syswizard 

Granted, the volatility can change. However, setting stops without getting a rough idea of what it is can result in larger than expected losses or just many, many losses resulting in a low win rate.

I agree the old timers looked at stop loss levels as a true art form. Too tight leads to too many whips, too loose and the losing trades overtake the winning trades ....

Tricky balance .....

OccamsRazorTrader 

I agree the old timers looked at stop loss levels as a true art form. Too tight leads to too many whips, too loose and the losing trades overtake the winning trades .... Tricky balance .....

Absolutely and the "R-Factor" is at play here. 4 pt stop loss, 2 pt profit target = R-Factor of 2
High % win rate systems usually have an R-Factor of 4 or more.

On my "to-do" list is determining the optimal R-Factor by creating a strategy that buys and sells using a randomizer and throttle the number of trades per day to 20 or something close to that. My guess is that an R-Factor of 2 will be optimal for the E-Mini futures markets.
Also on the list: setting the R-Factor dynamically based on volatility. Now that would be interesting.

Mt Waas - scalping mode


Mt Waas - scalping mode - R-Factor of 1



Well I stumbled upon this over the weekend.
It was a dumb trend-following system on ES from the beginning of the year.
About 100,000 trades in total.
Nice even mix between shorts and longs.
First one is an R-factor of 2; second one is an R-factor of 1.
Big difference, eh ?

You changed your R-multiple also? or you only changed the r-factor?

syswizard 

Mt Waas - scalping mode Well I stumbled upon this over the weekend. It was a dumb trend-following system on ES from the beginning of the year. About 100,000 trades in total. Nice even mix between shorts and longs. First one is an R-factor of 2; second one is an R-factor of 1. Big difference, eh ?

syswizard 

Mt Waas - scalping mode Mt Waas - scalping mode - R-Factor of 1 Well I stumbled upon this over the weekend. It was a dumb trend-following system on ES from the beginning of the year. About 100,000 trades in total. Nice even mix between shorts and longs. First one is an R-factor of 2; second one is an R-factor of 1. Big difference, eh ?

100k trades @ $3 a trade ........... plus in the least .25 point spread ($12.50) + slippage?

Unless there is an allowance for trade costs in those numbers .........
it's a loser ................

kevinjd 

You changed your R-multiple also? or you only changed the r-factor?

What's the difference ? (R-Multiple vs. R-Factor)

OccamsRazorTrader 

Unless there is an allowance for trade costs in those numbers ......... it's a loser ................

Indeed it is...no argument on that.

I though you know haha. I had to read a pdf from "van thorp institute" or something like that (i googled R-factor). They said that R-factor is the risk of the investment and R-multiple is the profit of the investment in relation with the R-factor . For example if i invested $10 with a R-factor of 2 and my profit was 2, the R-multiple is 1 (it's one time the R-factor). That is what i understand maybe i am wrong.

syswizard 

What's the difference ? (R-Multiple vs. R-Factor)

Thanks for the response. Still trying to determine how and when to adjust the R-Factor.
Use volatility ? Equity curve ? Win Rate ?

I am trying to figure out that too haha.
I am going to study well the book of ralph vince "THE MATHEMATICS OF MONEY MANAGEMENT:RISK ANALYSIS TECHNIQUES FOR TRADERS" maybe i find some techniques and advices there.
Also i heard (from a good futures trader) that when you trade futures , because of the margin , you can take trades when the risk/reward is above one at least.
I only trade stocks, so i try that my risk/reward is above 1.5 at least.
In this forum i saw a post about calculating the position in relation with the streak of winning trades, maybe there is something there too.

syswizard 

Thanks for the response. Still trying to determine how and when to adjust the R-Factor. Use volatility ? Equity curve ? Win Rate ?