Argument: that risk is more adequately controlled by working test against back end of bars, rather than working violation of front end of bars on entry. Specifics: On the last swing of the day, here on MNQ, there is a 1-2-3 pattern off the top test against previous swing. Highs of the #3 point @ 13040, could enter say 13039 on sell-limit order @ 13044.75 risk = 5.75 points. OR could enter on sell stop market, @ 13025.50, protective buy stop @ 13044.75. Risk then becomes approximately 19.5 points depending on fill LOL. Quite a difference there. Say the target is initially @ 12952, with R = 15.13! 87 points / 5.75 points on the stop. This on a test of bar back ends. OK now how bout the other way? R = 4.46 and that is substantially lowered R value. Still a great trade, with R=4, no flies on that, but 3.39 X more risk associated with waiting on confirmation of the 1-2-3 top pattern to enter. The question: is the extra risk taken to wait for pattern confirmation validated and resultant R-value drop worth waiting to enter the violation of bar lows rather than trading the test of the back end of bar highs clustered up there at 13040? More and more lately I have been working the back ends of bars in an effort to reduce that R-value per trade on average, there are more losses that way, but also substantially better profitability also.
Same day, 500t chart to more clearly show the congestion area in discussion. Off the last swing high of the day.
Your charts can not be seen...you linking to a chart at another site, embedded the chart from another site or you "uploading" the chart from your hard-drive ? wrbtrader
I have to load the charts from my hard drive to my smugmug so I have a url to post from. Does not seem to let me just post a jpg or gif from my hard drive unfortunately.
Uploaded as a file link from my hard drive, may be a little better? I have used white background for my charts (Sierra) but the black background seems to be a little easier on my eyes for the long days I spend looking at charts. Hopefully the last 500t chart posted will be a little more legible...
Too late in the day for me to enter, but if the big red candle did already scream down, down, down the two following candles with long selling wicks sure did:-
OK that's cool. The intent was to discuss probability of having to take the loss based on where the entry is taken. And the effect of entry positioning relative to R-value; so these are valid considerations at least for me when structuring risk placement vs position sizing because those voodoo probabilities LOL.