real world stops and risk reward ratio. | Psychology and Money Management


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real world stops and risk reward ratio.

  #17 (permalink)

Boise, Idaho/USA
 
Trading Experience: Advanced
Platform: Ninja Trader 8
Broker/Data: IB, NinjaTrader Brokerage, Schwab
Favorite Futures: ES
 
Posts: 124 since Sep 2014
Thanks: 35 given, 210 received

This thread is moving towards PriceActionTradingSystem or as some of us say trading with Mack. Every Monday thru Thursday he puts up a 20 minute u-tube (free to all) talking about every single price action trade set up that he saw. It is a simplified Al Brooks method.

Where you are is really close but no Guacamole (sounds like a trade deal to me )-
1. 2 point stop 1 tick above signal bar, which is usually the swing high or low. Stop can be tighter but never wider so giant bars are not traded when they end.
2. A unit is four contracts, not two. So sandwich two more contracts inside your two point scalp for a one point profit. Three contracts on scalp, two go out for a point each, one goes out for two points. On profitable trades you usually get all three, but occasionally you just get the 1 pointers.
3. No mention of the critical break even move. When the trade goes five ticks in your favor it goes to break even on the two remaining contracts.
4. All of this is of course automated, so you just sit there with your buy stop or sell stop outside of the action and drag and drop into your set up as it happens.

I think if you run the numbers the closer to coin toss or worse on your wining percent the bigger your wins need to be. This system seems to let that fourth contract fail out at 0 about 60% of the time. But it does catch many of the big moves. I find over the course of 50 trades or so that it equals the profits from the scalping operation.

Supposedly this system takes advantage of the longer term harmonic rotations in the ES. All you need is for the market to move six ticks in your direction.

I have yet to figure out how to calculate Van Tharp's numbers on this system. To start there is not a fixed stop, so you have to use average loss for R. But because you are trading two systems with a common entry I get real confused about using his standard method or one of the complicated portfolio methods.

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