Contradiction. You state: Setting arbitrary targets goes against this maxim and puts you back on the sidelines looking for an entry rather than making money. OK, you're interested in making money. Followed by: 1. Exiting too soon ("Phew! I got away with it!") and seeing price subsequently run away 2. Sitting and watching paper profits erode to zero (or worse down to your "protective" stop) Are you interested in making money -OR- making maximum profits? The distinction is subtle. The implications very different. Consistently, one is very attainable, one is not. Exiting too soon, so what. Oops, I forgot, you would have been one of the handful of trades that actually gets filled at the high or low tick. Re-enter if you still like it. Next trade. Watching profits erode to zero or beyond. You mean holding a loser? Your interest is neither making money nor making maximum profit. Your interest is in being right. Next trade. In the movie A Few Good Men there is a pertinent line: I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom I provide, then questions the manner in which I provide it. Trade on.
A great point indeed. One needs to spend more time in reflection on that topic. I think once I realized the above, trading became easier and more consistent. --RS
There is no contradiction in my post. Making an arbitrary amount of money based on a multiple of the first R in the conventional R/R calculation is straying into areas for which we have no responsibility. Pre-determining and capping the Reward is done by people who are not used to profits. I was asking a question - what makes people feel worse? Most would answer 2, naturally. I introduce 3 as an alternative that many do not even consider. Either you exit at the optimum price or you don't - too soon or too late are the alternatives. Too soon and you miss potential profits which go to making you money. Too late and you let profits slip away because you haven't banked them in time. Do you disagree with this? Isn't it worth finding out how you can know when the optimal exit price has been reached? It is very unlikely to coincide with your target price - why would it? Do you disagree with the maxim "Let your profits run..."? Banking target profits puts you on the road to mediocrity when the markets offer so much more. (I don't see the pertinence of your movie quotation in this context at all.)
I take it you have PERFECTED this then? If not, then your argument against targets is BASELESS. In my simple world, the OPTIMUM point is that point which allows you to advance your trading maxims. If the optimum entry was .50 and the optimum exit was 1.00 and I got in at .55 and out at .95, I suppose that makes me a loser because I missed .10 of optimum. Now I entreat you.... If this is something you have PERFECTED... Please in DEEP DETAIL, elaborate so the rest of us below average traders can learn from your great experience. And yes this was meant to be 1 - rhetorical and 2 - VERY sarcastic. Targets are fine....... Oftimes, targets help you focus...... Sorta like Target practice. If you dont have something to shoot for, your just wasting bullets..... Even "letting your profits run," in and of itself is a TARGET. Perhaps we should ask good old webster what a TARGET is before we embark upon a journey of answering a question with an EASILY definable word. Good day chaps. LOL.
Targets are the trader's interpretation of the limits of the market in which they are trading, minus what they perceive (basically, what their strategy has told them) as their margin for error (in determining these limits). Limits in a market are basically market turns (they show up in a market as reversals, or whatever). A trader will interpret signals for market turns (based on whatever strategy a trader is using), factor in the margin for error for that trading strategy, and then make a decision on a target. Targets are useful because they complete a set of rules for trading (actually, no set of trading rules is complete without targets, or some way to deal with the limits of the market you trade). These rules are in place to take the emotional pressure out of trading. I don't think targets should be random. If a trader thinks targets are arbitrary, they prolly don't understand some of the rules of the system they are trading, which could lead to dangerous things (like, for instance, not trusting those rules and then, disregarding them).
Let your winners run ... an interesting statement but not necessarily the only answer to trading. This is traditionally embraced by those who want to be trend followers. Often its a newbie attitude. Often its a response from those who've had problems and see it as a solution to small winners and big losers. But its only one approach. Advantages of targets: - markets do have high probability extensions and targets can consistently hit a large percentage of this; trailing stops often give a lot back in return for the possibility of a bigger move. - even arbitrary rr based targets can provide the advantages of psychological rewards (consistency) and lower standard deviations (read stridsmann on the advantages of lowering the standard deviations of your trading results.) I'm in the game to make money consistently. If I can lower my standard deviation and increase my win percentage I can bet bigger on each transaction. And make more money than someone who gets the odd huge home run but a lot more losers. And be happier than those who frequently have to sit through draw downs. