Winning TP / SL ratio | Forex Factory

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Winning TP / SL ratio

  • #1
  • First Post: Edited 5:30am Jul 20, 2011 5:06am | Edited 5:30am
Hello,

it's just a question for considerations...

do almost all systems (or something that trader uses) with trading sl / tp ratio more than 1/30, 1/40 (it's an example, not the exact number) or more will always be the winner?

You can have very little percent of winning trades to be in +.

Thanks,
Donatas
  • #2
  • Jul 20, 2011 5:29am Jul 20, 2011 5:29am
Do all systems with an inverse and very large risk : reward win most of the time?
Yes
Do they blow up spectacularly?
Eventually, yes.
  • #3
  • Jul 20, 2011 5:32am Jul 20, 2011 5:32am
Sorry,

did a mistake. the ratio would be i.e. 1/30 where sl / tp.
  • #4
  • Jul 20, 2011 5:37am Jul 20, 2011 5:37am
Nothing is guaranteed but it is very possible to have a strategy like that which works great.
  • #5
  • Jul 20, 2011 5:52am Jul 20, 2011 5:52am
If having patience to see a big part of the trades running half way or more to TP and then turning around to go to SL instead. Could eventually putting on a trailing stop when in profit as many would suggest but then it's not a consistent 1/30 sl/tp system anymore.
  • #6
  • Jul 20, 2011 6:05am Jul 20, 2011 6:05am
Quoting Nighttrader
If having patience to see a big part of the trades running half way or more to TP and then turning around to go to SL instead. Could eventually putting on a trailing stop when in profit as many would suggest but then it's not a consistent 1/30 sl/tp system anymore.
yeah, this is the worst part of that. Leaving the computer, o just turning the terminal off would be the solution.
  • #7
  • Jul 20, 2011 6:09am Jul 20, 2011 6:09am
Get good at entries and once the trade moves in your favor, set stop to BE. Limit risk, never limit reward. Keep doing that across forex and you'll have a nice diversified portfolio.
  • #8
  • Jul 20, 2011 6:30am Jul 20, 2011 6:30am
Quoting EmeraldEyes
Get good at entries and once the trade moves in your favor, set stop to BE. Limit risk, never limit reward. Keep doing that across forex and you'll have a nice diversified portfolio.
Yes to reduce risk and drawdowns but then a part of the potential winners will go to BE that otherwise would have gone to TP and the system might becomes a 1/60 instead of a 1/30 SL/TP.

Did some tests with BE trails on a 1/1.5 SL/TP system and I missed out 25% of the potential winnners because they got stopped at BE after I set a trail BE halfway towards TP. I noticed the end results would have been the same if I had let them run to TP without BE trail. Guess it depends a bit on current market conditions, how volatile or trendy it is.
  • #9
  • Jul 20, 2011 6:37am Jul 20, 2011 6:37am
Ya the market will never be the same. Backtesting shows what the market did and what was optimal at that point in time. The future outcome of trading this methodology (or any other) will be unknown no matter what.
  • #10
  • Jul 20, 2011 6:42am Jul 20, 2011 6:42am
tested lots of back time, and the results show that leaving the sl to it's opening instead of moving it to BE are better.
  • #11
  • Jul 20, 2011 6:44am Jul 20, 2011 6:44am
Yes letting a decent profitable trade turn to a loss feels terrible so maybe is best for any trading soul to use BE trail stops in the long run.
  • #12
  • Jul 20, 2011 6:47am Jul 20, 2011 6:47am
Quoting Nighttrader
Yes letting a decent profitable trade turn to a loss feels terrible so maybe is best for any trading soul to use BE trail stops in the long run.
But this is the main idea that you can afford loosing many trades before hitting the TP. Hitting the SL that is moved to BE appear more often than prime SL.
  • #13
  • Edited 7:18am Jul 20, 2011 7:02am | Edited 7:18am
Quoting BaliuxXx
But this is the main idea that you can afford loosing many trades before hitting the TP. Hitting the SL that is moved to BE appear more often than prime SL.
Yes I agree. With BE trail the system is not consistent anymore. Example if you got a break out trade entry from a level and then after a while settting SL higher to that break out does not seems ok because it often do pull backs to the level before running higher again. The noise on lower time frames can therefore destroy an original idea for a trading system.

