Reducing impact of bad trades.

C

c.chugani

The current system I am working on relies on identifying possible breakouts and trading accordingly.

The chart I have attached is self-explanatory, green candles signaling a buy and red ones signaling a sell.

To reduce the number of bad trades, would it be wiser to add another filter to the indicator (aka another criteria that must be met before giving a buy/sell signal)?

Or would it be better to leave this to the money management aspect (ie. cut losers quick and let winning trades run)?

Thanks for the input.
 

Attachments

Quote from alex.samant:

keep it simple
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care to elaborate?
I do agree with your statement though, the more an indicator resembles a 50/50 coin toss, the more effective it becomes at signalling good trades :)
 
Use limit orders and scale in, use appropriate starting price and retracement based on type of catalyst, movement, individual stock characteristics, etc. Simple yet deadly....
 
Quote from c.chugani:

To reduce the number of bad trades, would it be wiser to add another filter to the indicator (aka another criteria that must be met before giving a buy/sell signal)?
More...

You may be changing your system. I think it is important to stick to the system. Sure, there are losing streaks. Losing streaks may trigger feelings associated with lack of confidence, sadness, and frustration. I notice certain ("doom and gloom") feelings and they seem associated with stock market bottoms. I use the feelings as an indicator, but I do not trade off my feelings. I follow my mechanical system. Today, I show a profit compared to 12 months and 24 months ago. I find my trading results are not always correlated to performance of the Standard and Poors 500 Index.

You might test different trading method ideas and observe simulation results. Perhaps your feelings are motivating you to perform more testing.
 
Quote from Hook N. Sinker:

You may be changing your system. I think it is important to stick to the system. Sure, there are losing streaks. Losing streaks may trigger feelings associated with lack of confidence, sadness, and frustration. I notice certain ("doom and gloom") feelings and they seem associated with stock market bottoms. I use the feelings as an indicator, but I do not trade off my feelings. I follow my mechanical system. Today, I show a profit compared to 12 months and 24 months ago. I find my trading results are not always correlated to performance of the Standard and Poors 500 Index.

You might test different trading method ideas and observe simulation results. Perhaps your feelings are motivating you to perform more testing.
More...

I don't quite get what you are telling me. Are you saying I should continue to forward test my current system; or tweak the parameters (thus, changing the system and its outcome) and forward test the new values?
 
Quote from epetrov:

Make it KISS, which means Keep It Simple and most of all, Stupid,
:D :D :D
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I know what you mean - but if it really were true - most aspiring traders wouldn't fail.

Cheers.
 
FWIW, be on the lookout markets that have had narrower than normal price ranges and then position yourself for a potential breakout from that type of set-up.
 
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