R/R for trend following systems

A

antincedo

im asking for what would be an educated guess as i imagine it is hard to figure out the r/r ratio for trend following strategies as the only thing one can actually define is the risk

my way of defining risk is

7 tick stops

5 full trades max (not counting scaling)

adding to winners, first size being 40%

what would one surmise be the r/r of a strategy like this
 
good luck not getting stopped out using 7 tick stops.

see my thread called something like "does using tight stops necessitate picking tops/bottoms?" i'd post a link but i'm posting from my phone right now and i cant copy paste.

7 ticks is noise, especially for trend followng systems. i've had positions go against me by as much as 20 ticks (on the YM) before going massively in my favor.
 
well hitting it on the first try is rare but i rather improve my entries than widen my stops

if the entry is good the stop doesnt need to be 20 ticks
 
Quote from antincedo:

well hitting it on the first try is rare but i rather improve my entries than widen my stops

if the entry is good the stop doesnt need to be 20 ticks
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Before the volatility hit the market I would agree with this statement. But with the recent market conditions, 7-10 ticks on the YM is very small IMO. There might be people who can trade that successfully but I am not one of them.
 
understandable, although it is still possible to execute entries with small stops. perhaps you get stopped out a little easier but i think it encourages one to be more disciplined.

it is possible to make an entry at a s/r level where that approximate price area is withing 7 ticks and if it is to break that, well then you're probably better off being stopped out than holding and hoping.

i believe with out these sort of limitations our stops can become too loose and a little too discretionary.

to become a better trader we must structure our efforts so that we have a basis to improve upon.
 
Quote from antincedo:

im asking for what would be an educated guess as i imagine it is hard to figure out the r/r ratio for trend following strategies as the only thing one can actually define is the risk

my way of defining risk is

7 tick stops

5 full trades max (not counting scaling)

adding to winners, first size being 40%

what would one surmise be the r/r of a strategy like this
More...

You first must define "Trend" within strict objective parameters.
Then you must define the trading opportunities you are taking inside that specifically defined "Trend" environmnet.
Then assess the R/R yourself.
 
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