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walterw

Walters Aproach

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I completely agree, as will everyone else here, in your R/R. I, however, have a different question :)

 

You mentioned in a post in the Forex Room about using investor r/t and the VB indicator. This is how I trade as well, working mainly off of market profile levels and pivot points. Would you mind sharing how you're using IRT and the VB indicator? I'd love to see some charts too!!

 

THanks Walter,

 

Chris

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Well Chris I must admit that I am experimenting with delta... I am very new to it and must say that from an intrinsic concept it does make sense... I do trade delta divergence setups, you can see them at charthub... with names er_110t also er_22T and some other experiments (green background) I was very inspired by the charts of "5pillars" (elitetrader) also lots of charts from him on charthub as es_317_VB he trades es ... My hardtime on this is that I am more a "Trend Trader" and delta divergence trades are countertrade... so it makes it hard to detect when market shifts from trending to cycling and viceversa... actually Delta Divergence Trades (DDT) realy work fine on cycling markets.... but will make you get run over on trending situations.... I am working in a method to "clearly" detect the change from trending to cycling... maybe we could aboard that topic on this thread.... I would like to interact on the issue, I believe that if you have a clear method to detect those shifts on the market stage would be very great... I did look your post here Chris and I find them very nice stuff... mp levels are so predictible.. combined with delta... you got a powerfull combination... hope we can keep interacting.... cheers Walter.

er_22T_5.thumb.png.4b8b355b89fc1937fe9029d749354a16.png

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Thanks Walter! 22T chart, huh? That's a fast moving chart, especially on ER2. :) Chris, 5P, was the one who got me hooked on it too! hehe, funny. He was a wealth of information and gave me some great tools to step up my game.

 

Let's definitely talk more about this...I'm about to leave to catch a flight home, though...so can't write more. I'll catch up maybe tomorrow with this.

 

Till then!

 

Chris

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Well, I want to make some comentaries on this thread topic I did start some days ago on RRR (Risk Reward Ratio). On my personal experience, and I think most traders have the same tendency, we get to much enthusiastic about a technical aproach and become some how very "loyal" to it... the true fact after 11 years on trading I came to the sad conclusion that just about any trading aproach has 50/50 technical performance... there is no such 70 or 80 % performance as some "gurus" tell they have... when you trade with the real thing you come up with 50% success and 50% non-success trades... if you are having less than 50% success, then you are on "School mode" yet... you need the 50/50 to consider yourself a good trader... now, dont be mean on yourself trying to get that fantasy 70 or 80 % success... you will loose precious time... the key is RRR applied to the 50/50 performance, thats my story, and I can say now that I am happy with my 50/50 performace...

So... what REALLY is this RRR thing ?... well in my experience its not just a ratio, its more than that... its a STRATEGY that has to be embeded on your technical aproach.... where in simple words you have tight stops vs long runs.... so we are talking about "closing positions" more than opening.... HA¡¡¡ dont you spend hours thinking and studing how to "open positions" ? well thats fine but after you got a plan you say in lets say 10 minutes : I will close my position such and such... or I will see as it happens... well there you go... thats where any "analist" work goes to the toilet... well, this trader NEEDS a change of mind, when you study so many hours where you are going to "open" your position you MUST include in this study "simultaneosly" where are you going to place your stop and where is your aproximate target... thats more than chart reading or a simple RRR math... it is formulating a Strategy on your trade that will keep you alive during this very dangerous journey of being a trader.... where your fellow traders are big dinosaurs with thousands time more money than you, with greater technology and the worst.... they DO have a technical aproach with real RRR on action.... so RRR should be the center of your ecuation... doesnt care what technique you use, if its trendwise or countertrend, if its based or not on indicators, if it uses old fashion stochastics or new fantastic deltas.... doesnt matter, ALL of them eventually have a 50/50 performance... RRR inside your technique will make the diference to make you profitable...

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tin, it's proven at least from testing trading systems that if you have more winning trades than losing trades, the avg win vs avg loss is smaller. If you have a larger avg win than the avg loss, the winning number of trades are higher. This is to assume your strategy is a winning strategy. It's rare, but not impossible, to find a strategy that has higher percentage of wins over losses AND a greater avg win over avg loss. If you have it, you got the holy grail!

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Hi pismo...I'd love to know more about why you think the win % would drop if you expect to win more from your winning trades than you expect to lose on the losing trades?

 

 

 

I agree with that comment as well. It just make sense to me. If I'm going for 4 pts on the es, the chances of price traveling 4pts w/o my stop being hit ( where ever that may be, thats an entirely different topic:) ) is a lot less likely to deliver when comparing it to a smaller 2pt profit target.

 

So its a trade off in my view. A bigger profit objective and lower win % or smaller profit objective with a higher win %. You could have the best RR ratio, but if the reward is hardly hit then what you have a just a theoretical RR ratio since your targets aren't generally hit. So what might start of as a 2 or 3 RR ratio, might just turn out to be a 1 or below by the time the trade is said and done.

 

Therefore, a trader would need to compare the initial RR ratio with what actually happened. I found that my targets were ambitious. When I put the trade on I was happy since I had a 2 or even 3 RR ratio. But watching price move in my favor and then retracing back so I get 1 or 2 ticks, reality sets in that my actual RR ratio isn't the same as my theoretical or initial RR ratio.

 

So I brought in my targets, my initial RR ratio is lower, but the targets are being hit more often. In turn, my actual RR ratio is congruent with the initial or theoretical RR ratio.

 

I thought about RR ratios from a lot of angles. I hope this helps, and not confuses anyone:cool:

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I think it makes sense to me now. I was thinking pismo was saying that if you expect to win more points on winning trades than lose on losing trades, your win % would drop. It was just a little confusing for my tiny brain, but I'm all straight now.

 

Thanks guys

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This is the bane of the day trader.

 

If you position or swing trade, you do not have to win more than you lose.

 

Suppose you have a system that wins only 4 out of 10 times, or 40%. On those winning trades you win 2000 each. Now on the other 6 times you lose 500 per.:

 

4 wins @ 2000=8000

6 losses@ 500=3000

net amount=+5000

 

You can be wrong more than you are right and still make money. Most of the "market wizards" fall into this camp. Long term position traders who don't have high winning percentages, but know how to keep losses small in comparison to winners. One thing that separates them from the newbies, and those that fail, they are willing to take that 5th signal even after the last four failed. By this time, the newbie is already looking for a new secret indicator or method to beat the market.

 

For the day trader things are inherently more difficult. The percentage of winners needs to be higher than the percentage of losers. This is basically because the wins will tend to be smaller and the amount of trades taken will increase. Which of course really means more opportunity to put capital at risk. Successful day traders have to have a better than 50% win ratio. If you position trade, yes you could basically throw darts at a board. As long as you had the ability to cut the losses and let the profits ride (sometimes a cliché is a cliché because it's true). As a day trader that number has to be around 65-70% winners. For scalpers it is even higher. Which is why so few people make it as scalpers.

 

While I would agree that most technical analysis does not work, I find it hard to believe that nobody can do better than 50/50. That is no better than flipping a coin. If you are a long term position trader that would be okay. Short term traders need more. That short term traders do exist and can achieve success would imply that it is possible to reach a higher percentage. 80-90%, well that's for the system vendors and holy grail hucksters..........

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Pivotprofiler : My personal experience actually its a 50/50 performance on my technical aproach.... every 10 trades I normally get stopped 5 off them and the other 5 are succesfull, what keeps me alive and growing its that I am having quite tight stops "in the argument" and long lived trails that give me a very nice positive difference... I could still even have more stops and still be positive... the key is taking trades that will risk 1/4 off your normal positive trail average... if you dont have that RRR in view... I prefer not to take the trade... To establish this "potencials" I use S&R type studies... The truth is that very few good trades make me succesfull... the rest are just part off the promediating game... the most hard part for newbies its the psicological toll this takes... cheers Walter.

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