1% per trade

[Gordon Gekko]

instead of trying to go for big gains, has anyone thought of just going for small consistent gains? for example, find a pattern with a high probability that it will go your direction 1%. once you enter a position, place a sell limit 1% away. i know this brings other problems, such as when to take losses, but it seems to me that it would be easier to make small gains consistently rather than big gains. i mention this, because i see what the common problem is for most people trying to trade.

you enter a position, get stopped out
you enter a position, get stopped out
you enter a position, get stopped out
you enter a position, you don't get stopped out, you use a trailing stop and get stopped out with a small gain
you enter a position, get stopped out
you enter a position, get stopped out
you enter a position, you don't get stopped out, you use a trailing stop, you want to get a big gain, so you let it wiggle, if you're too strict, you're gonna get stopped out with a small gain again, so you trail your stop under the previous day's low. today is a big up day, you have a 6% gain. tomorrow the stock opens a little lower, sells off and goes under the previous day's low, you got stopped out with a small gain again
you enter a new position, get stopped out
you enter a new position, get stopped out
add in commissions and you're going nowhere

the more i trade, the more i want to go for smaller gains. if you think making 1% per trade isn't good...do some math compounding at 1% and you'll see it adds up.

 

[Gordon Gekko]

please don't bother responding to this if you are a trader who does not make money.

 

[daniel_m]

Originally posted by Gordon Gekko
instead of trying to go for big gains, has anyone thought of just going for small consistent gains? for example, find a pattern with a high probability that it will go your direction 1%. once you enter a position, place a sell limit 1% away. i know this brings other problems, such as when to take losses, but it seems to me that it would be easier to make small gains consistently rather than big gains

You erroneously assume that small, "consistent" gains are easier to come by. (Personally, I don't find any direct relationship between the size of the gain hoped for and the consistency in attaining it)

The crux of the matter is this:

How much do you risk in attempting to get a certain gain? (note, if you don't have a predefined stop price, imo, you are winging it)

Depending on your reward:risk ratio, a "high probability" pattern is not absolutely necessary.

If you are risking 5% in order to get a 1% gain, you are definitely going to need a very high probablity setup. (And too bad if you hit a string of losers, or your strategy stops working!)

EDIT. I should add the my whole strategy is geared toward gains of 20-25 cents, whilst risking no more than 15.

 

[bronks]

In theory this sounds good. But in reality... It's amazing how many times my trade never even came back to breakeven. Maybe if you could consistently buy @ the bid and sell @ the ask. I don't know, there's so many divergences on the way to that 1%. Not even counting commissions.

I do agree, however, with the principle of risk/reward for small gains at a time, because eventually it can add up.

 

[Gordon Gekko]

Originally posted by daniel_m


You erroneously assume that small, "consistent" gains are easier to come by. (Personally, I don't find any direct relationship between the size of the gain hoped for and the consistency in attaining it)

fist of all, just because i'm debating with you, does not mean i don't appreciate your response..in fact, i thank you for it. however, i have to say...

how many times have you entered a position, you got stopped out, and then it went back the original direction you thought it would? THIS HAPPENS A LOT. how many times have you entered a position and it immediately went up 20% never going the other direction at least 1%? RARELY! my conclusion is that random "noise" is more likely to happen than the rare time a trade totally goes the way you hoped it would.

 

[daniel_m]

Originally posted by Gordon Gekko


fist of all, just because i'm debating with you, does not mean i don't appreciate your response..in fact, i thank you for it. however, i have to say...

how many times have you entered a position, you got stopped out, and then it went back the original direction you thought it would? THIS HAPPENS A LOT. how many times have you entered a position and it immediately went up 20% never going the other direction at least 1%? RARELY! my conclusion is that random "noise" is more likely to happen than the rare time a trade totally goes the way you hoped it would.

Read the edit to my first post.

I don't think in terms of percentages. I don't really think it's appropriate in daytrading.

I get stopped out only to see the trade "work out" quite often. I am pretty much beyond the point of being bothered by this, and I'll quite oftn re-enter the trade. Sure, continually getting stopped out is sometimes frustrating, but I have learnt (through bitter experience) to take my stops every time.

 

[Gordon Gekko]

Originally posted by daniel_m


Depending on your reward:risk ratio, a "high probability" pattern is not absolutely necessary.

yes i agree.. i know about expectancy too... but what i'm saying is it isn't easy to be a positive expectancy trader.

 

[daniel_m]

Originally posted by Gordon Gekko


but what i'm saying is it isn't easy to be a positive expectancy trader.

Was that the whole point of your thread?
Tell us something we don't know.

 

[lundy]

the crux of the matter is not how many times you can get 1% gain, it's how many times you stop out and what your stop is.

if you don't put a stop, it's like gambling... ie you are risking everything for something relatively small.

If you have a big stop, you'll have a big loss.

 

[spectre]

depends on both your initial risk, and the size of your trade. If your goal is 1%, assuming you risk .25-.5%, a win would represent a 2-4R trade. You seem fairly confident about the reliability of your system, but your stop looks abit slim. If you risk 1% to make 1%, how long do you think you can keep that up before you hit a rough patch. I think this keeps you focused on entry signals, which really shouldn't be the case. If you are going to risk any capital at all, you might as well start looking for trades that are potentially going to return far greater than 1%, and cut down on the hyperactivity. But this is just my 2 cents worth.

Good luck.