The price action facebook journal

Quote from amitman:

I for myself use 1:1 R:R ratio to determine my exits (meaning my target will be the same as my stop). Why do I do it?
Two reasons:
I can backtest it and see that it has positive expectency.
It fits my trading style.

That being said, if you have any good ideas or thought about how to squueze more of a trade, I'd be very happy to read them.
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I think your approach is excellent. The most frustrated traders I've encountered are those who don't have a specific plan of some sort. Instead they try to outsmart (or avoid developing) a simple plan and end up with far less than if they'd stick with a plan based on positive expectancy.

I've posted this link many times and I read this little story often to keep my big brain from micro-managing a simple and effective plan:

http://www.cornixtrading.com/2012/07/rats-vs-yale-students-randomness-psychology/

I just posted on another thread that my intraday price action analysis over time has shown that fixed targets produce a superior outcome for those who trade varying market conditions (as opposed to those who only are trying to catch a strong trend).

If you're adept at identifying a well-defined trend, you may want to run a spreadsheet comparison of your fixed target method to some flexible target methods to see if an adjustment can be made to "squeeze more out".

A couple flexible target methods I use are:

1) N ticks beyond the last new high/low (N might be based on the number of ticks the last breakout ran, or on a channel line drawn parallel to the main trend line)

2) Adjusting a trailing stop at the close of each 1-min bar
 
I agree that the exit strategy doesn't matter as long as you can trade your system profitably. Still here are some of the issues that I have with exiting using a constant R:R ratio.

Focusing on your R:R ratio will take you focus away from what is really happening in the market and what the market is telling you.

For ex: sometimes when the trade is going my way and I see a breakout bar against me, I just exit. The odds of the price turning around and hitting my target reduces when such price action happens against me.

Letting your profits run has to be used in the context in which the day's price action is unfolding. It doesn't make much sense to not exit for a decent gain when the market is range bound. In trending markets you can try to let profits run.

Trailing stop is one good way to lock in as much as possible when the price is trending.

Taking a trade with a 1R risk is more like betting. You either make $x or lose $x. By using dynamic exits you either lose the most as per your stop loss or you lose little or you break even or you make a small profit or medium profit or a monster profit. This is easier said than done but this is the path I want to take and perfect.
 
Quote from mspkash1:

For ex: sometimes when the trade is going my way and I see a breakout bar against me, I just exit. The odds of the price turning around and hitting my target reduces when such price action happens against me.
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So you've analyzed this event over a sufficient series of occurrences to determine the average reduction in odds of price then hitting your target? Or are you making this decision based on how often it seems to have happened?

Quote from mspkash1:

Taking a trade with a 1R risk is more like betting. You either make $x or lose $x. By using dynamic exits you either lose the most as per your stop loss or you lose little or you break even or you make a small profit or medium profit or a monster profit. This is easier said than done but this is the path I want to take and perfect.
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1:1 is only like betting if the odds are around 50/50 or negative. If the odds are favorable enough to overcome the cost of commissions and slippage, then it's a positive expectancy plan. There's a scalping setup that has a > 70% chance of hitting a .10 target before hitting a .10 stop, quite sufficient to trade it for a decent income.

The path you describe that you "want to take" seems to make a lot of sense until you take the ample time necessary to develop a plan for doing it based on statistical analysis. I tried pursuing that path for a while and gave up, and I've yet to hear of anyone doing it. It's the same path the Yale students attempted in the link I posted.
 
Quote from NoDoji:


A couple flexible target methods I use are:

1) N ticks beyond the last new high/low (N might be based on the number of ticks the last breakout ran, or on a channel line drawn parallel to the main trend line)

2) Adjusting a trailing stop at the close of each 1-min bar [/B]
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Hi NOD, thank you for your resposnse. I was following you journal in my previous round of trading back in 2008, great to see you're still in the business.

Could you be kind enough to give a chart example of this two methods because I'm not sure I've understood what exactly do you mean.
 
Quote from amitman:

Hi NOD, thank you for your resposnse. I was following you journal in my previous round of trading back in 2008, great to see you're still in the business.

Could you be kind enough to give a chart example of this two methods because I'm not sure I've understood what exactly do you mean.
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I'm posting an example from today. In choppy conditions, or in a channeling trend (where the new highs/lows are rather shallow), your fixed smaller targets make sense. But this morning there was a decent breakout, so a measured move type of continuation was likely.

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I'd like to emphasize that your current method appears to be producing fine results. The method I illustrated for larger targets is something I reserve for strong breakout/trend conditions only.
 
Thanks you for the illustrations!

Indeed, today is a crazy day in FB, a textbook example of when not to use fixed targets.
I, however, couldn't trade today except for 10 minutes due to work. I was able to make one trade in this time which, miraculously, was the only one where a fixed target was better :D
will post later the trade and blotter later.
 
Quote from amitman:

I was able to make one trade in this time which, miraculously, was the only one where a fixed target was better :D
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You remind me of my favorite "just stick with one plan" story. I was trading oil and watched three trades in a row show me just a wee bit more than my minimum profit target and come all the way back to stop me out break even. All three trades would've been fulfilled had I placed .20 hard targets. So then I position short once more for a test of the new low and price breaks the low by a couple ticks and just hangs there in space, so I quickly move my stop to lock in .20 because clearly this is a failed breakout...and the second after my stop triggers for my whopping .20 profit, price commences to drop over 2.00 ($2000/contract) :eek:

That's what I get for my changing my plan of holding for a strong move!
 
Quote from amitman:

Thanks you for the illustrations!

Indeed, today is a crazy day in FB, a textbook example of when not to use fixed targets.
I, however, couldn't trade today except for 10 minutes due to work. I was able to make one trade in this time which, miraculously, was the only one where a fixed target was better :D
will post later the trade and blotter later.
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came here to tell you exactly that. in days like today, you don't need to let the profits run - atleast you can try for 2R or 3R or so.
 
Quote from mspkash1:

came here to tell you exactly that. in days like today, you don't need to let the profits run - atleast you can try for 2R or 3R or so.
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Indeed :)
 
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