Understanding the Risk vs Reward of Multiple Contracts

SimpleMeLike

SimpleMeLike

Hello,

I am trading sim testing a method.

I have been trading the ES with one contract for a very long time my R:R is generally 2. I understand with one contract if I risk $100 (stop loss at 2pts) and exit at $200, my ROI is 100% in of that trade. Good. I look for 4pts per trade and lately, I would like to try 2 contracts for more profits and catching a runner. Like today!

Now I am trading 2 contracts and I kinda confused how I justify the risk vs reward for the following options. :

1. 1 off at 2pts, trail the other by 2pts
2. 1 off at 4pts, stop to breakeven, the other off at 8 pts
3. both off at 4pts, maintaining my existing 100% ROI that I am use too.

Does scaling out depend on your win to loss ratio or just practicing what works best for me and my planning?

Thanks,
 
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I'd Risk 2Pts with 1 contract.
Or loosen to 4Pts with 1 contract.
But with the Option to cut loss shorter.
Then add 1 another contract if it goes well.
Keep the same ratio. But lose MAX Pts with 1 contract.
Once the 2nd contract triggered, tighten stop without being to tight.
 
Well, one side of camp says if you think you will make more than 2 points, don't take profit at 2 points, and the other is a probability game of how many of your successful trades would get more than 2 points? Ask yourself this through your backtesting, by passing up the 2 points to try to get more, how often do you end up getting much less than the 2 points? I have backtested how I trade often to try to find a logical way to make more, but the numbers don't work out for me as when I get 2 points, the number of times I can get much more are much fewer and I end up with 2 ticks when I could have made 8 ticks. I don't know how many signals you have, but some signals might be able to get like 3 points OR have you tested if you add a contract at minus 4 ticks, risking half as much but exiting at where you make the 2 points on original target? Much depends on your losing percentages to average down. I use 3 point risk and target 1.75-2.25, if I give up a tick to get in, that affects my targets as well.

You have to test and also comes down to your personality, if you relaxed trader and can wait for it or if second conscious like me, more of "Wow, only been three minutes-felt like an hour". I never have found ES to be a happy trending market and why I rather be done with it in 75 minutes. I rather have a stop idea in where it seldom gets touched, for me 2 points too tight, but also comes down to where you get in.

But really comes down to back testing.

Good luck.
 
K-Pia said:
I'd Risk 2Pts with 1 contract.
Or loosen to 4Pts with 1 contract.
But with the Option to cut loss shorter.
Then add 1 another contract if it goes well.
Keep the same ratio. But lose MAX Pts with 1 contract.
Once the 2nd contract triggered, tighten stop without being to tight.
More...

Thanks K-Pia,

I currently trade 1 contract in hopes to earn 4pts per trade, 2pt stop loss per trade.

When would you recommend moving up to 2 contracts?
When trading 2 contracts would you recommend the same money management as i used for 1 contracts (i.e.,risk 2pts to make 4pts)?

Thanks
 
SimpleMeLike said:
Thanks K-Pia,

I currently trade 1 contract in hopes to earn 4pts per trade, 2pt stop loss per trade.

When would you recommend moving up to 2 contracts?
When trading 2 contracts would you recommend the same money management as i used for 1 contracts (i.e.,risk 2pts to make 4pts)?

Thanks
More...

I recommend nothing.
Money Management ain't contract depend.
Trading more contracts just allows for more flexibility.
You can either loosen your SL and / or Scale in & Out of markets.
As Handle said ... There is no A Priori (Logical) better way to act.
Depends what you trade. But with more than 1 contract,
I'd try to lose 2Pts with 1 and win 4Pts with 2 contracts.
Since the setup work -> Proof you can add up.
I don't know where I'd add the 2nd,
But I'd know when to do it.
It's up to you ...

As I said ... It adds flexibility.
Now ... A Posteriori, you may be better not to exploit it.
I truly don't know. I can't tell what's more efficient for you to do.
Maybe you should just enter with 2 and exit 2 @ -2Pts or +4Pts.
 
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I belive what is puzzling me is this

Let's say I can get 4pts consistently risking 2pts per trade with 1 contract. 100% roi

If I move up to 2 contracts, and take 1st one at 4pts, and leave other for possible 8pts, would that make sense? My hope is to catch a runner for more points while having a 4 ot profit
 
K-Pia said:
I recommend nothing.
Money Management ain't contract depend.
Trading more contracts just allows for more flexibility.
You can either loosen your SL and / or Scale in & Out of markets.
As Handle said ... There is no A Priori (Logical) better way to act.
Depends what you trade. But with more than 1 contract,
I'd try to lose 2Pts with 1 and win 4Pts with 2 contracts.
Since the setup work -> Proof you can add up.
I don't know where I'd add the 2nd,
But I'd know when to do it.
It's up to you ...

As I said ... It adds flexibility.
Now ... A Posteriori, you may be better not to exploit it.
I truly don't know. I can't tell what's more efficient for you to do.
Maybe you should just enter with 2 and exit 2 @ -2Pts or +4Pts.
More...

Thank you K-Pia,

So it really depends on the trader how they want to trade multiple contracts.

For me, trading one contract it's easy for me to justify any trading with 50% roi. I want take trades with anything less roi. It's just my thinking.

With that being said, entering 2 contracts and existing both at the same time still meets my +50% roi rule.

But there greed side of me thinks, "man I could have had +8pts if let the other contract run.

Guess it all depends on preference.
 
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