Balancing open profit vs potential profit ?

[SIUYA]

Quote from Aston01:


...For those of you who are, I was wondering if it is possible to calculate the turning point where it is better to capture open profit then to risk anymore for profit potential.

As an example lets say I am up $65 in a trade and based on historical data it is relatively reasonable to think that a $100 total gain is possible.

haven't you already determined this by showing in your testing or historical trading that $100 is where most trades for this strategy should be exited?

In which case, the only potential profit is anything over $100 should you choose to run it further?

Otherwise, pulling out numbers like $100 is meaningless, why not use $60 or $80 or $200?

Now, if you have already determined that $100 is the optimal /average/curve fitted exit point then the question seems to raise issues that you dont want to stick to the strategy you have, or you want to meddle and take profits early.....in which case $100 is meaningless. You dont trust your strategy to let it do its pre determined thing.....


Either way.....the idea of balancing open profit v potential profit seems like a self soothing way of reassuring yourself something. Much like when people talk about 'unrealised v realised' losses.

It is a good question to ask when you have a open ended trade - "does this have more potential to run further?....".am I getting greedy for a few ticks when I have a large open position and things are changing." "I have $35 open PL this could go to $1000! unless things change"

Now....if you are running positions and exiting when other factors occur, then focus on the other factors not some arbitrary $ amount.
This is probably not a mathematical question.

 

[Ghost of Cutten]

It's an error to think in terms of open profit - whether you entered at the low of the move, or 1 tick ago, all that matters is the likely profit or loss from the current price into the future. The way to think about it is this - if I was flat right now, what would be the correct position to have on? Flat, long, or short? That depends almost entirely on whether the market is likely to move up significantly more before it moves down any significant amount. If it is, then you should be long. If not, you should be flat - or short, if its more likely to fall significantly first. The only way to know that is to know the odds, which requires you to be intimately familiar with the market situation you are trading - something you can only get by a combination of backtesting, forward-testing via observation and then live trading on small size, and taking extensive notes on your experience, then subjecting them to detailed analysis and rigorous thought.

Once you have done that, you will know the answer to your question - stay long when the odds clearly favour further gains more than losses; in all other situations, immediately exit your long. Pretty simple.

 

[ammo]

to add to cuttens post,you should have s/r areas on your radar, those holding or not holding should determine whether its going to continue direction after a small reverse, or a real reverse, those details should keep you in or get you out, not the profit figure

 

[Redneck]

I have reservations OP knows how to read PA/ draw proper context


RN

 

[jack hershey]

Yes it is true that he OP has a problem.

He did not define it, however.

Neither did his respondents.

I am unfamiliars with spending time in the 100 dollar range.



All of the time (this means without any risk) a person has to know how the system of operation of the market is going.


Logic demands that a person always stay on the correct side of the market.

The OP says he is approaching a turn. The past turn is receding into the past.

Ammo suggests the above vaguely. Most of you say something about the OP's substantive content; this just means you personally have no alternative substantive context.

I do.

turn types are known.

trend types are known

When these two sets are crossed, a person always knows what and how he is approaching the next event.

Thus there is NO balancing to do in any system when it is complete.

In the absence of completeness (all posts so far demonstrate incompleteness); people do betting.

Lousy betting and hope do work to some extent (see Schwager et al). In the financial industry success comes from comissions and fees not from knowing what is going on.

So the OP needs to drop the subject. The respondents need to rethink their errors.

Thier is more than enough information being supplied by markets for any uncertainty to ever exist.

Both sets that need crossing come from the independent variable dictating the dependent variable.

I log in columns.

I have a column for the trend type, the turn type, the arrow of sentiment, and the end effect. I circle the combinations that allow a reversal and I "x" the combinations that require a hold through in a statisitacally insignificant event.

As nodoji says, you do your homework and make use of the totally complete system of the ooperation of the market that results.

Certainly, hate this post and its substantive content. But also look at the change in knowledge and skills that trading has demonstrated.

You all are less than a decade away from seeing the full offer of the market taken all the time by knowledgable and skilled traders. Wait and see for the decade.

 

[jimmyjazz]

Quote from jack hershey:

Yes it is true that he OP has a problem.

He did not define it, however.

Neither did his respondents.

I am unfamiliars with spending time in the 100 dollar range.



All of the time (this means without any risk) a person has to know how the system of operation of the market is going.


Logic demands that a person always stay on the correct side of the market.

The OP says he is approaching a turn. The past turn is receding into the past.

Ammo suggests the above vaguely. Most of you say something about the OP's substantive content; this just means you personally have no alternative substantive context.

I do.

turn types are known.

trend types are known

When these two sets are crossed, a person always knows what and how he is approaching the next event.

Thus there is NO balancing to do in any system when it is complete.

In the absence of completeness (all posts so far demonstrate incompleteness); people do betting.

Lousy betting and hope do work to some extent (see Schwager et al). In the financial industry success comes from comissions and fees not from knowing what is going on.

So the OP needs to drop the subject. The respondents need to rethink their errors.

Thier is more than enough information being supplied by markets for any uncertainty to ever exist.

Both sets that need crossing come from the independent variable dictating the dependent variable.

I log in columns.

I have a column for the trend type, the turn type, the arrow of sentiment, and the end effect. I circle the combinations that allow a reversal and I "x" the combinations that require a hold through in a statisitacally insignificant event.

As nodoji says, you do your homework and make use of the totally complete system of the ooperation of the market that results.

Certainly, hate this post and its substantive content. But also look at the change in knowledge and skills that trading has demonstrated.

You all are less than a decade away from seeing the full offer of the market taken all the time by knowledgable and skilled traders. Wait and see for the decade.

Well, thanks for that? Jesus, what a bunch of gibberish. I eagerly await the sycophants to jump on board telling me I "just don't understand" -- much like cult followers do right before they drink the KoolAid.

Seriously, man. Just stop.

 

[jack hershey]

Quote from jimmyjazz:

Well, thanks for that? Jesus, what a bunch of gibberish. I eagerly await the sycophants to jump on board telling me I "just don't understand" -- much like cult followers do right before they drink the KoolAid.

Seriously, man. Just stop.

LOL

LMAO ROTF

 

[ammo]

this just means you personally have no alternative substantive context.

I do.

turn types are known.

trend types are known............false ,they are recognized like lights or voices in the distance but not known till closer and more likely after the fact

 

[Aston01]

Sorry for my lack of follow up the last couple of days (holidays ...need I say more). My original question was more of a theoretical one in that I was trying to find the balance of leverage asymmetry by basically weighing the risk to open profit with the potential for an expected value.

By understanding this I could then better determine how to deal with signals indicating change of other circumstances being measured. I appreciate the input and upon further research it appears you can actually reverse engineer the leverage asymmetry to determine the situational point at which there is a cross over and it "mathematically" doesn't necessarily make since to suffer any additional drawdown for what you had hoped to gain. Granted you could make the determination of what you personally will tolerate by backtesting or whatever other method works for you.

... I was just looking for a bit more cut and dry way to determine it.

BTW - Thanks for all the responses.

 

[xelite777]

Quote from SIUYA:

haven't you already determined this by showing in your testing or historical trading that $100 is where most trades for this strategy should be exited?

Some common sense, at last!