Need a suggestion on risk/reward setup

B

BillySimas

I'm testing out a new system which is fairly simple, and I was hoping some systems traders could give me some pointers on how to set a logical target and stop for each trade.

Here is the system:
Use a 200 period simple MA and a 20 period RSI (70/30). Buy at the close of a price that has entered oversold territory and above the MA and short at the close of a price that has entered overbought territory and below the MA. Basically this system is just getting in on pullbacks of the major trend.

Would fixed profit targets ever be good here? I don't like trailing stops but this is a trend following strategy so maybe fixed targets are not a good idea. What do you think? btw, any time frame works here, but i prefer shorter, say 30 or 60 min charts.
 
Quote from BillySimas:

I'm testing out a new system which is fairly simple, and I was hoping some systems traders could give me some pointers on how to set a logical target and stop for each trade.

Here is the system:
Use a 200 period simple MA and a 20 period RSI (70/30). Buy at the close of a price that has entered oversold territory and above the MA and short at the close of a price that has entered overbought territory and below the MA. Basically this system is just getting in on pullbacks of the major trend.

Would fixed profit targets ever be good here? I don't like trailing stops but this is a trend following strategy so maybe fixed targets are not a good idea. What do you think? btw, any time frame works here, but i prefer shorter, say 30 or 60 min charts.
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Here's my two cents. I've watched RSI for years. It's my crack cocaine of indicators. The trades that work tend to work real well. By milking those (in fact by adding to winners) you might find some positive ex. OTH the losers MUST be managed. The obvious problem is if you liked buying a 21 rsi you'll love a 13. Few strats can provide outlier losses like a stubburn RSI fade.
 
In other words, fixed profit targets are bad :) I hear what you're saying about RSI but just like anything else if you follow your plan it can work.



Quote from Pa(b)st Prime:

Here's my two cents. I've watched RSI for years. It's my crack cocaine of indicators. The trades that work tend to work real well. By milking those (in fact by adding to winners) you might find some positive ex. OTH the losers MUST be managed. The obvious problem is if you liked buying a 21 rsi you'll love a 13. Few strats can provide outlier losses like a stubburn RSI fade.
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Quote from BillySimas:

In other words, fixed profit targets are bad :) I hear what you're saying about RSI but just like anything else if you follow your plan it can work.
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Let them winners rippppp! :)
 
If you're doing a trend following strategy, I think the best profit targets would be to set a bollinger band to 3 standard deviations and take profits when price gets close or above the 3 sigma level.
 
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