Risk to reward: positive, negative or neutral ?
- Thread starter Razor
- Start date
Quote from CFerret:
Of course I do not say this!
Of course better perfomance is achieved if no fixed profit target is used (assuming that you have enough experience or objective signal of your methodology to find good exit points). I know it exactly because I did such comparative manual backtests myself for 1000's of trades and spent really a lot of time on it.
What I am saying is that profit targets, scaling out etc. is mostly a way to reduce stress, not to increase profits, but stress reduction is critical at the stage of achieving consistent profitability.
Once it is achieved you have all your life to improve your results and increase your performance, but it is all worthless until you become consistent.
Hence for a trader trying to become consistent it is more important to trade in their psychological "comfort zone" than to reach outstanding performance.
agreed
something else that is worth considering is that investors / financial backers will often put a higher premium on consistency (assuming positive results) than maximised returns. this is similar to a "novice" trader as they are often not prepared for fluctuations in their accounts
people i talk to would rather see returns of +0.5% every week consistenly than flat or -1% most weeks with the occasional +10% result, even if this second scenario generates much higher returns in the long run. [all these figs are example obviously]
first of all, my "risk/reward" (this is a problematic term, but that's another story) is based on setup structure, for each setup (i trade index futures, mostly YM)
you can;t force a setup into an artificial risk/reward structure.
iow, some setups i risk 3 times my reward (first target. and yes, i scale out).
on others, my target is larger than my stop (but these are uncommon) etc.
i have no problem with a stop of 12, and a target of 5,9 and discretionary on third portion, if i KNOW (and I do) that the trade meets my first target before my stop 88% of the time, and then i move stop to entry, etc.
i could not care less about whether people think scaling out is "mediocre"
it is also not necessarily suboptimal on absolute basis. depends on the setups and probabilities
regardless, i trade futures for INCOME (not capital appreciation, like my investment accounts), so smooth, consistent income is important
i very rarely have losing days in my futures scalping account, and that's because I have designed it that way, to use setups with high probability, etc. to make relatively small targets
also, the NATURE of index futures is that they are usually rotating around value, not "trending" and thus this sort of strategy has better positive expectancy, at least for me and my methodology
you can;t force a setup into an artificial risk/reward structure.
iow, some setups i risk 3 times my reward (first target. and yes, i scale out).
on others, my target is larger than my stop (but these are uncommon) etc.
i have no problem with a stop of 12, and a target of 5,9 and discretionary on third portion, if i KNOW (and I do) that the trade meets my first target before my stop 88% of the time, and then i move stop to entry, etc.
i could not care less about whether people think scaling out is "mediocre"
it is also not necessarily suboptimal on absolute basis. depends on the setups and probabilities
regardless, i trade futures for INCOME (not capital appreciation, like my investment accounts), so smooth, consistent income is important
i very rarely have losing days in my futures scalping account, and that's because I have designed it that way, to use setups with high probability, etc. to make relatively small targets
also, the NATURE of index futures is that they are usually rotating around value, not "trending" and thus this sort of strategy has better positive expectancy, at least for me and my methodology