Patience and Discipline, these are the Holy Grail.
- #23
- May 21, 2017 11:34pm May 21, 2017 11:34pm
I would say only use 1:1 if you trade a specific number of pips every time your method tells you to do so, i.e. every time the 5 sma crosses the 10 sma, enter for 10 pips, with 10 pip sl. Then adjust the lot size when your account grows bigger. Assuming your method gives you at least 51% win ratio, your golden. You can even do a martingale strategy since, 49%X 49% eventually goes into your favor statistically speaking. But if your doing 50 pips tp with 50 pip sl on Tuesday, then 20 pip tp and sl on friday, thats a strategy to fail in my perspective with a 1:1 RR..
But then again, Im not a pro.. so take that with a grain of salt..
But then again, Im not a pro.. so take that with a grain of salt..
- #25
- May 23, 2017 5:21pm May 23, 2017 5:21pm
- | Membership Revoked | Joined Aug 2015 | 1,640 Posts
Forex Philosopher
- #26
- May 23, 2017 5:23pm May 23, 2017 5:23pm
- | Membership Revoked | Joined Aug 2015 | 1,640 Posts
Forex Philosopher
- #27
- May 24, 2017 2:59am May 24, 2017 2:59am
- Joined Aug 2011 | Status: Trader | 1,327 Posts
Guys, R:R is not something you decide then you search an edge that fit your whim! That's the other way around. You first find some edge then after many trades you see what you R:R and winrate happen to be.
Because you asked...
Your average profit over a very long time (called expected profit in math term) is the sum of your expected gain minus your expected loss. You risk one unit of money (being 1%, $X or whatever) to gain R units of money. You win with probability P and lose with probability 1-P. Your expected profit is E = R x P - (1-P) = (R+1) x P - 1. P is somewhere between 0 and 1 and R is greater than 0. You can plot this (win rate is on the x-axis):
The curve between the purple level and the green surface (here seen from above) gives the values of P and R for a given edge (E fixed):
This is something I have thought about many a time. Assuming all things equal, I have often wondered if the probability of a win is inversely exponential to the increase in the R:R. So, if it is not a linear comparison, it must also impact on the profitability. Can anyone come up with a mathematical explanation between probability, R:R and profitability?
Your average profit over a very long time (called expected profit in math term) is the sum of your expected gain minus your expected loss. You risk one unit of money (being 1%, $X or whatever) to gain R units of money. You win with probability P and lose with probability 1-P. Your expected profit is E = R x P - (1-P) = (R+1) x P - 1. P is somewhere between 0 and 1 and R is greater than 0. You can plot this (win rate is on the x-axis):
The curve between the purple level and the green surface (here seen from above) gives the values of P and R for a given edge (E fixed):
No greed. No fear. Just maths.
- #28
- May 24, 2017 3:47am May 24, 2017 3:47am
- Joined Oct 2009 | Status: Exploiting psychology of the crowds | 1,426 Posts
Depends on an edge and strategy. Reversal strategies are much different than momentum strategies concerning winrate and RR.
Side note: I found that I need high rate strategy for my personality type. Reversals are not for me.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
- #30
- Edited 8:59am May 24, 2017 8:14am | Edited 8:59am
- Joined Dec 2015 | Status: Trader | 14,257 Posts
Excuse me, if I may... RR is nothing IMO.
Why?
Say, you toss the coin. Is 50-50% win/lose, right.
Trading up'n'down (apparently) is the same 50-50% win/lose.
Now, trading using RR 2:1 could mean that every time you lose you get minus 1, but every time you win you get +2
So you may think since the trading game is 50-50% chances, putting in the poket 2$ everytime you win and put on the table 1$ everytime you lose ...you will find your poket full of money in short time
lol
And no need to know anything about market, trading startegies, economics, finaces, maths... nice and easy, right?
Explanation? Any rigid math calculus on probabilities in trading is stupid, (orientative, at most)
because the market dynamics can wipe SLs for thousands of times before you see any +2 on a bad strategy
Conclusion: if you are not successful on RR 1:1 you will not be successful on 1:2, 1:3... 1:n ratios !
Is the strategies wich are making the big money, not the RR ratios!
Why?
Say, you toss the coin. Is 50-50% win/lose, right.
