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The REAL reason why nearly every trader fails. Can you solve this trading dilemma?

  • #21
  • Apr 19, 2010 11:40pm Apr 19, 2010 11:40pm
It sounds like you are a short term scalper, as I am attempting to be.

Basically, over time, and many recorded trades that you can analyze... you are going to make decisions to sometimes give up your profit for more profit. Obviously, other times, you will not.

So now that you presumably have your stop loss and position size down...start thinking about trade management (whether to hold longer or take profits) based upon:

1. current volatility
2. time of day
3. "strength" of whatever is your signal
4. price being near high/low, pivots, or psychological levels.
5. price being near support/resistance

These are the things I am trying to consider .... to add more "depth" to my scalping.

( For example, I try not to enter trades near round numbers, or pivot points because of higher volatility around them ...though I will attempt to hold trades so that my exits will be near them, because I believe price is drawn to these over time. )

My 2 cents... Good Luck!
  • #22
  • Apr 19, 2010 11:44pm Apr 19, 2010 11:44pm
Quoting Intu
It sounds like you are a short term scalper, as I am attempting to be.

Basically, over time, and many recorded trades that you can analyze... you are going to make decisions to sometimes give up your profit for more profit. Obviously, other times, you will not.

So now that you presumably have your stop loss and position size down...start thinking about trade management (whether to hold longer or take profits) based upon:

1. current volatility
2. time of day
3. "strength" of whatever is your signal
4....
GREAT ANSWER!

Thank you very much.
  • #23
  • Apr 19, 2010 11:49pm Apr 19, 2010 11:49pm
Quoting finally
You can't calculate your risk/reward in trading BECAUSE you can not KNOW how much profit there will be in the trade.

Without this KNOWLEDGE it is extremely difficult to make meaningful money in trading.
Well, it is extremely difficult. The market reveals itself on a real-time basis. The orders are flooding in and out as different price levels are made available - there is no KNOWING what will happen. Hop on board with the currently dominant side and take what you get. Sometimes a lot, sometimes a little - sometimes a kick in the teeth.
  • #24
  • Apr 19, 2010 11:50pm Apr 19, 2010 11:50pm
Quoting Intu
It sounds like you are a short term scalper, as I am attempting to be.

Basically, over time, and many recorded trades that you can analyze... you are going to make decisions to sometimes give up your profit for more profit. Obviously, other times, you will not.

So now that you presumably have your stop loss and position size down...start thinking about trade management (whether to hold longer or take profits) based upon:

1. current volatility
2. time of day
3. "strength" of whatever is your signal
4....
Also, the most important thing needed to make big bucks in this game is a high winning percentage set-up. You can search for years before you find one of these.
  • #25
  • Apr 19, 2010 11:52pm Apr 19, 2010 11:52pm
Quoting finally
How can you GUARANTEE a risk/reward ratio of ANY kind if you can not KNOW, for certain, how much profit there will be in a trade?
I know because I calculate that my TP is 1.5 the distance to my SL. Then I let PA decide which way it's going to go. I know that I'll either get the TP or the SL.
  • #26
  • Apr 19, 2010 11:54pm Apr 19, 2010 11:54pm
Quoting finally
Also, the most important thing needed to make big bucks in this game is a high winning percentage set-up. You can search for years before you find one of these.
With this I can see that you and I are on completely different wavelengths - which is fine. Good luck to you!
  • #27
  • Apr 20, 2010 12:01am Apr 20, 2010 12:01am
Quoting blueace
I know because I calculate that my TP is 1.5 the distance to my SL. Then I let PA decide which way it's going to go. I know that I'll either get the TP or the SL.
So you place OCO orders (one cancels the other).

What if your stop loss is 20 pips and your profit target is 30 pips and the rrade goes 25 pips in your favor and starts stalling and then retraces 3 or 4 pips, do you still try to get your 30 pips or do you grab the 24 pip profit?

If you grab the 24 pip profit, then your r/r ratio is no longer 1 to 1.5.

