Tell me about stop and reverse strategies

Discussion in 'Strategy Development' started by IronFist, Feb 18, 2018.

  1. lots of unrealistic hopes on this thread!
    #31     Feb 20, 2018
  2. Xela


    There, if you don't mind my saying so, I think you've picked a slightly awkward example, because between two methods each of which has exactly the same expectancy (as you've exemplified) clearly it would be far better to use the one with the 80% win-rate rather than the 40% win-rate, if only because the risk-management parameters will be much easier to operate, and the losing runs much shorter, etc.

    These are only abstract, theoretical examples, of course ... but the reality that between methods with very similar expectations the higher win-rate is better is, I strongly suspect, part of what attracts people to higher win-rates, overall. Sometimes very unwisely - partly because it becomes a "principle they believe in", almost subconsciously, and often without examining the details.

    Probability and statistics are counterintuitive subjects, to most people.

    A whole stack of textbooks from those for complete beginners (e.g. Van Tharp's Trade Your Way to Financial Freedom and Tushar S. Chande's Beyond Technical Analysis) to far more complicated, advanced, mathematically sophisticated books, explain - many of them in some detail and at some length, with specific examples - why the realities of pragmatic trading predicate that for most people, most of the time, it's actually going to be far easier to become steadily profitable with lower win-rate methods than it is by striving to develop the very high win-rate methods that so commonly precede "accidents".

    That's perfectly true, of course (albeit not actually illustrated by the specific example you've provided above).
    #32     Feb 20, 2018
    lovethetrade and lcranston like this.
  3. bpr


    What you say is disadvantage may be a non issue to somebody. One of the major problems in we humans is we tend to generalize too much. I have been guilty of the same in the past.

    In the second example there is room for improvement in win percentage from 40% to say 50% creating a massive increase in expectancy
    where as in the 1st method there is no room for improvement in win percentage it is already pushing its limit I might argue the second method is better.
    #33     Feb 20, 2018
    Xela likes this.
  4. Buy1Sell2


    Most folks don't understand trading.
    #34     Feb 20, 2018
    murray t turtle and volpri like this.
  5. Xela


    Yes - both good points: I agree.

    To be honest, I don't think it's a great discussion for forums. One is inevitably "preaching only to the converted" which is, ultimately, a waste of anyone's time. The people whose opinions are actually informed by a fixed underlying belief that "as high a win-rate as possible is the most important principle of systematic trading" typically don't listen; it seems to me that the primary motivation for their apparent desire to engage at all in the discussion is simply to "Be Right". I strongly suspect that for the most part it's themselves they're really trying to convince, though they'll never say so (probably including "to themselves"!). So I've said enough, here (some would doubtless say "too much"). [​IMG]
    Last edited: Feb 20, 2018
    #35     Feb 20, 2018
    treeman, Handle123 and lcranston like this.
  6. volpri



    I am not sure I have a program that figures all those stats. All i generally care about is win rate (high) and average win at least twice average loss. I know by the end of the day I’ll be fine. Providing my average win isn’t 1 tick ROFLMAO

    Here are 7 one contract ES trades i took this morning. Actually, on one trade I averaged into a losing position then exited both with a profit. Could you figure those stats for me? If 1.4 is pretty good then this should be better. All 7 were winners. So how does this work out? Just interested in knowing...


    TRADES ES FEB 20 2018.PNG
    Last edited: Feb 20, 2018
    #36     Feb 20, 2018
  7. volpri


    ROFLMAO that's a great post! HOWEVER, why wouldn't you want a high win rate? Is your mind made up against a high win rate?
    #37     Feb 20, 2018
  8. Handle123


    Much is like comparing apples and oranges, of course am trying for perfection, but perfection of the system and as close to zero losses as I can-but it is not winning percentages-I can't control "how far", getting losing percentages and drawdowns down as far as possible through tight or even loose increments of charting whether points, percentages or patterns=3P's as part of my risk management, yes it is that boring area few get our claps and joys, but what many would say is a small win of one tick or considered a breakeven, if you seldom lose, think of it, if you can take some of the losses away and turn them into breakeven or +1 ticks cause you spend more time on this side of the kitchen, you don't need to concentrate on winning.

    The old cliché's we now look/hear and toss off the table, taken me over 30 years to understand in different ways "Buy Low/Sell High" so short a phrase but you ever try to Buy as low as the pattern or sell as high as the pattern of a Major turn, fricken hard! "If you planning to panic, panic now"- never going to get the last dime, people who are hogs get slaughtered. Like Bitcoin, who reversed at the highs? The PSAR, I have spent years on/off of making this reasonable, never thought of using it in Bitcoin, might be perfect place.

    And the best "You never go broke taking a profit", want to bet? And you never get rich by taking profits way too early. Sit on your hands and study charting.

    Yes, my very long term commodity model is SAR, but yearly win rate generally is 5-15% on futures side, take a great deal of tries to find extremes and always hedged-redeeming factor. I found very very few commercials ever go out of business, granted they have the grain or cattle, I have options or other ways to push off risk.

    Reverses in day trading is by luck but am trying to do this more, say there is down sloping trend line and SMAs are flattening, getting in long has a signal but cause trendline is short of targets, automation disallows, so am going to do more back testing to see how often price gets to trendline even though less target, and reverse.

    I only know two traders who do SAR well in 40 years, if there are others, I applaud you.

    Eight years ago I abandoned win rates for loss rates and I will never turn back, my trading has improved cause I can do size.

    Those who did 7 of 7, I think that is fantastic, do you have losing days?
    #38     Feb 20, 2018
    birdman likes this.
  9. volpri



    If you are referring to me on the 7 of the 7 then occasionally I do have a losing day. More often I will have a day with some losing trades but still a high win rate and end the day profitable. High for me, is at least 70% up to 90%. 60% to 70% I consider a fair percentage for the day. 50% to 60% is low. Below 50% best to get my $as in the MH and go camping or go fishing. Or go to dairy queen and buy an ice cream cone and forget trading for the day.

    I trade size too. For me big size is 10 lots. I prefer trading 1 to 5 lots over and over again and again during the day. Maybe one day I'll jump to 20 lots. I am not a gambler nor a high roller.
    Last edited: Feb 20, 2018
    #39     Feb 20, 2018
    Handle123 likes this.
  10. volpri


    No more trading for me today unless i get time in last hour. Gotta go to town. Garden tiller not working. I will see if the local repair place will clean the carb.

    However, today seems to be jacking up to be a SPB afternoon. For me, that means long entries on pb’s ...also averaging in to losers on pb’s then exiting on swing highs. Over and over again.

    Naturally that could change and if it does then the trading tactic changes but that is what it looks like at this moment...grinding up. I am referring to the ES. Odds favor a grind up as opposed to a TR but all that can change.
    Last edited: Feb 20, 2018
    #40     Feb 20, 2018