ES Risk/Reward?

[NihabaAshi]

Quote from spike500:

I have a question but first i would like to explain how i limit my risks. I daytrade the ES with a FIX stop of 2 points.

I took about 1000 trades. For each trade i noted the entry price, the exit price, the maximum open loss and the maximum open profit.
With this data i tried to optimize my stop. The aim was to make the highest return possible in combination with the lowest drawdown possible.

The ideal stop was below 2 points. So i took 2 points. In these 1000 trades less than 5% of the trades were stopped out.

Why would i used a NON fix stop, and why would that stop be better?
And why would a fix stop be related to not understanding price action? I think thta if you understand price action you can use thighter stops, so just the opposite of what you claim.

Hi spike500,

My commentary is for those that use a fixed stop loss and a fixed profit target and it's not working as such together.

Further, if your profit targets that are being reached and exited are different from one trade to the next trade.

That's a trader not using fixed numbers as a package deal.

Thus, sometimes when someone saids my stops will be 2 points and my profit targets will be 3 points...

They really meant that if the trade looks like it can go further...they'll capture more (4 ES points, 5 ES points and so on).

However, there are some traders that literally meant what they said...as soon as that fixed stop is reached...their system takes them out of the trade.

As soon as their fixed profit target is reached...their system takes them out of the trade.

As for yourself...all you mentioned was the stop/loss mechanism of your method and nothing about if your using a fixed profit target.

Why would i used a NON fix stop, and why would that stop be better?

Simply, my comments is for those that are using fixed numbers for both as a package deal (stops/profits) and not just for one aspect.

Thus, if one trade you take profits in ES at 3 points and another trade you take profits in ES at 5 points and another trade you take profits in ES at 2 points as soon as either of those numbers are reached...

Your not using fixed profit target numbers as a package deal with your fixed stop/loss protection and my commentary is not aimed at traders like you.

It's aimed at the few traders that actually are using a fixed stop/loss and a fixed profit target as a package deal and sticking to it without letting one aspect be non-fixed.

My question to you is this...

Are you using a fixed profit target and exiting at that number when that number is reached along with a fixed stop/loss protection?

If you say yes...pm me either charts of some of your recent trades (winners and losers) or details about your entry/exit times and entry/exit price along with the chart interval you used of recent specific trades.

I'll then show you how using non-fix numbers will be better.

ES trading only.

Therefore, I need to see specifically what your doing to determine if you can make improvements.

Without that info, it will be impossible for me to determine if it will improve your results or not.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term

 

[PitchBlack]

Quote from NihabaAshi:



My question to you is this...

Are you using a fixed profit target and exiting at that number when that number is reached along with a fixed stop/loss protection?

If you say yes...pm me either charts of some of your recent trades (winners and losers) or details about your entry/exit times and entry/exit price along with the chart interval you used of recent specific trades.

I'll then show you how using non-fix numbers will be better.

ES trading only.

Therefore, I need to see specifically what your doing to determine if you can make improvements.

Without that info, it will be impossible for me to determine if it will improve your results or not.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term

No, i don't use fixed exit prices. Entry and exit are defined by the strenght of the trend, not by quotes. Where the price stands has no impact on my decisions to trade. Sometimes i have to exit after 0.25 points, sometimes after 10 points, sometimes after 15 minutes, sometimes after 5 hours. It's all based on the strenght of the trend.

 

[LoosenUp]

Quote from spike500:



The ideal stop was below 2 points. So i took 2 points. In these 1000 trades less than 5% of the trades were stopped out.

[/B]

Can you please elaborate further. Do you mean that less than 5% are losers, meaning you have 95% or more of either winners or breakeven trades?

 

[PitchBlack]

Quote from LoosenUp:

Can you please elaborate further. Do you mean that less than 5% are losers, meaning you have 95% or more of either winners or breakeven trades?

No,
this means that less then 5% are stopped at 2 points and all the others losses are smaller (I mostly manage to get out before a 2 points loss).
The 2 points stop is only in case my system did fail to warn me for a bad trade before reaching a 2 points loss.

 

[NihabaAshi]

Quote from spike500:

No, i don't use fixed exit prices. Entry and exit are defined by the strenght of the trend, not by quotes. Where the price stands has no impact on my decisions to trade. Sometimes i have to exit after 0.25 points, sometimes after 10 points, sometimes after 15 minutes, sometimes after 5 hours. It's all based on the strenght of the trend.

Hi spike500,

Thanks for the clarification.

I too use the strength of the trend or lack of it to help determine my exits.

Mark

 

[CharlesTrader]

Always an intriguing subject. If you use stops, the placement of those stops depends on many things that only each individual trader can answer for themselves.

However, it is good to know what the markets have to offer or what risks it presents in various timeframes. I calculated the ATR's for each bar, a long term average of the ATR's and a 1 standard deviation of the ATR's for the ES market (see attached chart).

What you try to protect yourself from by using stops are the occasional EXTREME bars, if you are on the wrong side of the market. The trick, of course, is to be on the right side of the market during these times.

This analysis will not tell anyone where to place stops or take profits, but it, at least, gives you an idea of what the market has to offer or risk. So, 67% if the time, this is what the ES market currently offers:

5 Minute Timeframe: 1.5 +/- 0.75 points.
15 Minute Timeframe: 2.25 +/- 1.25 points.
30 Minute Timeframe: 3.25 +/- 1.5 points.

Charles

 

[PitchBlack]

Quote from CharlesTrader:

Always an intriguing subject. If you use stops, the placement of those stops depends on many things that only each individual trader can answer for themselves.

However, it is good to know what the markets have to offer or what risks it presents in various timeframes. I calculated the ATR's for each bar, a long term average of the ATR's and a 1 standard deviation of the ATR's for the ES market (see attached chart).

What you try to protect yourself from by using stops are the occasional EXTREME bars, if you are on the wrong side of the market. The trick, of course, is to be on the right side of the market during these times.

This analysis will not tell anyone where to place stops or take profits, but it, at least, gives you an idea of what the market has to offer or risk. So, 67% if the time, this is what the ES market currently offers:

5 Minute Timeframe: 1.5 +/- 0.75 points.
15 Minute Timeframe: 2.25 +/- 1.25 points.
30 Minute Timeframe: 3.25 +/- 1.5 points.

Charles

You are right in general.
But if you trade with the trend, and your system works well, the offerings of the market will be bigger in + and smaller in - because the size of the moves depend on the trend. So the risk/reward ratio will become better.

 

[bronks]

Quote from CharlesTrader:

This analysis will not tell anyone where to place stops or take profits, but it, at least, gives you an idea of what the market has to offer or risk. So, 67% if the time, this is what the ES market currently offers:

5 Minute Timeframe: 1.5 +/- 0.75 points.
15 Minute Timeframe: 2.25 +/- 1.25 points.
30 Minute Timeframe: 3.25 +/- 1.5 points.

Charles

Those spikey things in that chart...hmm...probably will have a tendancy to do just enough to undo what you do.

Calamity stop might work... might not