Breakeven Stops: At Entry or 1-2 Tic Profit? - Psychology and Money Management | futures io social day trading
futures io futures trading


Breakeven Stops: At Entry or 1-2 Tic Profit?
Updated: Views / Replies:570 / 16
Created: by MTCTrades Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 100,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

Breakeven Stops: At Entry or 1-2 Tic Profit?

  #11 (permalink)
Chicago
 
Trading Experience: Beginner
Favorite Futures: MES
 
snax's Avatar
 
Posts: 539 since Feb 2019
Thanks: 1,750 given, 1,303 received


centaurer View Post
But this formula (Win% x Avg Win) - (Loss% * Avg Loss) is highly flawed for the statistical properties of trades. This makes sense on an IID process that there is only one win/loss %. Then with an IID process the more samples you take the more informative the average win and average loss becomes.

This all breaks down with market data because the distributions change over time. The distribution of a trade for ES on Monday is not the same distribution as a trade on ES from early February bouncing out of the lows.

It is viewing the trader as the generating process as opposed to the market.

I've thought about this as well, its part of why i started trading in small cycles of trades so I could track if and how this result "(avg_win * win%) - (avg_loss * loss%)" changes as I modify my technique in an ever changing market. And that's just for one contract with its own unique behavior.

Its an interesting problem and one which I've been coming to the conclusion that I'll have to come up with my own formula eventually unless there is already good stuff out there.

@centaurer you have hit upon a topic which has bothered me, the fact that there is so much cargo-culting of information that is of questionable value. But that's a huge topic. And I think exploiting this condition could be a rich area for developing an edge perhaps.

Note: I didn't mean to imply that anyone in this thread is cargo-culting bad information, I meant in the broader sense that you see throughout trading in general.


Last edited by snax; May 11th, 2019 at 11:51 AM. Reason: added clarification.
Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to snax for this post:
 
  #12 (permalink)
Super Moderator
Sarasota FL
 
Trading Experience: Intermediate
Platform: NinjaTrader, Sierra Chart
Favorite Futures: ES, YM
 
bobwest's Avatar
 
Posts: 4,966 since Jan 2013
Thanks: 37,576 given, 16,778 received


centaurer View Post
But this formula (Win% x Avg Win) - (Loss% * Avg Loss) is highly flawed for the statistical properties of trades. This makes sense on an IID process that there is only one win/loss %. Then with an IID process the more samples you take the more informative the average win and average loss becomes.

This all breaks down with market data because the distributions change over time. The distribution of a trade for ES on Monday is not the same distribution as a trade on ES from early February bouncing out of the lows.

It is viewing the trader as the generating process as opposed to the market.

I had to look up "iid process": https://en.wikipedia.org/wiki/Independent_and_identically_distributed_random_variables

()

I do think I agree (partially), for several reasons. The main one is simply that this formula gives you an "average trade" based on the group of trades you figured it for. While there's nothing at all wrong with knowing what your average has been (in fact I think it's a good idea), by itself it doesn't tell you important things like:

(a) How were the trades distributed? By this I mean essentially how consistently are they close to your average. "All tightly bunched up" means something very different from "all over the place." If the variation is large enough, the average number is semi-worthless, because a really big losing trade can still be in the average, and could also kill you. You'd want to know something like the standard deviation, but you would likely then run into the problem that your trades probably aren't actually distributed in a classic bell curve so the s.d. will mean less. This does not mean "don't use an average and/or a measure of deviation," it means "don't put too much faith in it."

(b) As @centaurer puts it, the actual distribution of trades (or let's say, of potential good trades) will change a lot with market conditions. Not only by day or month, but with anything else that can affect profitability -- are prices ranging, trending, high volatility, low volatility, etc. So your expectancy -- meaning, what you can really expect -- may not depend either on you or your method as much as the market at the time. One thing is certain, and that is that the market will change.

With all this said, I do think you should know your averages, and also how differing conditions affect them, and certainly how consistently you come close to your averages under different conditions.

I also think you should be fairly nuanced in how you look at and apply your past trade statistics. Use them, but recognize the often-changing context they came from and apply to.

