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R:R Fallacy?

  • #101
  • Jan 18, 2017 7:17am Jan 18, 2017 7:17am
Quoting NaughtyPip
{quote} can you elaborate?
If you BUY at 137.xx how long do you need to wait for 139.xx.... 50Hours ..20H etc?
  • #102
  • Jan 18, 2017 8:43am Jan 18, 2017 8:43am
Quoting chess king
{quote} If you BUY at 137.xx how long do you need to wait for 139.xx.... 50Hours ..20H etc?
I still don't understand how that affects this?.
  • #103
  • Jan 18, 2017 8:53am Jan 18, 2017 8:53am
neither - they are identical.

most important for me is entry and enough space for market noise - anything below 50-100 pips is random noise for me.

here is a trade i took just before the canadian overnight rate news - looks bearish last tow hours.. with a sl of 70pips. no fixed tp... everything more than 1:1 is okey.
Attached Image (click to enlarge)
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  • #104
  • Jan 18, 2017 8:56am Jan 18, 2017 8:56am
if both of those setups have identical probability of hitting their TPs, then you'll find out that your risk on both trades are identical

trade 1 method will have many small losses that will equate to trade 2's infrequent big losses.

so the answer is, TAKE BOTH!

yup case close

now let's move on..
  • #105
  • Jan 18, 2017 9:05am Jan 18, 2017 9:05am
After reading the book Fooled by Randomness by Nicholas Taleb, Hedging is the best way to go. To answer you question above, well i would chose neither.
  • #106
  • Jan 18, 2017 9:05am Jan 18, 2017 9:05am
Quoting hilmy83
if both of those setups have identical probability of hitting their TPs, then you'll find out that your risk on both trades are identical trade 1 method will have many small losses that will equate to trade 2's infrequent big losses. so the answer is, TAKE BOTH! yup case close now let's move on..
They don't have identical probability. They have identical profitability over a series of trades. So taking both trades you would end up with the same amount of profit over a series.
  • #107
  • Jan 18, 2017 9:14am Jan 18, 2017 9:14am
Quoting NaughtyPip
{quote} I still don't understand how that affects this?.
Of course it does not affect the RR this is there and it is not variable.
The time spent to reach the target is variable.
That's all.

