Attachments: Very small stops (from 3 pips), ridiculously high RR (to 1:30)

Very small stops (from 3 pips), ridiculously high RR (to 1:30)

#21
Jan 22, 2016 10:33am Jan 22, 2016 10:33am

tunera
| Commercial User | Joined Sep 2005 | 2,784 Posts

Some update..

this is kind of.. exciting/funny, some other trades.

Two consecutive losses, of 4 and 3.6 pips.

Then finally a winner, risked 3 pips, made 15 (1:5 RR).

So far seems working well.

Any questions/observations/ideas?

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#22
Jan 22, 2016 12:33pm Jan 22, 2016 12:33pm

Quinton
Joined Nov 2015 | Status: Profit Maker | 994 Posts

Quoting tunera

Disliked

{quote} Hi, yes i see, during trending times it is "easy" to make good entries with high RR and win big. The problem is when market is choppy up and down going nowhere, that's when maybe is better to just grab profits at 1:2 or 1:4 and move on. Or even better, is just not trade at all, like today in EU, yes i grabbed some profit here and there, but it's really not worth the risk. Better to focus on cross pairs and stock indexes..

Ignored

Indeed, cross pairs and indexes tend to retrace less giving you more reward for your risk. However, keep in mind that these are also less liquid than the majors.

The approach you describe is similar to a trend following approach with regards to the R:R profile. You will end up with a few huge winners paying for many smaller losses. There is nothing wrong with this approach until you consider that your exposure to liquidity gaps increases with every SL that gets hit. Don't forget, a stop order essentially says, "get me out of my position now at the current market price". Liquidity in FX is not distributed evenly and that "current market price" could be very far from the bid/ask.

This is a potential pitfall even if you are able to time price action at the lower TFs. Just a heads up that the strategy might not scale beyond a few lots (10 or so). Which might be more than enough.

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>> Quinton’s Simple & Effortless Trading thread

#23
Jan 22, 2016 12:57pm Jan 22, 2016 12:57pm

Mingary
Joined Mar 2011 | Status: I should be on your ignore list | 5,597 Posts

Quoting tunera

Disliked

Some update.. this is kind of.. exciting/funny, some other trades. Two consecutive losses, of 4 and 3.6 pips. Then finally a winner, risked 3 pips, made 15 (1:5 RR). So far seems working well. Any questions/observations/ideas? {image}

Ignored

1) sell the high or buy the low (your screen print shows the opposite)
2) move to BE after 3 pips in your favor
3) 3 pip stop loss only as a "safety net"
4) item 1) is key

#24
Jan 22, 2016 1:11pm Jan 22, 2016 1:11pm

andoseg2
Joined Jun 2011 | Status: Swing trader using Market Cycles | 2,152 Posts

Quoting tunera

Disliked

Some update.. this is kind of.. exciting/funny, some other trades. Two consecutive losses, of 4 and 3.6 pips. Then finally a winner, risked 3 pips, made 15 (1:5 RR). So far seems working well. Any questions/observations/ideas? {image}

Ignored

Yes, one observation : you can increase win rate if you trade in the direction of the trend only

Money moves the market, not an indicator.

#25
Jan 22, 2016 1:30pm Jan 22, 2016 1:30pm

tunera
| Commercial User | Joined Sep 2005 | 2,784 Posts

Last 3 trades of today.

First sl: 2.1 pips
second: 1.8 pips
third: 1.2 pips

Win rate of today (and yesterday too): 81%

I'm still skeptical about this small SL trading style, but so far is looking like profitable.