(I wish I could be more conclusive about how to do that.... When I have it all figured out, I'll be sure to let people know .)

Bob.

Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to bobwest for this post:
 
  #13 (permalink)
Winnipeg, MB Canada
 
Trading Experience: Intermediate
Platform: Sierra Chart
Broker/Data: Oanda
Favorite Futures: EURUSD (spot forex)
 
MWG86's Avatar
 
Posts: 490 since Jul 2015
Thanks: 852 given, 623 received



bbilotta View Post
Not knowing your set ups, time frame, context, account size........ there's probably no way for anyone to accurately answer that question.

I agree with @bbilotta's sentiment that there is no one-size-fits-all answer here and it will be highly dependent on your strategy and historical results. I did a bunch of work on this a while back (analysis here) on a subset of randomly generated trades and there was no exit strategy that showed edge over another. Exit strategy is never going to be perfect and all you can do is adopt something that makes sense within the context of your strategy and historical results.


centaurer View Post
It is viewing the trader as the generating process as opposed to the market.

Please correct me if I've taken your quote out of context, and this may be getting off topic, but for a discretionary trader with a non-benchmark-correlated absolute return strategy (which is what I see most short-term intra-day traders here attempting) isn't this the whole point?

Visit my futures io Trade Journal Reply With Quote
 
  #14 (permalink)
south africa
 
 
Posts: 170 since Dec 2018


MWG86 View Post
Please correct me if I've taken your quote out of context, and this may be getting off topic, but for a discretionary trader with a non-benchmark-correlated absolute return strategy (which is what I see most short-term intra-day traders here attempting) isn't this the whole point?

haha yea getting way off topic but it is interesting.

I think many people believe that but I am just not sure it is correct. The distribution of trades for entry on ES at 10:06am 3 seconds and 125 milliseconds on 5/13/19 is the same for both of us.

I think it is like trying to argue that the deck of cards is not the generating process in a poker game. Of course the player has strategic options given the deck run out but I do think there is much language used here that is slightly magical thinking. "I didn't stick to the trading plan and so the flush draw didn't hit so I lost."

snax mentioning cargo cult is perfect. I never really think to use that phrase but it is perfect.

Reply With Quote
 
  #15 (permalink)
south africa
 
 
Posts: 170 since Dec 2018


snax View Post
@centaurer you have hit upon a topic which has bothered me, the fact that there is so much cargo-culting of information that is of questionable value. But that's a huge topic. And I think exploiting this condition could be a rich area for developing an edge perhaps.

There is all kinds of strange historic artifacts IMO. Why does every charting package default to different color up and down bars even though absolutely no one uses that information for anything? Especially red and green that has all these associations with traffic signals to nicely throw some unneeded bias into your brain as you try to make a decision.

Then IMO there is a ton of cargo cult stuff because there is self interest in selling things that don't work but can't be easily shown to not work.


Last edited by centaurer; May 11th, 2019 at 04:27 PM.
Reply With Quote
 
  #16 (permalink)
Winnipeg, MB Canada
 
Trading Experience: Intermediate
Platform: Sierra Chart
Broker/Data: Oanda
Favorite Futures: EURUSD (spot forex)
 
MWG86's Avatar
 
Posts: 490 since Jul 2015
Thanks: 852 given, 623 received


centaurer View Post
haha yea getting way off topic but it is interesting.

I think many people believe that but I am just not sure it is correct. The distribution of trades for entry on ES at 10:06am 3 seconds and 125 milliseconds on 5/13/19 is the same for both of us.

I think it is like trying to argue that the deck of cards is not the generating process in a poker game. Of course the player has strategic options given the deck run out but I do think there is much language used here that is slightly magical thinking. "I didn't stick to the trading plan and so the flush draw didn't hit so I lost."

snax mentioning cargo cult is perfect. I never really think to use that phrase but it is perfect.

