Example of the trader who is using a losing system: Four ES Contracts 90% win ratio all in/all out versus Four ES Contracts 90% win ratio scaling out at half target. 1 pt target 10 pt initial stop loss 1st example with 20 trades 18 winners for 1 X (4 contracts) = 72 pts ($3600) 2 losers for 10 X (4 contracts) = -80 pts (-$4000) Net loss $-400 2nd example with 20 trades 18 winners for 1 X(2 Contracts)=36 pts ($1800) 18 winners for .5 X(2 Contracts)=18 pts ($900) 2 Losers for 10 X(4 Contracts) =-80 pts (-$4000) Net loss $-1300 As you can see, even the trader who employs a losing system will lose less by not scaling out. --Ishmael
either one will work, depending on how you manage your trades between entry and stoploss, and between entry and your targets. both can make money, either 2 targets or 1 it depends on what you are comfortable with and how you manage the trade.
That's not true because my target could be hit and move more in my favor and reverse and I would then move my stop to my original target. I find it hard to understand how you can criticize my method when you know nothing about it
are you two saying one method or the other will not work? I have used both and they both work, depending on your entries and how you manage the trade to profit or loss.
Both can work. One is sub-par to the other though and is more to calm emotions. There is no reason to be trading with a strike against you right from the start. Absolutely no reason to do that. It's self defeating. He will see in time.
yes... i first started using the 2 target method due to emotions... each trader has to decide to use what they are comfortable with. But I still made money with the 2 target method and managed the stops/stoploss to minimize losses and that also helped with emotions. It takes quite a while to become comfortable with a process and learn what to manage to minimize losses and maximize profits. bottom line is what you are comfortable with and are making money with. I currently use all in and all out and for the way that I trade each method, the all in/out method makes more money for me. However along with more profits, I have more and larger losses. Took quite a while to become comfortable with larger losses, even when net profits were higher.
Here are the scenarios... 1. Outright losing trade... 2 contracts hit the stop loss 2. Scratch trade... first target hit, market reverses, 2nd contract stopped out 3. Small profit... first target hit, moves stop on 2nd to breakeven... 4. Small profit on one contract, large profit on one contract...first target hit, half position exited, second contract allowed to run. If in the last scenario he lets the second contract profit run to a point where he makes more money on that position than he would lose if his initial stop loss is hit with both contracts, then he has clearly created an edge if he can do this consistently. For example... Let's say he buys Gold at 1,300 with an initial stop loss at 1,295. His target for the first contract should be 1,305 (plus a little more to account for slippage and commissions). 1. Scenario 1 ... he loses 5 points on each position, or 10 points 2. Scenario 2 ... he exits 1 at 1305, stopped out on other at 1,295. scratch. 3. Scenario 3... he exits 1 at 1305, stopped out on other at 1300..small profit of 5 points 4. Scenario 4... he exits 1 at 1305, and exits 2nd at 1315...total profit of 20 points. If he is able to achieve scenario 4 at least half as many occurrences that Scenario 1 occurs then he has created an edge, because scenarios 2 and 3 will provide small profits. So, if his strategy results in his initial stop loss getting hit 50% of the time, then if he can achieve Scenario 4 at least 25% of the time, he has created an edge for himself. Trading 101... find your edge.
In scenario 2 and 3 he would be better off taking full position off at 1305. You never allow for that. Also in scenario 4 you don't allow for the position to run totally to 1315. You must let winners run to full target or to be taken out by a trailing stop in full. Taking partial profits strokes the ego and makes a person feel they are doing well. It is sub par performance though. He (and you) will see this in time or will be trading subpar no matter how good or bad the system entries and exits are.---Toucan has it right---Thank you for your time