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#26
Edited Jan 23, 2016 1:21am Jan 22, 2016 2:07pm | Edited Jan 23, 2016 1:21am

Squiggles
Joined Nov 2014 | Status: Trader | 1,736 Posts

Quoting tunera

Disliked

Some update.. this is kind of.. exciting/funny, some other trades. Two consecutive losses, of 4 and 3.6 pips. Then finally a winner, risked 3 pips, made 15 (1:5 RR). So far seems working well. Any questions/observations/ideas? {image}

Ignored

Hi tunera
An overlooked factor in scalping is assumed risk V actual risk and is very important to consider imo. ie your entry sees No DD and your up 5 pips within 10 seconds. This is not the same as spitting nails on a 20 pip DD praying for a 120 pip move some time soon, not because of the pips but because one has no actual risk.
I scalp on an auto 15 pip SL Generally I will close obove a 3.5p DD . If it turns before this I will factor in the DD for the TP and be looking to close anything above 1to1 of actual risk.. No DD which is what we are looking for and I lock in free trade and ride. As they say It aint what you do its the way that you do it ....plus a constant to hide behind. good luck

#27
Jan 22, 2016 7:14pm Jan 22, 2016 7:14pm

tunera
| Commercial User | Joined Sep 2005 | 2,784 Posts

Quoting Quinton

Disliked

{quote} Indeed, cross pairs and indexes tend to retrace less giving you more reward for your risk. However, keep in mind that these are also less liquid than the majors. The approach you describe is similar to a trend following approach with regards to the R:R profile. You will end up with a few huge winners paying for many smaller losses. There is nothing wrong with this approach until you consider that your exposure to liquidity gaps increases with every SL that gets hit. Don't forget, a stop order essentially says, "get me out of my position...

Ignored

I had your same thoughts, in fact there is to be expected from time to time a gap in the stop filling of a few decimals of a pip (or even a pip or more), but this really is not a huge problem (we are talking about a pip at worst after all).
The same is true for entries.

The second problem you mention about the unscalability of the system is very real, in my experience liquid pairs such as eurusd are good enough to handle trades way above 50lots (without any liquidity problems), however as we get near the 100lots, there can be some sort of bad fills (one or even 2 pips!).

One solution to this problem can come from the automated entries, where instead of open a big 100lots trade, we open 4 25lots trades for example (market orders, opened in fast succession by an ea), this would kill the scalability problems.
Of course not all trades would be opened at the same price, but then some may be open at a worst price, some at a better price (as the market move in the few seconds that are required to open the trades), so it's ok.

Also, this way of trading (high RR) can be traded on a super-short-term basis (like the 1min chart), however thanks to the fractal nature of the market, such setups do occurs on any "timeframe", so we are not necessarily forced to make ultra-short-term trades, we can do short-term or medium-term or even long-term swings with a very high RR. In this case we would not have any scalability problem as we have all the time to get in our trades at the price we want.

Maybe next week i can focus on short/medium term trades, they are surely better from a RR perspective as the commissions costs would impact less on the overall profit.

#28
Jan 22, 2016 9:30pm Jan 22, 2016 9:30pm

Quinton
Joined Nov 2015 | Status: Profit Maker | 994 Posts

Quoting tunera

Disliked

{quote} I had your same thoughts, in fact there is to be expected from time to time a gap in the stop filling of a few decimals of a pip (or even a pip or more), but this really is not a huge problem (we are talking about a pip at worst after all). The same is true for entries. The second problem you mention about the unscalability of the system is very real, in my experience liquid pairs such as eurusd are good enough to handle trades way above 50lots (without any liquidity problems), however as we get near the 100lots, there can be some sort of...

Ignored

If you stay away from news events then even during quiet times you should be fine if you have access to liquidity with sufficient counter-party aggregation.
In fact, I wasn't even talking about getting it. That's the easy part these days. On the E/U 10 mill on either side is to be expected, but that drops down to the 100Ks for crosses like U/C. Most of the liquidity is concentrated in the top 2-3 majors.

___________________________________________
>> Quinton’s Simple & Effortless Trading thread

#29
Jan 22, 2016 9:57pm Jan 22, 2016 9:57pm

PiptheRipper
| Joined Aug 2009 | Status: Trader | 480 Posts

Hey Tunera.

