How do you handle price being halfway between your buy signal and stop loss.

[HolyGrailSeeker]

As you know, we do not trade one stock alone. So sometimes while browsing you may chance upon a stock with a buy signal but price has already retraced halfway towards your potential stop loss (it could be 1/3 or 3/4 or anything arbitrary).

Let's say your strategy that has an edge is a 1 to 1 risk to reward. But since the price had retrace halfway and you enter it now it's actually in between your buy signal and stop loss so RR becomes 1 to 3 which obviously skews the probability.

Based on common sense it is still probably a trade with an edge but how would you handle it? Trade it 1 to 3 RR? Or 1 to 1 RR?

Or maybe you don't enter trades like this and always wait for fresh signals?

 

[Sergio123]

I just change my chart to trade on a different timeframe.

I don't need to trade that many different products.

 

[MarkBrown]

if you like your strategy stats then trade it - if you don't keep looking, the whole purpose of having a strategy is to follow it to perfection. so the results of actual trading reflect what historical testing shows.

 

[maxinger]

eg

You missed this trade :

Target profit $110
buy signal $100
STOP $90
so Risk reward ratio 1:1 ($5:$5)


Then the price drops to $95
Quickly buy that stock without hesitation.
So Risk reward ratio 1:3 ($5:$15) <<< very good!

 

[PPC]

As you know, we do not trade one stock alone. So sometimes while browsing you may chance upon a stock with a buy signal but price has already retraced halfway towards your potential stop loss (it could be 1/3 or 3/4 or anything arbitrary).

Let's say your strategy that has an edge is a 1 to 1 risk to reward. But since the price had retrace halfway and you enter it now it's actually in between your buy signal and stop loss so RR becomes 1 to 3 which obviously skews the probability.

Based on common sense it is still probably a trade with an edge but how would you handle it? Trade it 1 to 3 RR? Or 1 to 1 RR?

Or maybe you don't enter trades like this and always wait for fresh signals?

“Based on common sense”, it is against common sense to buy a stock that is moving in the opposite direction of what you expect.

 

[traider]

I just change my chart to trade on a different timeframe.

I don't need to trade that many different products.

Short term trade turned into long term investment?

 

[Sergio123]

Short term trade turned into long term investment?

Actually long term investment turned into short term trades.

 

[Drawdown Addict]

The price dropped and ma'guy is assuming that is going to go the other way just because it will.
So they are making all sorts of calculations on an amazing return. First it was 1:1 and now is 1:3 just because it is.
And we read without even blinking that is "Based on common sense" on OP's post.

Of course it is.

 

[tomkat22]

Sounds like you missed your entry. I personally dont like to chase(although there are times I wish I had chased). Wait for the next trade.

 

[Wide Tailz]

One way to deal with this is to open the position with several small buys, to take advantage of the retracements inside the range.