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  • #11,381
  • Jul 19, 2012 11:44am Jul 19, 2012 11:44am
4REXX and HOLY cow,

reading your back and forth discussion has been interesting...of course, i have my own thoughts on the topic...but...your conversation prompts me to ask the two of you these questions:

what is more important, win ratio or risk vs reward?

How do you maximize either one of them? or both?

If you try maximization, what are the potential trade offs?

**if you dont mind, try and illustrate your thought process...even give anecdotal examples from your trading history. if you dont mind.**

Your discussion has been about profit target...within that purview of profit target is the issue of risk vs return with regards to win ratio. (consider these questions to be part II of the discussion...is there a part 3? hehehehe. yes. )
" It may mean something. It may mean nothing at all "
  • #11,382
  • Jul 19, 2012 4:00pm Jul 19, 2012 4:00pm
Quote
Quoting Skynet

what is more important, win ratio or risk vs reward?

How do you maximize either one of them? or both)

It is hard to quantify which is more important in my view. If you want your account to increase at a faster pace an excellent RR (i.e risk 1 to get 20 back) would be a major factor in that calculation. However, if your WR was 1in20 (i.e. 19 b/e or losses before a win) that 1 winner would have to be the home run to end all home runs every time. So first of all to maximise your WR, consistency is needed so that your level of winning trades are high. 6/10, 7/10 or better is a very good WR. Once you have consistency then you can focus on the beautiful RR trades which will make your account hurdle past the targets you set yourself.

Persistence overcomes resistance!
  • #11,383
  • Jul 20, 2012 4:43am Jul 20, 2012 4:43am
I think that both R:R ratio and hit rate are important but I do not think it cannot be quantified this way.
First of all there is day trading, medium term swing trading and trend trading.
I think Skynet you are a medium term trader while I trade long term and I also day trade. Both things I trade very differently. when it comes to longer term I do not have targets at all. as long as trade makes money I am in. Not closing manually. I just move stop cause as I already mentioned I was out of 2 amazingly good trades cause closed manually and now they are 600-1100 pips away. second, is taking profits but this I will do in full now cause taking partials undermine the whole R:R thing. on my longer term I have hit rate now 50%, was 60% but took hits this week. generally it is around 50% lower or higher. I was taking aprtials so R:R on myfxbook account looks like 4:1. but it is spread. I started trading with smaller stops based on daily ATR now so it will be interesting to see how it will influence but say many of my trades runing have already reached from 3 to 8 R:R with bigger stops and I wa snot in much DD on those trades ever. It would ahve been better with new stops. I noticed that good trades never go against me much so no point to use too wide stops. The only thing is, not taking aprtials. All in all out.
My R:R was slowly improving. once I had losers 2:1 to winners with high hit rate and then 1:1 and then it 's been moving. but reading about trend trading getting advise form a guy who has been doing it for 10+ years and reading right stuff helped to turn my head around. Generally speaking. we do not know what the market gonna do next moment, so the only thing we can control is risk.
On day tarding r:r is very important but most important to enter with smaller risk cause keeping risk small increases potential of good r:r and waiting for right set ups is critical to good hit rate. For day trading both hit rate and good R:R is critical. longer term high hit rate is not as critical as long as winners are bigger.
to have all this psychology must be stable and patience must be top notch.
  • #11,384
  • Jul 20, 2012 11:02am Jul 20, 2012 11:02am
Short on: EUR/AUD
Long on: AUD/NZD, GBP/CHF
Waiting for consolidation to end: USD/JPY, US OIL

Any comments???
  • #11,385
  • Jul 20, 2012 11:56am Jul 20, 2012 11:56am
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do not think there will be much changes till the close.
  • #11,386
  • Jul 20, 2012 6:14pm Jul 20, 2012 6:14pm
Quote
Quoting Holy Cow
First of all there is day trading, medium term swing trading and trend trading. For day trading both hit rate and good R:R is critical. Longer term high hit rate is not as critical as long as winners are bigger.

You said in an earlier post HC that you are not analytic but your reply to the questions sky posed shows that you are. Clearly the trading style of each trader does dictate whether the R:R or WR or both are equally important. Your conclusion the day trader needs both, hits the nail right on the head. The day trader also needs to set targets and ideally take partial profits so that they are in and out of the market by the end of their trading session with some pips banked otherwise the day will be largely wasted.

