DislikedWell it's something that you have to test. It's impossible to say it will or won't work with your style of trading. I tracked multiple exit methods for a long time. My research always took me back to simplicity. You may find different and that is what the learning curve is all about
Best
MikeIgnored
james16 Chart Thread
- #91,003
- Mar 7, 2011 7:18pm Mar 7, 2011 7:18pm
I've been toying around with Risk management and reducing my losses while maximizing winners. What do you guys think of the following set up?
risk based on account balance: ex 5% of 1000 = 50,
$50 total stoploss
Stop loss= 10 pips
$/pip = $5
I want to be able to set up counter buys if my trade goes against me. IE
If Price Hits .010 Total Position is closed out
If Price Hits 1.008 Buy 1%
If Price Hits 1.006 Buy 1%
If Price Hits 1.004 Buy 1%
If Price Hits 1.002, Buy 1%
Entry Short 5% risk at: $1
1st FTA in pips or price: TP 2%, move...
You have three basic outcomes:
a) Trade takes off, never goes into drawdown. Your strategy adds no value.
b) Trade goes backwards for a total loss. Your strategy adds a small amount of value (your losses go from 1R to 0.6R, basically)
c) Trade goes into drawdown, you reduce your position size, and it then goes back into positive territory, but with a smaller position. You lose potentially alot of value.
Given that (c) is the most likely outcome, you almost certainly have a -EV strategy here. You said you want it to maximise your winners, but it doesnt actually do that - your winners where the trade takes off are the same regardless, but the winners where you go into drawdown first are reduced (potentially by 80%).
The other problem I'd have with such a strategy is that you are closing your position based on money management, rather than trade management. Is there any reason to think that if a trade goes into drawdown by 20% that it is now more likely to fail?
Money management and trade management are seperate. Money management is there to minimise the effects of variance on your account. Your stops should be based on your chart. Stops based on your chosen %R are meaningless to the market.
If, instead, your strategy was based on 'if price retraces back past the last ppz, take 20% off. if it goes past some fib, take another 20% off...', that would be much more interesting (but likely a bunch of hassle for minimal gain).
Anyways, regardless of whether I agree with it or not, it is always good to see someone thinking outside the box and coming up with their own strategies
j.
When you have to shoot, shoot. Dont talk.
- #91,004
- Mar 7, 2011 7:55pm Mar 7, 2011 7:55pm
- Joined May 2010 | Status: HCR-LCS SFP | 6,026 Posts
I am going to post something here that looks a bit unconventional but I can't help but think that it is highly possible cable could give very little to the downside if this daily closes as a BEOB. I have been watching the hrly TF's over the past week or so on this pair and have been taken back as to the volatile nature of it. Overall, I see the USD getting very strong soon, but I believe that 1.6350 is very much in the works before any meaningful downside on GBPUSD.
K.I.S.S.
As always a refreshing KISS.
Great stuff and how simple.
Thanks KISS.
- #91,005
- Edited 8:30pm Mar 7, 2011 7:57pm | Edited 8:30pm
- Joined May 2010 | Status: HCR-LCS SFP | 6,026 Posts
- #91,006
- Edited 9:07pm Mar 7, 2011 8:42pm | Edited 9:07pm
- Joined Feb 2009 | Status: Borderline yahoo & oh-no! | 6,607 Posts
Hey DB
This sets off a lot of warning signs for me....
Well it's something that you have to test...
The problem is that your trade wil go into drawdown more often than not, at which point you will be arbitarily closing your position for a loss.
...you almost certainly have a -EV strategy here..
The other problem I'd have with such a strategy is that you are closing your position based on money management, rather than trade management
.. Your stops should be based on your chart. Stops based on your chosen %R are meaningless to the market.
...
I've been toying around with Risk management....
more or less similarly, i toyed with it with my live accounts before.
aggressive & audacious + trading knowledge = any possibilities
BUT
aggressive & audacious + little/perceived/NO trading knowledge = almost always disaster
5% risk and 10pt stop loss is all just for sake of discussion. The point of the 1% is that it will be slowly closing my short position, and take a SMALLER losses and a SMALLER drawdown.
the fact is, trading is not as mechanically easy as u portrayed in your above post.
there are a lot of dynamics working here. among others..
-big risk, smaller stop loss&losses&drawdowns, doesnt necessarily equate to bigger profits & bigger balance in the future.
-arbitrary, trader-set stop loss versus market-based stop loss? almost always, Market-based SL wins
a 10 pip to 100 pip SL, depending on market conditions, is hit as easy as getting candy from a child.
What exit method do you use? I find that trade management is the hardest part!
that is the biggest challenge we all have to face.
excellent posts from Mike & Joel.
u can ignore this post, but be sure to read, digest, assimilate what they told u.
step back & think. (sorry for the redundancy)
your live account will thank mike&joel in the future.
