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What is less risky on the ES?
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What is less risky on the ES?

  #1 (permalink)
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What is less risky on the ES?

What is the less risky proposition on the ES? 5 trades to win 1 pt while risking 1 pt each time or 1 trade risking 3 pts to get 5 pts one time a day on average?

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  #3 (permalink)
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Depends mostly on your time frame, check the average true range of the chart configuration you are trading.
I believe 1pt is too little of a natural breath space for ES.
You will get stopped out virtually on all your 5 trades with 1 pt of risk if you are trading a 15min chart for example
But maybe that's ok if you are trading a small tick chart, and so on...

I would personally chose to take one trade, with 3 points stop and 5 points target; it will be also less expensive commission wise if you track your cost of business while trading and it allows some room for the price to move.

a 5min ES chart today has an ATR of roughly 1.5 points, so a 3 points stop is equal to 2x ATR, and that starts to be a fairly acceptable stop for my liking.

Another way of looking at it is through expectancy if you wish.
First case, you have win = loss = 1 pt, but if you have a 50/50 chance of winning on your trades, you will end up a loser because of commissions eating your neutral stance.

Second case, you have win = 1.67 x loss so if you have a 50/50 chance of winning on your trades you are still profitable here.

Successful people will do what unsuccessful people won't or can't do!
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  #4 (permalink)
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Fadi View Post
Depends mostly on your time frame, check the average true range of the chart configuration you are trading.
I believe 1pt is too little of a natural breath space for ES.
You will get stopped out virtually on all your 5 trades with 1 pt of risk if you are trading a 15min chart for example
But maybe that's ok if you are trading a small tick chart, and so on...

I would personally chose to take one trade, with 3 points stop and 5 points target; it will be also less expensive commission wise if you track your cost of business while trading and it allows some room for the price to move.

a 5min ES chart today has an ATR of roughly 1.5 points, so a 3 points stop is equal to 2x ATR, and that starts to be a fairly acceptable stop for my liking.

Another way of looking at it is through expectancy if you wish.
First case, you have win = loss = 1 pt, but if you have a 50/50 chance of winning on your trades, you will end up a loser because of commissions eating your neutral stance.

Second case, you have win = 1.67 x loss so if you have a 50/50 chance of winning on your trades you are still profitable here.


Risking 3 points to make 5 is an unacceptable trader's equation as defined by Al Brooks.

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  #5 (permalink)
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trendisyourfriend View Post
What is the less risky proposition on the ES? 5 trades to win 1 pt while risking 1 pt each time or 1 trade risking 3 pts to get 5 pts one time a day on average?

Wow, where to start...

First of all, statistically, it depends on how often each target/stop trade wins (win rate).

If the market is a random coin flip then risking 1pt to make 1pt will be break even. Actually, it will lose money because of commissions and slippage. Targeting 1pt ES to make 1pt is not a very practical type of trade in my experience, but I can't prove that it can't be done profitably.

Risking 3pts to make 5pts will suffer lower win rates but can be over compensated with larger win sizes, so it will all depend on how often you win. In that case, you need at least a 37.5% win rate to even start thinking about making a profit (excludes commission and slippage).

Also, it depends on what context you are taking each trade on. Near support/resistance? In the direction of the trend? What time of day? Is there news coming out soon?

Finally, to determine which is more risky it depends on how you manage risk. What's the position size? How volatile is the market? How much drawdown do you need to endure to make profits, if at all?

Frankly, if you want to trade coin flips with asymetrical risk/rewards you are better off trading OTM binary options on NADEX.

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I have asked this question because of the number of traders suggesting to start a trade say with 2 or 3 contracts and close 1 contract at +1 pt while risking 1 pt or 2 pts with all of them trying to manage a runner.

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KosherTrader View Post
Risking 3 points to make 5 is an unacceptable trader's equation as defined by Al Brooks.

What would Al Brooks do then?
Take the 5 trades each with -1 / +1 point risk:reward instead?

Successful people will do what unsuccessful people won't or can't do!
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I was mistaken. Risking 3 points to make 5 points is actually ok with Al Brooks if it is a Major Trend Reversal where the probability of a big win is ~40%

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  #9 (permalink)
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I don't trade ES but I watch it closely.

I think most people will be able to get away with 2 handles for a stop, that is 8 ticks. Now also for profit I think one should try for 2.5 to 3 handles seeing that the thing rotates a lot in small ranges.

Risking 4 ticks will have you chopped up way to much and going for 5 handles all the time will have you at a very low win rate as the thing can get stuck in a 4 handle range for hours on end.

Just my two cents
Ian

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I think Mack from price action trading (PAT) encourages people to aim for a 1 pt profit and put your stop at BE and try to manage a runner on the ES. I posted this question to see what other traders think of such a money management practice. I once tried it in my journey and was beeing stopped out all of the time. But it seems some have success with it.

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