Want opinion on collective2

[xelite777]

Quote from gkishot:

I think 3x means profit factor as defined on collective2, not risk/reward ratio as you defined it. Then it makes sense.

No, this has nothing to do with Collective2. A profit factor is a well known metric, it is simply the historical net profits of a trading system divided by the historical net losses of the losers.

On the other hand, the risk/reward ratio is obtained by dividing the number of units you want to earn by the number of units you are willing to lose, for each trade.

You can calculate that ratio every time you initiate a trade, assuming you know your stop and your target in advance. The problem is that traders believe that by simply setting this ratio to 3 (risk 1 unit to make 3), they will automatically make money in the long run, regardless of their trading strategy, which is total nonsense of course.

 

[Ironplates]

Quote from xelite777:

No, this has nothing to do with Collective2. A profit factor is a well known metric, it is simply the historical net profits of a trading system divided by the historical net losses of the losers.

On the other hand, the risk/reward ratio is obtained by dividing the number of units you want to earn by the number of units you are willing to lose, for each trade.

You can calculate that ratio every time you initiate a trade, assuming you know your stop and your target in advance. The problem is that traders believe that by simply setting this ratio to 3 (risk 1 unit to make 3), they will automatically make money in the long run, regardless of their trading strategy, which is total nonsense of course.

nevermind C2 terminology. 3x risk means risk to return to me.

once the trade goes into your favor and you can find an opp to compress the risk, then at least the trade will break even or make a little money.

as for targets and stops.

i guess having a good process to estimate stops and targets will be necessary....which is beyond the scope of this thread.

 

[xelite777]

Quote from Ironplates:


i guess having a good process to estimate stops and targets will be necessary....

My friend, any trader who does not know his stop and target in advance (or at least have a clear exit strategy) won't be a trader very long.

 

[Ironplates]

Quote from xelite777:

My friend, any trader who does not know his stop and target in advance (or at least have a clear exit strategy) won't be a trader very long.

the quality of determining "where" the stops and targets are matter more to me...put in the wrong stop and you might as well all ready write the check out of your broker account.

 

[xelite777]

Quote from Ironplates:

the quality of determining "where" the stops and targets are matter more to me...put in the wrong stop and you might as well all ready write the check out of your broker account.

How true.

But once again, the location of your stop/target depends entirely on the logic of your fully backtested trading system.

A trader cannot enter a trade and then later say something like this :" Mmm...I believe my stop should be here, or perhaps here... and my target should be....Oh well, I will think about the target later, let's just see how it goes for now..."

This is total bullshit trading of course, and the only one making money consistently with that kind of trading is your "friendly" broker.

 

[Ironplates]

Quote from xelite777:

How true.

But once again, the location of your stop/target depends entirely on the logic of your fully backtested trading system.

A trader cannot enter a trade and then later say something like this :" Mmm...I believe my stop should be here, or perhaps here... and my target should be....Oh well, I will think about the target later, let's just see how it goes for now..."

This is total bullshit trading of course, and the only one making money consistently with that kind of trading is your "friendly" broker.

either the trade will work as originally entered or it will not.

HOWEVER, once there is some money in the trade, it is reasonable to compress the risk and move up the stop at the very least to break even plus brokerage.

As for the TARGET. The longer one is in the trade, the target needs to be moved up to compensate for this.

Box in the trade from both sides. Eventually the price will fluctuate enough to reach either the target or the stop.

not sure what backtesting would have to do with it except for providing historical information, just like accounting does.

my concern with backtesting is overconfidence.

my focus is on learning to read and understand the language of price and using such an interaction to gain an understanding and map of the market.

 

[drownpruf]

Quote from Ironplates:

nevermind C2 terminology. 3x risk means risk to return to me.

once the trade goes into your favor and you can find an opp to compress the risk, then at least the trade will break even or make a little money.

as for targets and stops.

i guess having a good process to estimate stops and targets will be necessary....which is beyond the scope of this thread.

I do mean profit factor. I don't believe much of what I read here on ET. You will get 100s of sub if you can produce a 3x PF with relative high frequency (>1 trade per week). Stating that you're risking one to earn six is absurd, unless you're taking three trades a year.

 

[gkishot]

Quote from drownpruf:

I do mean profit factor. I don't believe much of what I read here on ET. You will get 100s of sub if you can produce a 3x PF with relative high frequency (>1 trade per week). Stating that you're risking one to earn six is absurd, unless you're taking three trades a year.

Correct.