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Profit target and stoploss relationship


Discussion in Psychology and Money Management

Updated June 22nd 2013 by baruchs
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Profit target and stoploss relationship

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  #1 (permalink)
baltimore marylnd
 
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Profit target and stoploss relationship

how come X stop with Y profit results in a loss for system A. Alternatively, Y stop with X profit for the same system also results in losses, any explanation to this?

ie:

10 ticks stoploss after entry with 20 ticks profit target for system A results in a 10k loss

inverse the stops and profits.. so 20 ticks stoploss and 10 ticks profit also results in a loss, 8k

has anyone ever noticed this?

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Your stop of 10 ticks and even 20 ticks is perhaps too tight for the volatility of your instrument of choice
I understand from you that the win% remains the same in both scenarios... and which must be extremely low to generate a loss while your average win (20 ticks) is twice your average loss (10 ticks).

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calhawk01 View Post
how come X stop with Y profit results in a loss for system A. Alternatively, Y stop with X profit for the same system also results in losses, any explanation to this?

ie:

10 ticks stoploss after entry with 20 ticks profit target for system A results in a 10k loss

inverse the stops and profits.. so 20 ticks stoploss and 10 ticks profit also results in a loss, 8k

has anyone ever noticed this?

Most likely because the entries, targets and stops you are using are more or less meaningless, or random, aka "poor".

In today's webinar, Ernie Chan also talked about stop losses in detail. Check it out.



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Israel
 
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I call this phenomena "I see you see".
For example if you aim in ES for 4 ticks target with 4 ticks stop and your strategy for entry is coin toss.
You see it as a 50-50 event, but the market sees it as 33-66.
And it is before slippage and commitions.
I explained it about 4 years ago.

Baruch

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baltimore marylnd
 
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Big Mike View Post
Most likely because the entries, targets and stops you are using are more or less meaningless, or random, aka "poor".

In today's webinar, Ernie Chan also talked about stop losses in detail. Check it out.



Mike

correct, they are random, however, those random entries are the same for the inverse profit/stop settings. so you would expect good and bad results for atleast one set of profit/stop setting

i guess this could be related to NTbacktesting..

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  #7 (permalink)
baltimore marylnd
 
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baruchs View Post
I call this phenomena "I see you see".
For example if you aim in ES for 4 ticks target with 4 ticks stop and your strategy for entry is coin toss.
You see it as a 50-50 event, but the market sees it as 33-66.
And it is before slippage and commitions.
I explained it about 4 years ago.

Baruch

i actually did notice that NT would give you the more "favorable fill to the market, ie against you" when you send market orders. so the above 33-66 would be true in that case.

however, i adjustment my entries to be limit orders.. in that case.. it should be a coin toss. no?

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calhawk01 View Post
correct, they are random, however, those random entries are the same for the inverse profit/stop settings. so you would expect good and bad results for atleast one set of profit/stop setting

i guess this could be related to NTbacktesting..

@calhawk01

Your not comparing apples to apples. As soon you change the stop or target the entry for the next trade will change. This is because ninja skips over trades because you are already in a position. When you change the stop from 10 to 20 a trade previously skipped will now become valid and may result in a loss thus you end up with nearly identical results. Try comparing side by side the entries from the strategy with 10 tick stop vs the 20 tick stop. You are sure find trades on one that does not appear on the other.

I did a lot of analysis on my own strategy/bot as well. It started somewhere around here: https://futures.io/elite-automated-trading/12250-walk-forward-experiment-27.html#post249555 There is probably some analysis before this post which might be worth while.

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Israel
 
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Quoting 
i actually did notice that NT would give you the more "favorable fill to the market, ie against you" when you send market orders. so the above 33-66 would be true in that case.

however, i adjustment my entries to be limit orders.. in that case.. it should be a coin toss. no?

No, no, no. I said that the real win/loss is 33/66 against you!

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June 22, 2013


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