If you don't grab the 24 pip profit sometimes you will give back most of your profit and sometimes you will get your 30 pip profit.

Which way do you play it?
  • #28
  • Apr 20, 2010 12:06am Apr 20, 2010 12:06am
Quoting blueace
I know because I calculate that my TP is 1.5 the distance to my SL. Then I let PA decide which way it's going to go. I know that I'll either get the TP or the SL.
Also, I am not sure if a risk reward ratio of 1 to 1.5 or 1 to 2 really means anything at all because a risk reward ratio of 1 to 2 ALSO means that the odds are twice as likely that you will lose on the trade, so I think that r/r is not the key to trading but rather a high wining percentage set-up is the key and it could take years before you find one.
  • #29
  • Apr 20, 2010 12:09am Apr 20, 2010 12:09am
Quoting FXSurfer
Well, it is extremely difficult. The market reveals itself on a real-time basis. The orders are flooding in and out as different price levels are made available - there is no KNOWING what will happen. Hop on board with the currently dominant side and take what you get. Sometimes a lot, sometimes a little - sometimes a kick in the teeth.
Well said.
  • #30
  • Apr 20, 2010 12:11am Apr 20, 2010 12:11am
Another eye-catching thread that could be written as short as "can you solve the market's uncertainty?"
Trading is the game of fear and greed.
  • #31
  • Apr 20, 2010 12:13am Apr 20, 2010 12:13am
Quoting finally
So you place OCO orders (one cancels the other).

What if your stop loss is 20 pips and your profit target is 30 pips and the rrade goes 25 pips in your favor and starts stalling and then retraces 3 or 4 pips, do you still try to get your 30 pips or do you grab the 24 pip profit?

If you grab the 24 pip profit, then your r/r ratio is no longer 1 to 1.5.

If you don't grab the 24 pip profit sometimes you will give back most of your profit and sometimes you will get your 30 pip profit.

Which way do you play it?
Good question. To stick with the same example of 30 tp and -20 sl, I would move my stop loss to break even +1 when it reaches 75% of the way to tp. So at +23 my stop becomes be+1. From that point on I leave it alone, even if it starts retracing. It either hits tp or sl, no intervention.

What I might also do is start off with, let's say 2 lots (for example), cash one out at +15 then do as I said before... move stop on remaining lot at +23 etc..

You have to be discipline and allow the trade to finish. If you get ansy watching it, then I recommend walk away from the computer. I usually don't watch my trades finish. I will go outside, play chess, watch a movie, hang with the girlfriend, etc...

Atleast that's what I normally do.
  • #32
  • Apr 20, 2010 12:15am Apr 20, 2010 12:15am
Quoting Fx chartist
Another eye-catching thread that could be written as short as "can you solve the market's uncertainty?"
Or better yet how do you deal with the fact that there is NO WAY to know for CERTAIN how much profit there will be in a trade.
  • #33
  • Apr 20, 2010 12:18am Apr 20, 2010 12:18am
Quoting 2+2=4ex
Good question. To stick with the same example of 30 tp and -20 sl, I would move my stop loss to break even +1 when it reaches 75% of the way to tp. So at +23 my stop becomes be+1. From that point on I leave it alone, even if it starts retracing. It either hits tp or sl, no intervention.

What I might also do is start off with, let's say 2 lots (for example), cash one out at +15 then do as I said before... move stop on remaining lot at +23 etc..

You have to be discipline and allow the trade to finish. If you get ansy watching it, then I recommend...
I love chess too and will play in the World Open in July.
But getting back to trading, so you just, for the most part, place a stop and a profit objective and then, with the minor adjustments that you said, let either your stop or your profit be hit.

How's that working out for you?
  • #34
  • Apr 20, 2010 12:22am Apr 20, 2010 12:22am
Quoting finally
Or better yet how do you deal with the fact that there is NO WAY to know for CERTAIN how much profit there will be in a trade.
Since you don't know that is exactly why you have to set predetermined take profit and stop loss which make sense according to where the supports and resistances are. reward always greater than 1:1 versus risk.