Trading up'n'down (apparently) is the same 50-50% win/lose.
Now, trading using RR 2:1 could mean that every time you lose you get minus 1, but every time you win you get +2
So you may think since the trading game is 50-50% chances, putting in the poket 2$ everytime you win and put on the table 1$ everytime you lose ...you will find your poket full of money in short time
lolAnd no need to know anything about market, trading startegies, economics, finaces, maths... nice and easy, right?
Explanation? Any rigid math calculus on probabilities in trading is stupid, (orientative, at most)
because the market dynamics can wipe SLs for thousands of times before you see any +2 on a bad strategy
Conclusion: if you are not successful on RR 1:1 you will not be successful on 1:2, 1:3... 1:n ratios !
Is the strategies wich are making the big money, not the RR ratios!
Member
- #31
- May 24, 2017 9:54am May 24, 2017 9:54am
- Joined Aug 2010 | Status: Stare Into the Lights My Pretties! | 795 Posts
Generally speaking from my experience, the popular market "wisdom" doesn't work in FX trading. Especially in the short term. So you can throw all of your "smart" books and conventional theories in the garbage bin, because they are worthless anyway! This may actually improve your trading!
The original idea for high RR comes from the stock market and from long term trend following. In fact this is fundamental rule in any business and investment.
But short term FX trading is different, very different! (For many reasons)
In fact you have much higher chance to be profitable if you reverse all rules.
Instead of calculating RR pre-trade, you can calculate only the maximum risk on position basis. Use some volatility range and play with the position inside this range. There is absolutely no point to try to predict the direction of the market!
Just learn how to take advantage of the fluctuations.
If there is a "holy grail" in FX trading, this is it!
It's called variable grid trading. With this methodology you can make money regardless of the direction of the market. You can even make money when the market is constantly against you. Of course the risk is still there, but honestly I don't know of any other methodology which can deliver such consistent results.
To a certain extend you can control the trend in your account equity.
And the most impressive thing with this method is the profit factor.
In most of my experiments the profit factor is consistently over 5.
Here is example from one of my algorithms. The results are for the last month (on demo).
With this system I deliberately go against all market "wisdom".
If you examine in detail the trades you may be surprised to discover that the system breaks every single popular "rule".
Trades only against the trend.
Always adds to "losing" positions.
Cuts all profits quickly.
Does not use stop losses.
Trades only during high volatility. Mostly around news.
Sounds dangerous?
This may actually improve your trading!The original idea for high RR comes from the stock market and from long term trend following. In fact this is fundamental rule in any business and investment.
But short term FX trading is different, very different! (For many reasons)
In fact you have much higher chance to be profitable if you reverse all rules.
Instead of calculating RR pre-trade, you can calculate only the maximum risk on position basis. Use some volatility range and play with the position inside this range. There is absolutely no point to try to predict the direction of the market!
Just learn how to take advantage of the fluctuations.
If there is a "holy grail" in FX trading, this is it!
It's called variable grid trading. With this methodology you can make money regardless of the direction of the market. You can even make money when the market is constantly against you. Of course the risk is still there, but honestly I don't know of any other methodology which can deliver such consistent results.
To a certain extend you can control the trend in your account equity.
And the most impressive thing with this method is the profit factor.
In most of my experiments the profit factor is consistently over 5.
Here is example from one of my algorithms. The results are for the last month (on demo).
With this system I deliberately go against all market "wisdom".
If you examine in detail the trades you may be surprised to discover that the system breaks every single popular "rule".
Trades only against the trend.
Always adds to "losing" positions.
Cuts all profits quickly.
Does not use stop losses.
Trades only during high volatility. Mostly around news.
Sounds dangerous?
- #32
- May 24, 2017 10:10am May 24, 2017 10:10am
- Joined Dec 2015 | Status: Trader | 14,257 Posts
Generally speaking from my experience, the popular market "wisdom" doesn't work in FX trading. Especially in the short term. So you can throw all of your "smart" books and conventional theories in the garbage bin, because they are worthless anyway!
This guy here on FF made over 2M% return percetage using that strategy!!!
Check his TE on FF here!
...but one day he was almost lost everything but recovered ...but some other day really lost everything
Because is an adding up risk, exponential risk (martigale fashion) ...so is just a matter of time to blow up your account
Take care, ...all!
