TP. Moving to B/E would nullify the trade if it turns sour such that we get another chance on the next trade with 100 TP 50 SL.
The doulbing up as I mentioned is accepting the loss and moving on. Moving on to the next trade with twice the risk because your system has an even better chance of passing once it fails. Doubling up would not be a system to make a living off of, but as an extra system so to speak. Plus if you found a system (as I did on the weekly) for at most 4 failures in a row up to this point, why not use the system to where you got in 1 lot on that 4th failure. If you lose, oh well, you just lose a little, but it would be like 100% success, at least in the past. Perfect example is gbp/jpy. The weekly numbers on it have failed 3 times in a row now. Next week would be a 16 lots. I can't bring myself to trade 16 lots in that one, but I may do 1 lot. My only problem with doubling up is the fear that this next trade will be the time it goes to 32 lots. But I have been testing the daily this way since November, and it has worked so far.

I don't know about your idea of doubling tp. What s/l? I could put it in my system and email you the file if you want. If you went for 50 and it failed, you'd go for 100 the next week. What if it failed? 200 or start over?
  • #14
  • Jan 9, 2007 1:46pm Jan 9, 2007 1:46pm
No you're not really accepting the loss. If you were to accept the loss you wouldn't risk any more on the trades following it. You're risking a lot, 8-32 lots, just to break even.

I'm discussing going for larger tp's because if the lot size and SL stays the same then your risk is unaffected. You will not lose any more on this trade than you had on the original. Am I accepting the loss either? I guess not, but this is a safer way to minimize losses without increasing risk.

So while I don't increase my risk I still have a chance to save the loss and profit. I institute a 50 SL on every trade. No more, no less. First trade is 50 TP. If that fails move to 100. If that fails you try for 100 again. If that fails then you can go for more than 100 if you'd like.

What's different between this and martingaling is what I've already stated. You take trades just as if you're still only going for 50 TP. If you want to get to 100 TP then when the trade hits +50 you move to B/E so that you don't lose if the trade fails. If it doesn't hit +50 then you would have lost anyways, but you still only risked the same amount as usual.

So the sequence would be to get 50 pips profit. It loses so I want to profit on the next trade to eliminate the loss and also gain 50 pips by taking 100. If that loses then I go for 100 again to B/E for the entire sequence and then start trading back again at 50.

Martingaling your lot size increases your risk exponentially, and to survive you need to trade less than 1% of your account. It works if you have the funds, but I think it's wasting your time trading with less than 1% risk. The returns aren't worth the risk.
  • #15
  • Apr 22, 2007 8:32am Apr 22, 2007 8:32am
If there is system guranttee the number of string loss to be 3 or less then I will try this doubling up lot size method.
  • #16
  • Apr 22, 2007 10:20am Apr 22, 2007 10:20am
uh... bad bad bad...
1) Losers must be cut!
2) Let winners ride.


A flaw with your approach:

What if it makes 60 pips, doesn't reach your TP of 100 then tanks all the way down to your stop loss?

SL and TP should be based on ATR. Fixed SL or TP isn't going to cut it unless it is larger than the ATR across all currencies you trade.

Have a smart exit strategy! For example, in the case of a trendline breakout, the resistance becomes support, so trades should be dropped if it reaches that same line.

Let MM be your exit strategy. I like to have the same TP as SL. I'll take half profits at TP, move my SL up to breakeven and let the rest ride as high as it can get based on technicals.
  • #17
  • Last Post: Apr 22, 2007 10:52am Apr 22, 2007 10:52am
keep moving our stops UP...... lock in your profits.......Money management rules.....in fact MM is the holy grail.
Same Whore .... Different Dress
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