Razor, From my Dummy trades over the past 9 months I'd say expecting 30% of your trades to be 3:1 winners is overly optimistic. It looks like you're not taking into account the many cases where neither your stop or target is hit.
Hi Chud, You could indeed be correct. Only time will tell Cheers PS: Chud, yes there will be some cases by the end of day where they stop or target has not hit and you have to close the trade. For simplicity lets assume that over time these trades will breakeven, now the reality is maybe more will close up or more will close down but that is hard to guess at. So take the results above, and say 40 trades, 30 hit stop or target, 10 hit breakeven on mrkt close. Apply a 30% win rate to the 30 completed trades and see where you are at. Heck, try it for 2/1 r/r, 1.5/1 r/r....play with the numbers and see what you can come up with
You're right, I got a little confused. But not in the sense you're pointing out. I was mistakenly assuming a 6% profit target on the position, while you actually were talking about 6% on the whole equity. If you set your stop at 1R = 2% of equity, then you expect the trade to move in your favor 3R, that's 6% on the whole equity. This is even more of what I understood at first sight, and definitively unrealistic. By the way, my nick is inCom, not Incon GS
Apologies inCom, didn't mean to mess up your name. The numbers were not meant to be taken as this is exactly what you can do. It was mainly showing that if you keep your discipline then a solid system can perform well for you. If you feel that you can only achieve 40% win rate with 2/1 r/r or a 45% win rate with 1.5/1 r/r then you should crunch the numbers on this to see if you 'system' will give you the percentage gains you are after. Cheers PS: Chud, yes there will be some cases by the end of day where they stop or target has not hit and you have to close the trade. For simplicity lets assume that over time these trades will breakeven, now the reality is maybe more will close up or more will close down but that is hard to guess at. So take the results above, and say 40 trades, 30 hit stop or target, 10 hit breakeven on mrkt close. Apply a 30% win rate to the 30 completed trades and see where you are at. Heck, try it for 2/1 r/r, 1.5/1 r/r....play with the numbers and see what you can come up with
Hi again, This brings up an interesting question, has anyone ever looked at all their Dummy plays going back (people with 6 months experience or more) and seen how much the actual win rate was if they waited for 1.5/1, 2/1, 2.5/1, 3/1, etc This information would be very very useful. What if over time you could expect 30% to hit 3/1. I have seen quite a few that have given over 3/1 on posts in here, on the lessons and on my personal observation (although limited). Some hit over 5/1 of course those are very rare. Maybe the best system would be focusing on a 40% win rate and 2/1. If someone is willing to send me every trade they have 'taken only' over the last 6 months that falls under Dummy, I would be happy to back test and see what the results would have been. I would need entry date and symbol only. Cheers
You mean something like the attached spreadsheet? I'm not really sure you can code dummies (unless you tweak it into something codeable) as the whole thing is quite discretionary. The entry isn't but what stock you pick is. As well as how you manage the trade, which is probably the most important thing. edit: just so its clear, the spreadsheet is first looking at whether its a scratch or not (and assigning a %). Then from the remaining, how many are wins (taget of +R hit) or stop hit (-R). Its a good way to gauge how much leeway you have to be incorrect and still make money (positive expectancy).
Howdy, Ya, I didn't mean code it. I meant that I would like to see someones actual Dummy trades for the last six months (yes you wil l miss many trades, both winners and losers that setup that you didn't want to or could not take as you were in other trades). The I can go back and look at what you 'could' have done if you would have held for set r/r points (like 2/1, 3/1 etc). Hindsight is always 20/20; however, if 6 months of one persons selected trades shows that holding for 3/1 r/r would give you a 30% win rate then it is a good place to build confidence to hold your trade for better r/r than just a 1/1 scalp etc. Just some thoughts Cheers
No, I threw it together after reading your post. It assumes a +3R target, a 25% scratch rate, 22.5% win rate and a 52.5% stop loss hit. With those assumptions it shows that you would have a + expectancy of 0.15 or in other words for each $ invested you would get $1.15 (on avg over many repetitions). I think its good to see just how 'wrong' you can be and still make money with a good tight entry. Obviously if you enter into trends, that will improve your results a lot by giving you high +R. I tend to go along with what the market is telling me and giving me, rather than demand a +3R. Sometimes you should be happy with a +1R and sometimes it will give you a +7R (albeit rare!). Anyway, lets get back to talking about specific dummy trades.
Hey Guys, Any of you trade these setups with eod data only? Looks like it would work for swing trading stocks as well. Best regards, Trapper