Member
- #33
- May 24, 2017 10:51am May 24, 2017 10:51am
- Joined Aug 2010 | Status: Stare Into the Lights My Pretties! | 795 Posts
{quote} Thanks for sharing. Is the very popular "pyramidal defence" strategy... adding to the losing positions. This guy here on FF made over 2M% return percetage using that strategy!!! Check his TE on FF here! ...but one day he was almost lost everything but recovered ...but some other day really lost everything
But considering the fact that over 90% of traders are going to lose their account anyway.....
Assuming that for most traders at some point in the future the big drawdown is inevitable (regardless of the reason), then which proposition is better?
a) To trade with strategy which gives you the chance to withdraw profits almost every day. And you also have the chance to multiply the account several times.
b) To trade with strategy which doesn't give you any chance to withdraw profits. Loss after loss....drawdown from the very start. Only with the hope that the next trade may be "THE ONE" (with huge RR). so that you can "finally" recover from the hole.
Believe it or not, most traders consistently chose b).
While with a) you actually have the chance to generate profits in the long run. ( If you are not too greedy and you keep the risk low)
It's very funny situation. Sometimes I wonder...what the hell is wrong with people? Is this just a result of the constant brainwashing, or the education, or just human nature?
- #34
- May 24, 2017 11:19am May 24, 2017 11:19am
- Joined Dec 2015 | Status: Trader | 14,257 Posts
{quote} Well, yes there is always risk to blow the account no matter the strategy! But considering the fact that over 90% of traders are going to lose their account anyway..... Assuming that for most traders at some point in the future the big drawdown is inevitable (regardless of the reason), then which proposition is better? a) To trade with strategy which gives you the chance to withdraw profits almost every day. And you also have the chance to multiply the account several times. b) To trade with strategy which doesn't give you any chance to...
b) everything you have stated is based on that premise?
ok, now if 9 of 10 of us lose it all for sure, , here is a better position:
- if you have 9600$(e.g. any capital) and want to double it, you can start with 150$ and try to win 6 consecutive times doubling every time the gainings until you get 9600$;
- you have 64 shots to be lucky
...acceptable risk, if you are thinking that you have no chance (10% chance) to beat the forex game and the total drawdown is inevitable anyway...Forex time, and the living is easy...
Member
- #35
- May 24, 2017 11:49am May 24, 2017 11:49am
- Joined Oct 2009 | Status: Exploiting psychology of the crowds | 1,426 Posts
{quote} a) are you absolutely sure about that statistics, 90% of retailers lose? ...ok, is traders folklore, no one really posses exactly that information and no one spread it correctly/honestly;
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
- #36
- May 24, 2017 11:51am May 24, 2017 11:51am
- Joined Oct 2009 | Status: Exploiting psychology of the crowds | 1,426 Posts
Generally speaking from my experience, the popular market "wisdom" doesn't work in FX trading. Especially in the short term. So you can throw all of your "smart" books and conventional theories in the garbage bin, because they are worthless anyway!
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
- #37
- May 24, 2017 11:56am May 24, 2017 11:56am
- Joined Oct 2009 | Status: Exploiting psychology of the crowds | 1,426 Posts
{quote} Well, yes there is always risk to blow the account no matter the strategy! But considering the fact that over 90% of traders are going to lose their account anyway..... Assuming that for most traders at some point in the future the big drawdown is inevitable (regardless of the reason), then which proposition is better? a) To trade with strategy which gives you the chance to withdraw profits almost every day. And you also have the chance to multiply the account several times. b) To trade with strategy which doesn't give you any chance to...
There are also c) traders. Trading with low drawdown, discipline, edge and profits without greedy ideas of becoming rich quick risking more than 100% of capital.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
- #38
- May 24, 2017 11:58am May 24, 2017 11:58am
- Joined Oct 2009 | Status: Exploiting psychology of the crowds | 1,426 Posts
Hard facts and statistics and not fairy tales:
https://www.dailyfx.com/forex/fundam...ders-make.html
Which means this is a psychological problem. We are wired to cut profits fast and let losses run.
More on it in superb book:
https://www.dailyfx.com/forex/fundam...ders-make.html
Which means this is a psychological problem. We are wired to cut profits fast and let losses run.
More on it in superb book:
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