I still don't think I'm following here. I'm a discretionary trader, so the items below are in this context. I think of the expectancy formula as having 2 uses:
  • As a display of edge
  • As a metric to compare different sets of trades and whether performance is improving or degrading

On the first point, assuming a large enough sample-set of trades one should expect with random entry to achieve a result that is negative and equal to the spread of the instrument they are trading. If expectancy over a large enough sample of actual results is greater than this, to me that indicates that skill or an edge is present. If it is negative, then no edge or skill is present.

On the second point, assuming the sets of trades being compared are large enough to encompass multiple market regimes and minimize the impact of randomness, then higher expectancy on one set over the other would indicate better performance on that set.

To bring this back to the OP's question then, if moving the initial stop to BE+1 on the set of trades in question increases expectancy over leaving the stop at BE, then it would be the better choice. Obviously there are multiple variables here, size of set in question, stability of market conditions over the set, consistency of execution, etc., that can make this the wrong strategy in the next set of trades, but I don't see the issue with using expectancy as a gauge of which strategy would've performed better.

I'll add a big disclaimer here that I don't believe moving a stop a fixed amount relative to entry makes sense. The market doesn't know or care where your entry was, so saying your market call is "wrong" and you should get out if price retraces to your entry point isn't logical to me, but this will obviously depend on your own strategy.

I do agree with you on your magical thinking comment though. Every gain or positive day is a display of skill and every loss or down day is either a psychology problem or not following a plan when most of them are likely either due to the randomness of the market or simple lack of edge.

Visit my futures io Trade Journal Reply With Quote
 
  #17 (permalink)
Boise, Idaho/USA
 
Trading Experience: Advanced
Platform: Ninja Trader
Broker/Data: IB, NinjaTrader Brokerage, Schwab
Favorite Futures: TF, ES
 
Posts: 118 since Sep 2014
Thanks: 29 given, 193 received

Back in the day when I was in MBA night school I learned two very important lessons that are per-tenant to this.

A very large tech firm with a world wide monopoly on a very common office technology was not interested in sophisticated analysis. All the managers were held accountable in a way that made a simple payback calculation the go no go decision rule. So there is always a better way but that does not make it the best.

We also learned by experiencing an emotional disaster involving tinker toys, that the best plan in the world is worthless if you can not implement it in the real world.

To the original question. Many trading systems use a scale out. Price Action Trading System takes profits on half of the entry at 4 ticks and then moves the stop loss to break even at 5 ticks. Mack says this is based on years of observation.

Futures Trader 71 keeps statistical analysis of the average rotation size in the ES so he knows the difference between noise and a move.

So yes the first step is to track rotations and then work backwards to a rule of thumb that usually works. Then double check the rotations as the market changes.

Reply With Quote
The following user says Thank You to Trailer Guy for this post:

Reply



futures io > > > Breakeven Stops: At Entry or 1-2 Tic Profit?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)
 

futures io is celebrating 10-years w/ over $18,000 in prizes!

Right now
 

$1,000 in Amazon Gift Cards being given away right now from GFF Brokers

Right now
 

$250 Amazon Gift Cards with our "Thanks Contest" challenge!

Right now
 

Show us your trading desks and win over $5,000 in prizes w/Jigsaw Trading

August
 

Webinar: AutoTrading World Cup Advisor w/GFF Brokers

Aug 22
 

Webinar: Suri Duddella (TBA)

Elite only
 

Webinar: Richard Bailey (TBA)

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
How to take partial profit after breakeven. bryan1618 MultiCharts 2 January 1st, 2017 11:47 AM
DAX to S&P E-mini tic to tic ratio isty12 Emini and Emicro Index Futures Trading 5 May 16th, 2013 05:19 PM
Dax - moving from small loss/breakeven to small profit/profit Disciple Elite Trading Journals 67 April 30th, 2012 06:59 AM
Stops, trailing and breakeven stops jonc NinjaTrader 4 November 9th, 2010 12:06 AM
Runner Breakeven re entry emini_Holy_Grail Psychology and Money Management 6 May 1st, 2010 08:48 AM


All times are GMT -4. The time now is 05:56 AM. (this page content is cached, log in for real-time version)

Copyright © 2019 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts