If I trade ES and use 1 point stop loss, what are the pros and cons?

Discussion in 'Index Futures' started by BPtrader, May 1, 2009.

  1. If you were to simply trade every tick in a trading session either long or short without regard to any type of entry strategy. Taking into account a 1 tick spread between bid and ask,
    Statistically you have a:

    40% chance to hit a 1 point profit target before a 1 point stop.
    60% chance to hit a 1 point profit target before a 2 point stop.
    70% chance to hit a 1 point profit target before a 3 point stop.

    45% chance to hit a 2 point profit target before a 2 point stop.
    30% chance to hit a 2 point profit target before a 1 point stop.

    Just keep the odds in your favor.
     
    #61     Jun 17, 2009
  2. If your assumption is correct, I will get the following results after 10 trades:

    40% chance to hit a 1 point profit target before a 1 point stop=-2
    60% chance to hit a 1 point profit target before a 2 point stop=-2
    70% chance to hit a 1 point profit target before a 3 point stop=-2

    45% chance to hit a 2 point profit target before a 2 point stop=-2
    30% chance to hit a 2 point profit target before a 1 point stop=-1

    Donald Trump must be operating his casinos with your formula.
     
    #62     Jun 17, 2009
  3. How do you arrive at those numbers ?
     
    #63     Jun 17, 2009
  4. Not a scientific study or intended to be quoted as fact... Just ran a few days of ES tick data through Excel... about 6,844 Tick changes.

    For each Bid Tick: Used an array formula to scan down the table to see if Ask hits + 1 point before - 1 point... repeat for Each Ask Tick and various different scenarios. Summed the results for the stats.

    Obviously its a small sample of a few days price action. The point I was really trying to make to the op was sure its possible just keep the odds in your favor.

    An interesting observation was that a 5 Tick Profit Target / Stop Loss (1.25 points) hit 60% of the time. What a difference one more tick makes... Brought back memories of an old trader friend who would never trade on the zeros.
     
    #64     Jun 17, 2009