There is no simple answer for you that I can see. Trading as a discipline so multifaceted. What I can say is invest in yourself to a great extent. Keep learning here at FIO and maybe look into some of Van Tharp's work since your questions seem to centered on money management.
Van Tharp basically calls the concept of money management position sizing but he is talking about the same thing.
If you really mean you use a 200 tick chart on ES as a "trend" chart I would suggest changing it to a 240 min or daily chart or similar longer term chart. Just the normal market wiggles on a chart with that short of a time frame will take you out of the trade. Might be helpful to do a rotation study on ES using a 4 range (I feel this is way to small but that's just me) chart in Excel or something so you can get a good idea of it's behavior and see if those stop and target sizes are meaningful.
It seems to me from your stop and target sizes you have a smaller account. No problem, if you want to trade an instrument better suited to it. Examples might be micro lot spot FX where on most major pairs like EUR/USD (Fiber) GBP/USD (Sterling) AUD/USD (Aussie) USD/CAD (Loonie) etc etc you can trade a 1 lot micro and risk $0.10/pip. On ES you have to deal with not only going up against very experienced traders with boat loads of resources but $12.50/tick as well. That's 125 times the risk of micro lot spot FX. I would say learn and develop yourself creating the system that works for you with an instrument like these micros and once you have generated a lot of data about yourself and its a solid approach with a positive expectancy as @Big Mike pointed out then and only then increase your size.
A probability mind set is needed IMO to have success in trading. Probabilities are based on large amounts of data, huge. Even with a positive expectancy there will be streaks, long streaks possible, of losses as will as winners. What type of system can you create to notice these streaks and adjust you trading accordingly? (ie during a winning streak increase size during a losing streak decrease size.... might be an idea) This is normal and try as we might there is absolutely no way to avoid this.
Doubt kills more dreams than failure ever will. Perfect: the enemy of Done. per·fec·tion·ist: ultimately one lacking self-confidence
Buy Low And Sell High (read left to right or right to left....lol)
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@ucacme As others have so eloquently stated, your math is upside down and you're doomed to slowly bleed your account to failure.
What you're addressing here is a HUGE HUGE part of becoming profitable, which is getting the math right. This is the part that most people refuse/ignore/neglect to address in their trading system that has them spinning their wheels for years trying to find a more perfect entry, or a new indicator, or new trading system, or new guru trading room mentor. Basically taking on big losses and cutting their winners short.
As this article in Futuresmag points out, you can be theoretically profitable by even flipping a coin as long as the math is right.
I think Al Brooks mentioned somewhere that you need to be correct 90% or more with your reward to risk ratio is 1:2 and also if you're solely scalping. If you flip that reward to risk ratio to 2:1 you can be profitable even with about a 40% correctness in your trade.
So how do you get 2:1 reward to risk? Test. You might not be able to brag about the 70% stat anymore and it will probably go down near 40-50% but who cares. Profitable is profitable. Become profitable first, then start looking to hone your craft.
You're welcome, I just divulged my edge that took me years to figure out through my thick skull.
Nothing in life is to be feared, it is only to be understood. Now is the time that we understand more, so that we may fear less. - Marie Curie
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@fminus I tested my methodology for couple of weeks and went live. I was scalping and controlling the number of trades per day. (One of my main problems with me was that I was over-trading). But as most of them already have mentioned, I was wrong and started to see big losses when I had a bad day. The 70% profitability is from my trades for a month. But my expectancy was negative.
Now, I am working on changing my methodology to achieve 2:1 --> risk: reward ratio.
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It's difficult to add much helpfully to Bob's outstanding post on the previous page (#8), but it strikes me that it may also be that trading a single lot is part of your difficulties, here.
If you're considering trading two lots instead (as you mentioned above), it may be that adding the second lot after the trade is moving into profit will help. This can result in your having larger positions, overall, when the odds are more in your favour, and having smaller positions when that's less certain. Adding to winning positions is often a very viable and productive technique.
It seems that you need to do plenty of research, however you look at it, to find out the long-term effect on your results of using either smaller stop-losses, larger take-profits, or a combination of the two.
In trading textbooks such as Van K. Tharp's Trade Your Way to Financial Freedom and Michael Harris's Profitability and Systematic Trading, the authors explain why methods with lower win-rates (e.g. 30-40%) are in practice often easier to make overall profits from than methods with win rates in the 60-70% range, or higher.
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You also can't ignore a fundamental question of why 8 ticks?
Why 16 ticks?
Do you have an advantage using 8 ticks instead of 7 or 9? Volatility is not constant so it doesn't matter what volatility is, 8 ticks is best?
Multiple all that by the leverage you are using. Why use 10-1 leverage on 8 ticks vs 9-1 leverage on 9 ticks?
Probably the reason you have 70% winning trades is simply the fact that the stop is further away than the target. I don't know what your strategy is or the type of entry but maybe you could test the same strategy but once there's an entry signal with the target 8 ticks away and the stop 16 ticks away...
Don't enter the trade at the entry signal - see if it pulls back 8 ticks first and enter - then you will have 2:1.
Again, that may be ridiculous depending on the setup but I had success on something similar.
On the 5 min CL and I take a certain hammer bar setup. - But it only pays 1:1 if you enter on the breakout of that bar. So I just waited for a pullback to 2 or 3:1 and entered there. If it was too strong to pullback - I missed the trade. Big Deal - On to the next! Waiting for the pullback gave me a positive expectancy.
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