I trade both breakouts and mean reversion.
Here's some food for thought for all on this thread & IMO an important point about having a decent sized pot to play with.
Ponder Point #1
What's the difference in risk between;
1 contract with a 100 point stop
10 contracts with a 10 point stop
100 contracts with a 1 point stop
(excluding liquidity issues)
Ponder Point #2
Which trade is most likely to be stopped out?
Ponder Point #3
Which trade is most likely to capture a big move?
Very choppy day. Not like the beautiful downtrend earlier this week. One lacklustre long to begin the session and then in and out of shorts. Only one of the trades was pyramided. Probably captured about 40% of the move in total which is less than I like to get, but such is life. Lots of interruptions to my day for not all that fantastic a return.
Now have a small long order sitting and waiting to see what happens next.
so how are you choosing the initial direction?
Basically, most traders focus on the setup and the entry. I find these to be the least important part of my methodology.
This was something that initially puzzled me when I started posting in this thread (as it was the opposite of what I do) but I now understand and agree.I like to get the best price so I take as little heat as possible....
Dollar risk is the same for all three but this one is highly unlikely to be whipsawn allowing space and time for the price to move in our favour. Hard to ensure trade moves in our favour straight off the bat.I trade both breakouts and mean reversion.
Here's some food for thought for all on this thread & IMO an important point about having a decent sized pot to play with.
Ponder Point #1
What's the difference in risk between;m
1 contract with a 100 point stop
Dollar risk the same but more likely to be whipsawn out of trade.10 contracts with a 10 point stop
Dollar risk the same but highly likely to be whipsawn out of trade.100 contracts with a 1 point stop
the expectancy of my strategy is far easier to achieve with the quiver of many small arrows rather than the single large shaft.
Dollar risk the same but highly likely to be whipsawn out of trade.
Allowing a very small initial position with a relatively wide stop coupled with aggressive pyramiding when a trade does go in the desired direction creates a very interesting pattern of trade returns which is both extremely satisfying and which can be very stressful at the same time.
How it trades is:
-> There is a high win-loss ratio. This can be emotionally very gratifying.
-> There are regular large outlier wins. The big moves are captured. Extremely pleasing.
-> The losses tend to linger in the portfolio *but most importantly* they always remain very small in $ value compared to the winners. They're annoying to look at, though.
In contrast, trading with a very tight stop sees:
-> A much lower win-loss ratio. More frustrating emotionally. Getting stopped out happens a lot.
-> Outlier wins are present, but less frequently. Many potential outlier trades are simply cut due to the tight initial stop and so you watch them take off without you. Frustrating.
-> Losses disappear very quickly and are very small. No annoying itches to scratch.
Both methodologies can have a positive expectancy.
Below are my actual March trading results for consideration.
Index start: 5420 Index end: 5372
...
Note the very pleasant Profit Factor achieved.
Would be most interested in comparing others' results for the same period.
Yes! Pyramiding with leverage can produce sensational results provided that risk is well managed!
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?