Then this may interfere with the long-term end result... As faster or slower to achieve objectives.
  • #108
  • Jan 18, 2017 9:26am Jan 18, 2017 9:26am
Quoting chess king
{quote} Of course it does not affect the RR this is there and it is not variable. The time spent to reach the target is variable. That's all. Then this may interfere with the long-term end result... As faster or slower to achieve objectives.
I understand where you are coming from but in order to compare 2 R:R approaches accurately the sample size has to be exactly the same for both approaches and bringing in a time constraint would not allow this. But I appreciate your input.
  • #109
  • Jan 18, 2017 9:30am Jan 18, 2017 9:30am
Quoting alexanderd
neither - they are identical. most important for me is entry and enough space for market noise - anything below 50-100 pips is random noise for me. here is a trade i took just before the canadian overnight rate news - looks bearish last tow hours.. with a sl of 70pips. no fixed tp... everything more than 1:1 is okey. {image}
closed at be and would call it a day.
  • #110
  • Jan 18, 2017 9:46am Jan 18, 2017 9:46am
If you use a trailing stop, to lock in profits, you will eventually reduce the risk to zero. Once there is no risk you are then trading with the markets money, a free ride! The objective is to manage risk and the profits will follow. Focus on how much you could loose and to protect your capital.
Don't wait for the wind, take to the oars.
  • #111
  • Jan 18, 2017 11:05am Jan 18, 2017 11:05am
Quoting NaughtyPip
I will start with a question. Which one of these trades would you take, or wouldn't you take based on the R:R, or would you take both? Edit: This has nothing to do with technical analysis, it is a thread about whether one R:R can be more profitable than another. a3b49039acaf48e8929d290379d8c315.png;2141833 Ok so the point I am trying to make is if you say you would only enter trade 1, you must consider that when price climbs towards your target and is 10 pips away (at the trade 2 entry level), by holding on for those last 10 pips whilst having your...
First, you can't have a discussion about risk/reward without including probability. Second, the 2 options that you present are only trades, and there is no discussion about the trader. As a trader, if trade 1 meets my requirements of a good trade, I will take it. If I took it, and PA unfolded as depicted in the picture of trade 2, I will never lose money on trade 1, and would start looking for ways to enter more trades to get to the next target (if you don't have a second target, you should not take trade 1). The notion that trade 1 and 2 are equal is completely stupid, outside of an academic discussion about trades and trading, since no experienced trader would enter trade 2 as it is set up, unless, of course, trade 2 was targeting a price level well above target 1. The idea behind trading is to make money, and this academic discussion so far has done nothing to further the goal of making money. If you view trade 2 to be equal to trade 1, then you are doing nothing more than providing liquidity to the broker. Good trading to everyone!
  • #112
  • Jan 18, 2017 11:27am Jan 18, 2017 11:27am
Quoting GEfx
{quote} First, you can't have a discussion about risk/reward without including probability. Second, the 2 options that you present are only trades, and there is no discussion about the trader. As a trader, if trade 1 meets my requirements of a good trade, I will take it. If I took it, and PA unfolded as depicted in the picture of trade 2, I will never lose money on trade 1, and would start looking for ways to enter more trades to get to the next target (if you don't have a second target, you should not take trade 1). The notion that trade 1 and...
Read the thread
  • #113
  • Jan 18, 2017 11:37am Jan 18, 2017 11:37am
Quoting NaughtyPip
{quote} Read the thread
Maybe later, but the first post is not promising...
  • #114
  • Jan 18, 2017 11:39am Jan 18, 2017 11:39am
Quoting GEfx
{quote} Maybe later, but the first post is not promising...
well you can rip it apart after you have read it.
  • #115
  • Jan 18, 2017 11:57am Jan 18, 2017 11:57am
ok ive edited the first question to make it clearer - we are assuming a profitable strategy.
  • #116
  • Jan 18, 2017 2:09pm Jan 18, 2017 2:09pm
Quoting NaughtyPip
EDIT: You have setup that has proven to be profitable over a large series of trades where you risk 1 to achieve 4. The setup is highlighted in trade 1. Now, knowing that trade 1 is profitable over a series of trades would you also enter at the point highlighted in trade 2 (this is just a later stage of trade 1) to risk 4 to achieve 1? {image}
When you enter trade 1, you have a 1:4 ratio, but when you add trade 2, your ratio is 1:1. If trade 1 and 2 go to target, trade 1 delivers 40 pips, trade 2 delivers 10 for a total of 50 pips, but when you entered trade 2, you risked 40 pips on trade 2 and 10 on trade 1, for a total of 50 at risk. You should avoid trade 2. If you want to maintain the 1:4 ratio as you enter trade 2, you need to move your stop to 6 pips below trade 2 entry, for a total of 12 pips at risk for 50 to gain.
  • #117
  • Jan 18, 2017 2:18pm Jan 18, 2017 2:18pm
Quoting GEfx
{quote} When you enter trade 1, you have a 1:4 ratio, but when you add trade 2, your ratio is 1:1. If trade 1 and 2 go to target, trade 1 delivers 40 pips, trade 2 delivers 10 for a total of 50 pips, but when you entered trade 2, you risked 40 pips on trade 2 and 10 on trade 1, for a total of 50 at risk. You should avoid trade 2. If you want to maintain the 1:4 ratio as you enter trade 2, you need to move your stop to 6 pips below trade 2 entry, for a total of 12 pips at risk for 50 to gain.
I don't want you to analyse combining the r:r's. I gave the option to take both trades but I don't mean in the same sitting. If you were late to your screen and missed the chance to take trade 1, would you take trade 2?
  • #118
  • Jan 18, 2017 2:39pm Jan 18, 2017 2:39pm
Quoting NaughtyPip
{quote} I don't want you to analyse combining the r:r's. I gave the option to take both trades but I don't mean in the same sitting. If you were late to your screen and missed the chance to take trade 1, would you take trade 2?
No, i would not risk 40 pips to make 10.
  • #119
  • Jan 18, 2017 3:39pm Jan 18, 2017 3:39pm
Quoting GEfx
{quote} No, i would not risk 40 pips to make 10.
Well, every time you take trade 1, and price reaches the stage where it is at trade 2, you are effectively now risking 40 pips to make 10. So you are effectively taking trade 2 as stated on post 1, whether you like it or not.

Are you sure you have read the thread as I've gone over this many times.. Many have disagreed with me but some have agreed with me. I'd read the thread.
  • #120
  • Jan 18, 2017 3:58pm Jan 18, 2017 3:58pm
Quoting NaughtyPip
{quote} Well, every time you take trade 1, and price reaches the stage where it is at trade 2, you are effectively now risking 40 pips to make 10. So you are effectively taking trade 2 as stated on post 1, whether you like it or not. Are you sure you have read the thread as I've gone over this many times.. Many have disagreed with me but some have agreed with me. I'd read the thread.
Well no.. on trade 1. when your up 30 pips which was not previously your balance, your still risking 10 pips, being up 30 pips does mean a thing.. if its not banked, it does not matter.
It's in fear when people show what they truly value.
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