As I do a 9 to 5 job (just over broke) during the London session I don’t intraday trade as a rule, which I find too stressful as a rule anyway. I do prefer the set and forget type of trade which will run for a while. It is a more relaxed way of trading. HC stated before that; equities, indices, commodities are probably better for long term trades in one direction. I totally agree. You find trends in those markets can run quite easily for 6 to 9 months plus more often than in FX markets. I will be interested what others think about this. So even if your risk was 100 pips, if you can ride that trend for a few months you will still get a nice R:R.

I will end by saying again though that consistency is vital for all traders. That is what I am working on now.

Persistence overcomes resistance!
  • #11,387
  • Jul 20, 2012 8:11pm Jul 20, 2012 8:11pm
Quoting 4rexx
You said in an earlier post HC that you are not analytic but your reply to the questions sky posed shows that you are. Clearly the trading style of each trader does dictate whether the R:R or WR or both are equally important. Your conclusion the day trader needs both, hits the nail right on the head. The day trader also needs to set targets and ideally take partial profits so that they are in and out of the market by the end of their trading session with some pips banked otherwise the day will be largely wasted....

I get up at 2:30 a.m. est N.Y night here to trade till 7:00 a.m. it is my day trading session.
as day trader in FX targets are important, it is not stocks. most of the time any pair stays within it's daily ATR, no use to let intra day trades run too much. I also scale in into position. The maximums top I use is 15 pips. if more i do not take to have good r:r. if I am wrog from the start I lose only on half of position. The funny thing I have never back tested a thing in intra day trading. In fact I am like reading tape see set ups that I recognize and when I see things start moving I pounce. The more confirmation one needs the bigger the risk.
I still remember how when i was entering trade I was not sure what i would do if trade goes against me. it is particularly difficult in day trading cause things might move fast. This is the reason I believe new traders should avoid day trading until they get good habits. I think the only time frame they should use is daily even on this strategy being discussed here. for their own good
  • #11,388
  • Edited 7:35am Jul 21, 2012 7:16am | Edited 7:35am
Quoting Holy Cow
The maximum stop I use is 15 pips. if more i do not take to have good r:r. ...new traders should avoid day trading until they get good habits. I think the only time frame they should use is daily ...for their own good
HC if you can use 15 pip stop every time when intra-day trading that will definitely give you a good R:R, if it is a pair with a ADR of 100 for example a 1:5 or 1:6 R:R is good, if you risk 1% per trade 5% or 6% banked is very nice. Although a small 15 pip stop needs to be protected by a strong level as a little price spike could take you out of a good trade. One reason newbies may be frightened of trading of the dailies is that the stop loss could be large (that why I started on smaller TF’s) and with a small account they may have to risk 2, 3 even 4% per trade.

However, with some research and some patience this can be overcome. It was a few months ago now I caught the top of the AUDCAD market with a lower high on the daily chart. From the LH to the swing low entry point was about 168 pips, which if you have to fine. But if I was patient I could wait for a tighter stop which will greatly improve my R:R. So I went down to the 4H chart and waited for price action to give me another LH. So I have got a LH on the daily and a LH on the 4H which gives me added confirmation that the trend has turned and now I could enter with a 67 pip stop. But I went down to the 1H TF and waited again for another LH. When it came, 3 LH’s on 3 different TF’s is powerful confirmation price is going my way, and now I entered with a 35 pip stop and bagged about 250 pips. (if I had let it run could of got a lot more i can hear HC say!).

If we do the math, if I entered on the daily it would have been a 1:1.5ish R:R win but by waiting and entering on the 1H chart it turned into a 1:6.6 R:R winner. 35 pip risk on a daily move = serious R:R and a faster growing account.

