Baruch's Forex System Journal
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Quote from OddTrader:
When reviewing your systems, Don't forget the importance of how mcuh and how many consecutive trades of drawdown with each system.
Intraday trading would be better to controldrawdown, but the risk/reward ratio can be very poor, mainly due to the stop loss and profit taking strategies.
Drawdown is 10-15 pips - depending on the market.
Profit taking strategy? That's the problem - it's very difficult to decide, when the time is right for taking profit. A new cross, trailing stop, trend line - you name it, but there's no simple solution.
Hi Baruch
Here are some suggestions to your current system with this thread.
Perhaps you don't have to spend any time in analysing news in order to improve the timing of entries. (As you may not place an order against a 100% clear signal if the current market direction is against your interpretation of the latest news.) Instead, use stop entry with a breakout approach to catch an early trend.
Consider to try a pullback approach (whether with a stop entry) to improve overall risk/reward ratio. Test whether a directional approach to improve profit volume by placing proper trailing stops.
Most likely, a combination of multiple contracts and profit targets should be effective to improve risk/reward ratio.
Here are some suggestions to your current system with this thread.
Perhaps you don't have to spend any time in analysing news in order to improve the timing of entries. (As you may not place an order against a 100% clear signal if the current market direction is against your interpretation of the latest news.) Instead, use stop entry with a breakout approach to catch an early trend.
Consider to try a pullback approach (whether with a stop entry) to improve overall risk/reward ratio. Test whether a directional approach to improve profit volume by placing proper trailing stops.
Most likely, a combination of multiple contracts and profit targets should be effective to improve risk/reward ratio.
Quote from OddTrader:
Consider to try a pullback approach (whether with a stop entry) to improve overall risk/reward ratio. Test whether a directional approach to improve profit volume by placing proper trailing stops.
Most likely, a combination of multiple contracts and profit targets should be effective to improve risk/reward ratio.
Almost exactly what I do.
Jay
Quote from OddTrader:
Hi Baruch
Here are some suggestions to your current system with this thread.
Perhaps you don't have to spend any time in analysing news in order to improve the timing of entries. (As you may not place an order against a 100% clear signal if the current market direction is against your interpretation of the latest news.) Instead, use stop entry with a breakout approach to catch an early trend.
Consider to try a pullback approach (whether with a stop entry) to improve overall risk/reward ratio. Test whether a directional approach to improve profit volume by placing proper trailing stops.
Most likely, a combination of multiple contracts and profit targets should be effective to improve risk/reward ratio.
OK, it's good ideas. But what is a proper trailing stop? 20 or 40 pips away? 20 pips? You are stopped out very often - and the moves goes on, without you. 40 pips? You don't want to say goodbye to 40 pips. If you do it 2 or 3 times a day, it's 80-120 pips...
Quote from OddTrader:
I think you need to prepare the worst case for what would be the maximum loss after a maximum number of losing trades.
Consider to trade 2 contracts, of which 1 contract will be exited at a fixed profit target say 20pips.
There are no proof that fixed profit targets should work better than a trailing stop. Why should they? With a trailing stop you let the market decide the exit- it should know better than yourself when to take profit, I suppose.
And how should I know to decide what the profit target should be?
We need to understand first the purposes of stops. A trailing stop can be used for profit protection, limiting loss, SAR, etc. that could be too complicate for us to handle today. Moving stops too early to a breakeven level is required mainly because we don't have a high probability conviction of market directions (until one day we can improve it greatly).
I would say we could't define stops unless we can finalise our design of systems, because whether the system is a trend, breakout, pullback, range would have quite different stops in terms of pips. I'm afraid the best performance would be pullback approach.
No wonder some say a good system consists of 20% weighting on entry, 30% on exit, and 50% on money management.
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