Volpri actually has a very good point in making his strategy sucessful: Often it is not that hard to identify the direction within a certain time frame, however the precise entry point is hard and tricky especially in volatile market, and if you set a narrow SL, you would often end up a loss before the price running in your direction. So Volpri's model would work after you identify a potential solid price channel, then you just enter the first trade in the channel's directions (L or S), and then the second, the third to get get an average advantage entry prices, then when price moves in your direction, you reduce and reduce and finally you reach a profitable outcome.
Hello Volpri, I agree Grab them profits. I have been trying this lately. Question: 1. Does it make sense to grab them profits even if I know the profit I am taking is less than my risk? I have been trying to hold for 1RR, but scalping just seems too tempting lately. For example, https://www.tradingview.com/x/4Htfx5mw/ On this chart my entries are at blue dot, stops at orange dot, and took profit at purple dot. I took profit at purple dot because, well, it made sense to to take profit there, even though, I know I am supposed to be holding for at least 1RR and banking on a high win rate overall. My risk is larger than profit. All 3 trades were winners. Thoughts please? I appreciate your response in advance.
If your first trade was entered near the close of the bar Then your actual risk was very little as it was simply 1 tick below the low Of the next bar. Therefore your R:R was somewhere near 4:1 (reward to risk) as your actual risk was tiny. good exit mathematically. Your second entry was A long entry on a PB H1 assuming you got in near the close of the bar. Your actual risk is the low of next bar plus 1 tick and the risk was more than your profit, but considering you were long at the top of the range and a triple top it was wise to exit there even if R:R was not great. Your 3rd trade appears to be short at a now established TR. However I would have been going long not short in the bottom 1/3 Or 1/4 of a trading range. Being you were shorting the southern edges of a TR you did well to grab your profits. It was almost a RR 1:1 trade as your actual risk was 1 tick beyond the high of the next bar. Since you are short and not long at the bottom of a TR I’d just grab any profit and simply not worry about R:R. You sometimes just gotta grab what the market gives you on paper or you will be giving it right back. After your exit there were a series of 5 bull bars then a pb followed by a series of 4 bull bars that probably would have hit your stop and given you a loss. So, what is better a profit with a not too good R:R or a larger loss? You will find often times when scalping RR is not so good but high win rate makes up for it. After that second series of bull bars after your third trade exit I would be shorting in the top 1/3 Around where your SL was on that third trade an capturing the subsequent move to the bottom of the TR.
Thank you 100 times volpri within 1 minute, Your review helps It seems as if I am not understanding actual risk correctly. I need to do studying on actual risk because I have been logging my risk in my spreadsheet as my protective risk (protective stop loss minus entry) and then using that risk when calculating my R:R. I think Al talks about actual risk as well, I need to watch on that subject. I agree on everything you wrote regarding grabbing those profits and logical profit areas regardless of RR I want. I can always prepare for another trade afterwards Just to make sure I understand correctly. For the trade below (and this is probably not the best example entering at bottom of the range. Entry at blue dot Initial risk at orange dot. Profit target at purple dot. actual risk at red dot. Initial risk starts at $320 Profit is $150 Actual risk is $80 So I would log RR of 1.875 (150/80) in my spreadsheet journal? Not 150/320 RR=0.46 ? https://www.tradingview.com/x/CA7ncTdg/
Yes nearly a 2:1 (Reward to risk) providing on that red bear bar (your entry bar) that you entered near the close and price subsequently never went against you beyond that red dot, after the entry. Now if you entered before the close of that bear entry bar and price went back up to near the top of that red entry bar then traded Down to the close where it did then obviousley your actual risk was more than the red dot area. The point is how far did price travel against AFTER entry on ANY bar (including your entry bar), plus 1 tick until your PT exit. That Distance, in movement or money, IS your ACTUAL risk and the ONLY risk I consider when figuring R:R AFTER the trade is completed. The initial risk is not necessarily a true risk. Price never got there so how can it be? Mathematically your trade was nearly a 2:1 reward to risk. You really and truly only risked $80 to make $150. You never actually risked $320 to make $80 as price never went that far against you.
volpri, For this example, I assuming your initial risk at orange dot and actual risk at red dot after exiting bottom of the TR? For this case, I am short at the light blue dot, exiting at purple dot. https://www.tradingview.com/x/vuEqgvvL/
Thank you very much volpri, See comments in red above. Well, I have been calculating and entering my RR incorrectly, because I been using initial risk and set my reward equal to initial risk, and wait most of the time. Thanks for the clarification.
Thanks for clarification. I never though of it that way, and it makes sense. So if after enter and price goes instantly (no pull back or price going Against me) to target, then my actual risk for that trade is $0?
That is how I look at it. INTIAL risk is simply a PROJECTION, not reality. That is, I think this trade might go against me so I put my stop here (In x place) just in case it does. But instead as soon as I enter ..bam... it goes my way... I suffered no adverse movement so in REALITY I had no risk! That is what IS REAL and the ONLY WAY to accurately measure the real reward to risk, when tabulating it after the entry and exit are complete..IMO. A word of warning though. Anytime a trade goes my way quickly with little or no ACTUAL risk I Grab profits EVEN MORE quickly. Why? I caught the move as it was already moving so it immediately swept me along. That also means there is generally LESS distance left in the move. To exit quickly, grabbing a quick profit is counter intuitive as the tendency is to attempt to hold for a bigger gain ( “as in this baby is going to the moon”) but suddenly price reverses or has a PB that wipes out all paper profits and one is left with eyes spinning in circles wondering “what just happened?” Going my way with little or no risk also means this trade is a good R:R so I could jump out about anywhere and mathematically preserve the treasured concept guru’s spout out of at least having a 2:1 R:R. ROFLMAO I can take a quick 3 point scalp and have sometimes a good R:R as the trade immediately went 3 points my way after 2 ticks actual risk. So in the ES I risked $25 to make $150 per contract and I am out while the guru is waiting for his beloved 4:1 R:R based on his initial risk and soon finds himself eating crow as his SL gets hit because he failed to realize the PROBABILITY of price actually reaching his profit target before his SL. I’m on my way fishing while he is licking his wounds. Traders fail to assign probability to their trade after considering the larger and immediate context PA has drawn on a chart. A setup can be identical to another setup but the dynamics change according to the PA environment in which the same exact setup is found. PROBABILITY needs to be a part of the equation and not just oh..I backtested and this same setup gave me 60 wins out of 100. Everyday every chart changes and there are different dynamics at place. Remember every move up or down is gonna have a pullback. It can be shallow or it can be deep. It is not a matter of IF but a matter of WHEN. So if you suffer no adverse movement..no risk...then chances are some or much of the move has taken place already and therefore a PB is “closer”. There are exceptions like in very strong BO’s say of a range or trend line and I just happened to catch it with my entry at the moment the BO started. I will follow that further before grabbing profit.