Persistence overcomes resistance!
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  • #11,389
  • Jul 21, 2012 10:10am Jul 21, 2012 10:10am
Quoting 4rexx
HC if you can use 15 pip stop every time when intra-day trading that will definitely give you a good R:R, if it is a pair with a ADR of 100 for example a 1:5 or 1:6 R:R is good, if you risk 1% per trade 5% or 6% banked is very nice. Although a small 15 pip stop needs to be protected by a strong level as a little price spike could take you out of a good trade. [size=3][font=Calibri]One reason newbies may be frightened of trading of the dailies is that the stop loss could be large (that why I started on smaller...

as I mentioned I scale into trades. so here is one of my trades this week. Market during times when i trade is not very fast so it takes lots of time for intra day trade to trades to work out most of the time. I avoid trading NY time and done by 7:00 an hour before New York opens and before news.

Here is a couple examples one with big scaling in this week and another from yesterday. I took long which did not work as I expected as I was looking for 2:1 r:r and got only 1.3:1 and then waiting to go short unfortunately had to live PC for few minutes and missed my shorting opportunity. Generally I have had a large number of BE trades as I usually move stop to BE once I have 1:1 and my entry was somehow retested again.

one:

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I generally have a really good feeling for how price reacts and most of the time I am rarely in DD after entry. The first example is a rare thing still I had stop of 15 pips which was not reached and I dared to add more after trade hold. Usually I enter with 0.5% risk, then add another 0.5% and this time added another 0.5%.

On the second case I entered, however the price suddenly moved agaisnt me when i expected jump, I closed for -2 pips. then it recovered I reentered and it went up but did not reach my goal.

I would not advice to risk more than 1% for newbies. and I do not risk more either. with 1% risk it is hard to damage account seriously but with 2% it is much easier I would not go into 4%.
  • #11,390
  • Jul 21, 2012 10:17am Jul 21, 2012 10:17am
Two:

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with this kind of risk it is good to be patient and wait. if price action is messy better to stay away.
Also it is better to consider every trade loss until stop moved and not to try and get into another one after the loss.
Thankfully I have got only one real loser this months from 27 trade and half are BE or 1-2 pips negative as I moved stop slightly above below entry cause it is usually a good place where price goes for retest.
  • #11,391
  • Jul 21, 2012 10:22am Jul 21, 2012 10:22am
Quoting 4rexx
You said in an earlier post HC that you are not analytic but your reply to the questions sky posed shows that you are. Clearly the trading style of each trader does dictate whether the R:R or WR or both are equally important. Your conclusion the day trader needs both, hits the nail right on the head. The day trader also needs to set targets and ideally take partial profits so that they are in and out of the market by the end of their trading session with some pips banked otherwise the day will be largely wasted....

I would not say you could get more pips Those were nice pips and you are not trend following in the sense I am doing hence it was excellent pips. FX is a blind market, you never know when you gonna lose all winning pips if you do not pick them. the most important it was more than you risked.
  • #11,392
  • Jul 21, 2012 10:55am Jul 21, 2012 10:55am
guys, do u use currency correlation for find pairs who tend to trend better? or for anything else?
  • #11,393
  • Jul 21, 2012 11:37am Jul 21, 2012 11:37am
Quoting vladutz112
guys, do u use currency correlation for find pairs who tend to trend better? or for anything else?
Have no idea about it. You never know which one pair is going to trend better than another.
Try to check indexes which pair is strong and which is weak.
  • #11,394
  • Jul 21, 2012 1:18pm Jul 21, 2012 1:18pm
Lots of great material in the last few posts by Holy Cow and 4rexx. Its clear that both of them are longer term traders than most. Good explanation of multiple timeframe analysis and minimizing risk by using the lower timeframes 4rexx, I hope everyone reading this thread read your last post a couple times over.

Quoting vladutz112
guys, do u use currency correlation for find pairs who tend to trend better? or for anything else?
You never know for sure which pairs will trend stronger than others, but there are clues. One simple clue is to trade the pair that moved the most during the past month/week. Another clue is a monthly/weekly candle closing at/near the highs/lows of that particular month. Often the momentum from last month/week will continue into the next. And lastly look for pairs that are trading at fresh highs/lows. Those are three simple, yet effective clues. I hope this helps.
Twitter: @zusch_ -- Preselecting trending pairs, stocks on a weekly basis.
  • #11,395
  • Edited 3:45pm Jul 21, 2012 3:35pm | Edited 3:45pm
Quoting zusch

You never know for sure which pairs will trend stronger than others, but there are clues. One simple clue is to trade the pair that moved the most during the past month/week. Another clue is a monthly/weekly candle closing at/near the highs/lows of that particular month. Often the momentum from last month/week will continue into the next. And lastly look for pairs that are trading at fresh highs/lows....
Good analysis zusch, examining yesterday's, last week's and last month's candle/bars can give you a heads up of how the next session may trade for a particular FX pair or stocks and commodities.