The original thought is interesting. Maybe searching for good entry on a low time frame with relative low SL (depending on that being an trading edge) and always let it having very big TP no matter what.
  • #14
  • Jul 20, 2011 8:40am Jul 20, 2011 8:40am
Quoting Nighttrader
Yes I agree. With BE trail the system is not consistent anymore. Example if you got a break out trade entry from a level and then after a while settting SL higher to that break out does not seems ok because it often do pull backs to the level before running higher again. The noise on lower time frames can therefore destroy an original idea for a trading system.

The original thought is interesting. Maybe searching for good entry on a low time frame with relative low SL (depending on that being an trading edge) and always let it having very big TP...
being a software developer, it's easy to backtest simple systems for me. Almost randomly entries with such sl / tp ratio showing good results. Finding good entries, would implement a really good system.

Looking at charts for couple of years, now I realized that one more parameter in trading is very important. thats this ratio we were talking about.
  • #15
  • Jul 22, 2011 3:50am Jul 22, 2011 3:50am
Quoting BaliuxXx
being a software developer, it's easy to backtest simple systems for me. Almost randomly entries with such sl / tp ratio showing good results. Finding good entries, would implement a really good system.

Looking at charts for couple of years, now I realized that one more parameter in trading is very important. thats this ratio we were talking about.
what you are observing is that the distribution of returns in a market is not a normal distribution but has fatter tails.

It is this property that trend following systems exploit. For trend following systems the entry rules are not the important part of their trading system as it is not possible at the start of a potential trend to decide how far it will move.
  • #16
  • Jul 22, 2011 12:16pm Jul 22, 2011 12:16pm
http://www.nobrainertrades.com/2008/11/stop-losses.html
  • #17
  • Edited 1:15pm Jul 22, 2011 12:52pm | Edited 1:15pm
Quoting BaliuxXx
being a software developer, it's easy to backtest simple systems for me. Almost randomly entries with such sl / tp ratio showing good results. Finding good entries, would implement a really good system.

Looking at charts for couple of years, now I realized that one more parameter in trading is very important. thats this ratio we were talking about.
Being a software developer aswell I am not sure I agree with this. (unless you maybe use big SL and TP)

Could you give me an example of what SL and TP you use and for what period you do your test run for?
  • #18
  • Edited 9:43pm Jul 22, 2011 9:24pm | Edited 9:43pm
What am I missing here?
You say you can put in a 1-pip SL and a 30-pip TP and make a profit over lots of trades. Or 10 SL, 300 TP. Etc.
That's definitely only programming. Can't imagine even a scalper trying this.

1 to 3, maybe, your 1 to 1.5 likely.
2 to 4 : 1 SL:TP easiest, for me. So long as that float stays in-bounds.
  • #19
  • Jul 23, 2011 2:37am Jul 23, 2011 2:37am
Quoting foracy
Being a software developer aswell I am not sure I agree with this. (unless you maybe use big SL and TP)

Could you give me an example of what SL and TP you use and for what period you do your test run for?
Buy with 10 sl and 300 or 400 tp (it's the example. The numbers I use are only in my mind), the period doesn't matter and you'll see the results.
  • #20
  • Last Post: Jul 23, 2011 3:10am Jul 23, 2011 3:10am
Quoting ha-pattern
What am I missing here?
You say you can put in a 1-pip SL and a 30-pip TP and make a profit over lots of trades. Or 10 SL, 300 TP. Etc.
That's definitely only programming. Can't imagine even a scalper trying this.

1 to 3, maybe, your 1 to 1.5 likely.
2 to 4 : 1 SL:TP easiest, for me. So long as that float stays in-bounds.
Scalper? I don't think that can be named like this. Scalper uses inverse ratio
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