Small stops and high R target is the only way I can be succesful at trading in with my current skill level. I've realised that I'm too bad a trader, making too many mistakes, that going for 2 - 3R just isn't profitable. I've also realised that my "good" trades had very little DD. So I came to the conclusion to trade with small stops. I aim for 10R at a time with a SL op 5 pips. I'm still working on lowering it closer to 3 pips, but will do it gradually as I complete more trades.

I've been working on this for a few months and my trading has improved drastically since it forced me to focus on picking good entries. With a small SL, you have to be very precise. I only trade the extremes, daily high/lows and I only sell after a quick move up and buy after a quick move down. It is a very basic system, but it allows me to only follow a few rules.

One thing to keep in mind, keep your risk very low. 2% is too high in my opinion. Your DD will be significant. I trade with a 0.5% risk.

So my advice would be, find a speficic entry and keep trading that one, ignore the rest.

#30
Jan 23, 2016 9:31am Jan 23, 2016 9:31am

tunera
| Commercial User | Joined Sep 2005 | 2,784 Posts

Quoting PiptheRipper

Disliked

Hey Tunera. Small stops and high R target is the only way I can be succesful at trading in with my current skill level. I've realised that I'm too bad a trader, making too many mistakes, that going for 2 - 3R just isn't profitable. I've also realised that my "good" trades had very little DD. So I came to the conclusion to trade with small stops. I aim for 10R at a time with a SL op 5 pips. I'm still working on lowering it closer to 3 pips, but will do it gradually as I complete more trades. I've been working on this for a few months and my trading...

Ignored

Thanks for your post, you are right, keeping very small losses force us to focus on picking good entries (if the entry is not "good" it's going to get stopped out for sure!).

Yes untill now i traded with a 3-7% risk range, but i'm just doing some tests, to understand many things.
The final target for risk would be in the 1-2% risk range, maybe some sort of growing-risk-algorithm, like risk 1%, if the trade is stopped out, the next one goes to 1.2%, then 1.4% etc...

#31
Jan 25, 2016 2:48am Jan 25, 2016 2:48am

PiptheRipper
| Joined Aug 2009 | Status: Trader | 480 Posts

Hi Tunera.

I hope you carry on with your observations this week, as I for one believe in this type of trading. Not that there is only one way of trading, but I just feel this is the way that suits me. Looking forward to your findings. Happy trading buddy.

#32
Jan 25, 2016 2:57am Jan 25, 2016 2:57am

PiptheRipper
| Joined Aug 2009 | Status: Trader | 480 Posts

As encouragement, I hope, on Friday I bought Cable at 1.4209 with a 5 pip SL and took profit at 1.4344 for a good 27R return. Normally I would exit at 10R, but I held this particular trade, since I had a feeling it would run up all day. It paid off in this case. Nway not trying to brag, just stating that this type of trading can definitely be a good way to trade.

#33
Jan 25, 2016 4:12am Jan 25, 2016 4:12am

fiberman
| Joined Apr 2012 | Status: Swollen Member | 41 Posts

I agree, I find that I am more successful when I trade in a similar fashion.

#34
Jan 25, 2016 11:50am Jan 25, 2016 11:50am

tunera
| Commercial User | Joined Sep 2005 | 2,784 Posts

I agree, be unprofitable is very difficult when trading this way, i mean you can have 3-4-5 consecutive losses and still cover them all and make good money with just 1 good trade, and as long as you go with the trend/momentum it is not difficult to have good trades.

I will post some updates in the next days, currently testing an EA (not a standalone one) that do entry the trades in automatic (and calculate lotsizes and sl too), so it's more peace of mind.
But today not big movements on eu, really a boring day.

Maybe it would make sense to trade 3-4 pairs together, so at least some of them give some movements.. I'll think about it

#35
Jan 25, 2016 1:05pm Jan 25, 2016 1:05pm