It often is but I sort of look at it the same way I look at my entries. My exit is dependent on the situation. Each situation is different...
Like everything their are variations that should all be considered when deciding what works for you. It is what scares people off from learning discretionary trading b/c you have to go through this process
....
move further, deal with it & persist, or
QUIT?
Because..
Australian dollars, on the other hand, do earn interest. More than any developed country in the world, at the moment....
- #91,007
- Mar 7, 2011 9:44pm Mar 7, 2011 9:44pm
Hi guys
After reading all the points of view on the Yen pairs Yesterday I decided that I still liked the look of the GBP/JPY pin bar but there was too many doubts to trade it off the daily pin. I ended up trading a 4hr BEOB. The red line on the 4hr chart is the bottom of the daily pin + 10 pip buffer so would have been my entry point had I traded straight off of the daily. My entry was the break of the 4hr beob so my risk was considerably reduced and I took full Profit at the BRN which was my FTA
. Nice trade.
- #91,008
- Mar 7, 2011 10:48pm Mar 7, 2011 10:48pm
- | Joined Sep 2009 | Status: Making Money > Being "Right" | 1,811 Posts
Many choose unhappiness over uncertainty.
- #91,011
- Mar 7, 2011 11:59pm Mar 7, 2011 11:59pm
- Joined Feb 2009 | Status: Borderline yahoo & oh-no! | 6,607 Posts
- #91,015
- Mar 8, 2011 2:00am Mar 8, 2011 2:00am
- Joined Feb 2009 | Status: kiki soso largyalo | 2,243 Posts
meine augen sind die sterne
- #91,016
- Edited 2:24am Mar 8, 2011 2:14am | Edited 2:24am
BE COOL
Regarding the EUR JPY:
I trade similar to the methods talked about here but am very picky and manage the trades quite differently, but
Three things about the EUR JPY that I see are:
1. It just broke out to the upside and has been in an uptrend so going short is going against this momentum.
2. Look at the size of that pin compared to the recent size of bars. It's smaller, probabilities are better with large bars
3. If your stop was above the nose of the pin, the trade isn't over yet
Just my perspective.
No 1 is debatable. The weekly BUOB close is weak, and PB close just kinda sit on 115.0. I agree with no 2 -as with no 3 i stopped placing stop above PA bar since i can make 3 profitable trades mostly taking profits on FTA while the other half stopped out at BE and then lost all those profits on 1 trade that stopped me out for a full bar loss.
Never mind my thoughts -my head is messed up right now
- #91,017
- Mar 8, 2011 2:37am Mar 8, 2011 2:37am
Hey, any new people that have taken a few bad demo trades recently?
Don't feel too bad about it, here is one, I would probably have jumped into thinking it was the best thing since they invented beer, six months ago.
I am actually still laughing at how I would without doubt have already been into this trade, short and wondering why price wasn't going down. LoL
This is honesty folks, so don't feel bad if you have taken any not so good setups recently.
http://www.youtube.com/watch?v=fCZhiR3bETM
Hey Traders,
Any1 liking this IB in yellow?
0.68RN,greenish area FTA..but confluence is there,i like the way previous Bearish Bar got popped off 0.68.
TP..umm..either 0.69 or 0.70(more i feel 0.69..bit confused)..Reason H4 chart..
Weekly chart shown:yellowish area(0.68)..couldn't show it on Daily..
I'm going for this!
Thoughts appreciated!
now at BE..
Good Trading All!
- #91,019
- Mar 8, 2011 3:00am Mar 8, 2011 3:00am
I wish I could give an easy answer, Be Cool. On way is to make your setup qualifying criteria easier . .
. .everything is good - but the size is too small, . . . pass.
. .everything is good - but the Close is not lower/higher then the Open (PBs), . . .pass.
. .everything is good - but the Close is not lower/higher then the Low or High (OBs), . . pass.
Or check out Mike's . . didn't Close below the 115.00 BRN (or strong S/R, PPZ, etc.), . . pass.
etc . . .
These little seemingly simple setup qualifiers can make all the diffence in the...
And this is my thinking:
1. Regarding traffic. The reason it is hard to trade in traffic is because there are several difference lows/highs where people can draw support/resistance line differently. Or in other words, support/resistance is not very clear. However, depending on the choppiness of the consolidation area and the distance the FTA to the low/high of our PA bar, some traffic is still manageable, at least to reach FTA.
2. When there is a minor PPZ just below/above our PA Bar, it is preferable to have a large PA bar that tends to carry more momentum.
3.When the PPZ is a major (weekly) it is imperative for our PA bar to close strongly below/above it. I learned from that EURJPY that a PA Bar with a close that kinda straddle the PPZ is very risky to trade.
Just trying to make sense of it in my head , Jim. Please let me know if my thinking is flawed
