The Foresight Thread
- Thread starter dbphoenix
- Start date
Maximum Favorable Excursion and Maximum Adverse Excursion (though technically it should be Maximum Adverse Incursion). In other words, how far does price go before turning back on itself and how deeply does price recoil after you've made your entry?
For example, if your trade soars as soon as you've hit the Transmit key, fine. But if it backs up a bit before soaring, how far does it back up and still be good? How far does it back up before the deal's off? This helps you determine how much leeway to allow price if it doesn't take off immediately. It also helps prevent stomach upset.
As for the MFE, how far does price typically go before stalling? If you're trading multiple contracts, which of course you are, and you want to scale out, which of course you do, the MFE gives you an initial target for that first scaleout.
None of this is covered in the SLA, of course, as the beginning and fearful traders need to learn to walk with one contract before going wild.
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You bet. Note also that these will change with each instrument traded, which is why they are part of the characterization process. They may also change with the season and with the position in the market trend, i.e., early or late, which is why price-action approaches are self-correcting and self-adapting.
Since so many of you are following this thread today, I want to take this opportunity to point out that I don't pay much if any attention to "outliers" when it comes to DLs and SLs as the outliers have only a very temporary effect on the demand/supply balance.
Therefore,
In this case, the report's effect on price is not considered a "break". But this is just me. Others may want to deal with it in their own ways. That's one advantage of a discretionary system over a mechanical system. The SLA is flexible, to at least some degree.
Therefore,
In this case, the report's effect on price is not considered a "break". But this is just me. Others may want to deal with it in their own ways. That's one advantage of a discretionary system over a mechanical system. The SLA is flexible, to at least some degree.