Here is a little grading system I found for analysing candle/bars :

(Bearish Momentum Signals) Flip below on its head for bullish momentum
1. Printing a lower low than yesterday
2. Opening down on the day
3. Closing down on the day
4. Closing in the lower 50% of the range of the candle or bar
5. Closing below the opening
6. Printing a lower high than yesterday
7. Closing below yesterday’s high

Score a point for every bearish signal or subtract if it is a bullish signal. When you get all seven items going in the same direction price is 90% certain to move in a bearish direction the next day (week, month), and 80% of the time will close below the previous day’s (week, month) close.

Trader Vic II-Principles of Professional Speculation, Victor Sperandeo, p. 234-5

Persistence overcome resistance!

  • #11,396
  • Jul 21, 2012 6:25pm Jul 21, 2012 6:25pm
Quoting 4rexx
Good analysis zusch, examining yesterday's, last week's and last month's candle/bars can give you a heads up of how the next session may trade for a particular FX pair or stocks and commodities.

Here is a little grading system I found for analysing candle/bars :

(Bearish Momentum Signals) Flip below on its head for bullish momentum
1. Printing a lower low than yesterday
[font=Calibri]2....
I'm a little confused about the scoring system and how that generates buy/sell signals rather than the price action itself, but the areas you mentioned are all places you can build a trading edge around no doubt.
Twitter: @zusch_ -- Preselecting trending pairs, stocks on a weekly basis.
  • #11,397
  • Jul 21, 2012 7:25pm Jul 21, 2012 7:25pm
Quoting zusch
I'm a little confused about the scoring system and how that generates buy/sell signals rather than the price action itself....
Zusch you would really need to read Vic Trader II, to see exactly where the author is coming from. However, the scoring system does not give buy/sell signals. It is really to give you the probabilities percentage-wise whether the next trading session is likely to be a bearish or bullish one. You may score 7 for a bullish momentum but price action itself might move completely in the opposite way, as i'm sure you know. But a score of 7 or even 6 agreeing with your reading of price action will make it a higher probability that price will move that way.

Persistence overcome resistance!
  • #11,398
  • Jul 22, 2012 9:36am Jul 22, 2012 9:36am
Quoting 4rexx
Zusch you would really need to read Vic Trader II, to see exactly where the author is coming from. However, the scoring system does not give buy/sell signals. It is really to give you the probabilities percentage-wise whether the next trading session is likely to be a bearish or bullish one. You may score 7 for a bullish momentum but price action itself might move completely in the opposite way, as i'm sure you know. But a score of 7 or even 6 agreeing with your reading of price action will make it a higher probability that price will...
Ok so it is added confirmation, gotcha. Could be valuable, but like you said I'd need to read the book you are referencing to fully understand.
Twitter: @zusch_ -- Preselecting trending pairs, stocks on a weekly basis.
  • #11,399
  • Jul 22, 2012 11:54am Jul 22, 2012 11:54am
May you see the US News wasn’t much acceptable to move USD up, as Retail Sales at -0.4% versus positive expectation but Empire State Manufacturing Index showed some improvement also NAHB index and TIC Net Purchases. But the most important is about SNB selling EURO over concerning EUROPE situation.Therefore, I think these situation causes EUR/USD, GBP/USD Trend –Down ( at least for short term) and USD/CHF goes up, of course as I’ve mentioned before not more than 0.9920 or o.9945 and we have to see the reversed movement towards 0.96 very soon.
Two important News for AUD and NZD (AU CPI q/q on Tue at 9:30pm and NZ RBNZ on Wed at 5:00pm)
Kami
Don’t follow someone else’s trading advice blindly
  • #11,400
  • Jul 22, 2012 12:09pm Jul 22, 2012 12:09pm
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My indicator points to long Eur
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