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Hey Brian,i was wondering if you were trading 1 contract or more?Obviously,your trade placement is good enough.Not many traders have a very good grasp on where price should go....For that matter,most traders have no idea where to enter!
I say,work on your strengths.Maximize your strength,to nullify your weakness.We all know,that alot of traders who trade multiple contracts,take profit in increments.I think this is a statement in itself.Depending on what we trade determines the increment.
It seems to me you are creating alot of unease(understandable),but is there a way to avoid this?You trade the cl.I would say that with your entries,you probably get 10 to 15 ticks easily enough.
So,with that said,if you do trade more than 1 contract,cover in increments.Once you get your 1st target,now you can relax.A traders r/r is a personal decision.We all know that.Even the best traders take profit in increments,which means they ultimately dont know where price will end up
I know scaling out makes sense emotionally but from a math standpoint, its inferior. Scaling out requires large runners to make up for the full stop out if you are wrong. So what I've done instead is a compromise and one I hope to overcome soon. I space my "targets" out at multiples of risk. Then as price meets those objectives, I trail my stop up.
For example,
Price goes 1XR, I trail to BE
Price goes to 2XR I go to 1XR, etc....
I didn't do this exactly today, I tried to stay with the swings as my stop instead of the exact R multiple. But you get the idea. Also, it makes some sense to pick a target zone based on some other time frame S/R and aim for that, trail the stop up under swings in case it reverses prior to reaching that zone.
The end result is this; you're never gonna buy the bottom and sell the top. The best you can hope for is capturing a majority of whats available to you in the time you have allotted yourself to trade. If you can do that, you're a winner. This then comes down to probabilities. You trade your edge such as it is, you take profits where you think you should and let the results play out over time.
The more I trade, the more I recognize that letting the winners run is the key. And in crude, you can get some major winners. So no, I dont think its mathematically favorable to scale out. An all in all out 20 tick trade is better than a scale out with three targets if the targets are less than 50 ticks. Yes it does make it somewhat easier to manage the runner risk free but once you get past the kill zone as @tderrick likes to say, you have no risk. The only risk you have is that it might come back and take out your trail stop. But thats what its there for anyway. So if you are scaling out, that runner needs to run 100 ticks to make it really worth while in my opinion. Of course there are plenty of guys making money doing exactly the opposite so it really is just my opinion. I just want to win with full size. And I'm willing to experience some frustration in order to get to the place where I can hold a full size or scaled in trade as far as the trade is able to go.
All big time traders scale out and in constantly to reduce risk but more importantly, in an attempt to have maximum size on for the winners. I haven't gotten there yet but its my holy grail. To be able to scale into and out of a trade as it matures trying to have on as much as possible when the trades finally over.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
My first net losing week in over a month. I just couldn't get it together this week. I had two winning days and those days basically offset the losers. I'm down about 2 full winning trades +/- a bit. Mentally I had some weird blockage Monday and Tuesday. I was really nervous for some reason. Wednesday and Thursday were better but both days settled for less than I could have had. I was simply looking for an emotional band-aid to stop the bleeding. Today I KNEW it would not be conducive for my style of trading and yet I traded anyway. A small net loss today. Nothing major but unnecessary. Of course, after I had left the office for the day, there was a good set up that paid 50+ ticks. But I wasn't there for it and I'm not sure I would have taken it anyway after the way the morning set up.
Anyway, I'm looking forward to next week. Trading is the hardest thing I've ever attempted but I'm getting better at it. Or at least the mechanical portion. The mental self talk needs to improve while I am both waiting for a trade set up and while in the trade. I do feel like the open trade mental talk has gotten better. I took my stops today like a man and even though I wanted to move to BE early on a couple of them, my trade plan calls for price to move a certain distance before I do that. That only happened twice and the others were stops. So I quit after three stops and two BE trades after telling myself to just hold the line on moving the stop mid trade.
Hopefully after two inside days, we'll get a break out next week. If I had to guess which way it will go, I'd have to bet the first move will be to the short side to around 89.25 or we might get a head fake to the downside by breaking the inside bars by a few ticks and then reversing up. The double top looks like a tempting target for the longs to shoot for as a trading range breakout spot. . The 92.50-95.00 area served as resistance, then support and now it looks like it might be resistance again. So a true trading range has developed. 87.50-95.00. Should be an interesting week next week as price seeks to either resume the sell off or rally to new highs.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
I arrived at the 800 tick after trying a bunch of different ones. From 150 to 2000.
The 800 tick seems like the best fit, even in random backtesting. I wanted to have the entire day on a single screen, and with tradable patterns. Its very similar to my 5 minute, however, the tick chart combines a volume element on the single chart.
I like the idea of a single chart. Kind of the minimalist approach ala Al Brooks.
It also includes momentum because of the contracts traded and their time frame.
The candles seem to be a more managable size as well...around 12 to 25 ticks...on the 5 minute, get some 100 tick candles...a little intimidating to trade into one of those. Or against it.
When the candles paint up and down with overlap, it looks liike an area of exhaustion or capitulation. Again, on the the single chart. I beleive it helps to recognise choppiness in a tight range.
Again, I have only started developing this over the last few weeks. I havnt tested it extensively or traded it live. But it looks promising.
I decided to do a test on your premise of scaling out being inferior from a math standpoint. Below is a example of a 3 target scale out of 3 contracts and single target of 3 contracts with a target of 30 ticks for both.
Assumptions for the test:
Every trade had a favorable MFE of 1 tick to 16 ticks
Stop was moved up by 5 ticks for every 5 ticks advanced.
Did not take into account volatility taking out stops.
Does not include commissions
Targets are: 5, 10, 15 for the multi target
Target is 10 for the single target
In order for the trade to be valid it had to hit the target + 1 tick.
An assumption is made once the trade hit the MFE it then reversed and hit the stop.
There are 3 trades listed on the grid; 6 tick gain, 11 tick gain and a 16 tick gain. The only trade which is to the traders advantage is when the price hits the first target and reverses.
6 tick gain
This is the only trade which benefits the trader by saving 10 ticks on the loss. ( -5 vs -15)
The 11 tick move is interesting. On the single target the trader makes the full 30 ticks, however on the multiple target the trader makes half of goal, 15 ticks.
On the 16 tick move both setups make the 30 tick goal however the multi target trade had to gain an additional five ticks to achieve the goal.
Finally, I created a 35 random samples of 300 trades and applied the rules of the single target and multi target to see which setup made more money. In 100% of the cases the the single target had a higher account value than the multiple targets setup. See second grid.
Conclusion: a multiple target system with a set target will be less profitable than a single target with a set target. However, if the trader were to let the final contract profit run its conceivable it could beat out a single target system. I believe this is what your conclusion was as well.
Disclaimer: This is not a scientific test nor does it accurately reflect market conditions and how traders might handle trading conditions or the trade. You should make your own conclusions from the data provided and do your own due diligence.