One other thing another poster kind of eluded to earlier... you could look at a h4, daily and/or weekly chart and place a long-term 'open tp & sl' trade. I highly recommend this for traders who are beginners or find it hard to succeed on the smaller timeframes.
  • #35
  • Apr 20, 2010 12:25am Apr 20, 2010 12:25am
Quoting 2+2=4ex
Since you don't know that is exactly why you have to set predetermined take profit and stop loss which make sense according to where the supports and resistances are. reward always greater than 1:1 versus risk.

One other thing another poster kind of eluded to earlier... you could look at a h4, daily and/or weekly chart and place a long-term 'open tp & sl' trade. I highly recommend this for traders who are beginners or find it hard to succeed on the smaller timeframes.
So you just set a stop and a limit and let one of them hit?

What do you do if price is 15% short of your limit and starts stalling and then retraces a little, do you take the profit while you have it or do you still wait for your limit and risk giving up your profit?
  • #36
  • Apr 20, 2010 12:30am Apr 20, 2010 12:30am
Quoting finally
I love chess too and will play in the World Open in July.
But getting back to trading, so you just, for the most part, place a stop and a profit objective and then, with the minor adjustments that you said, let either your stop or your profit be hit.

How's that working out for you?
works just fine for me. sometimes you have to wait a bit for a good entry, but there few throughout the day. Once you're in just wait for that half way point to cash out partial and then 75% target to move stop loss. After you move stop loss, you don't have to keep watching. Go have fun!

I don't think I have to make note of this, but just in case... try not to risk more than 2-3% of your account balance. For example if you have $10,000 balance. If your trade should hit the stop loss, it should not be more than $300.
  • #37
  • Apr 20, 2010 12:32am Apr 20, 2010 12:32am
Quoting 2+2=4ex
works just fine for me. sometimes you have to wait a bit for a good entry, but there few throughout the day. Once you're in just wait for that half way point to cash out partial and then 75% target to move stop loss. After you move stop loss, you don't have to keep watching. Go have fun!

I don't think I have to make note of this, but just in case... try not to risk more than 2-3% of your account balance. For example if you have $10,000 balance. If your trade should hit the stop loss, it should not be more than $300.
If you don't mind me asking, it's not personal, what is your percentage win rate on your set-up?
  • #38
  • Apr 20, 2010 12:34am Apr 20, 2010 12:34am
Quoting finally
So you just set a stop and a limit and let one of them hit?

What do you do if price is 15% short of your limit and starts stalling and then retraces a little, do you take the profit while you have it or do you still wait for your limit and risk giving up your profit?
I leave it alone. It either hits stop or take profit. If it was 15% short of my take profit then my stop should be at be+1 at that point.

I've also developed this mindset, as strange as this might sound, that 1 pip away from your stop loss is as good as 1 pip away from your take profit. In other words, the trade is never over (no matter how close it might seem to be), until it is over. I always let them finish.
  • #39
  • Apr 20, 2010 12:44am Apr 20, 2010 12:44am
Quoting finally
If you don't mind me asking, it's not personal, what is your percentage win rate on your set-up?
On a weekly basis, 50-70%. Draw out all the lines and watch price bounce off them. I am posting some charts I have saved from prior trade setups so that you can get an idea of what I mean by trade off the lines. When you draw them out you can achieve 50%+ even with a greater tp to sl ratio.
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  • #40
  • Apr 20, 2010 12:50am Apr 20, 2010 12:50am
Quoting 2+2=4ex
On a weekly basis, 50-70%. Draw out all the lines and watch price bounce off them. I am posting some charts I have saved from prior trade setups so that you can get an idea of what I mean by trade off the lines. When you draw them out you can achieve 50%+ even with a greater tp to sl ratio.
Terrific!
Good for you.

That's a good winning percentage.

What are the main lines that you use besides trendlines?
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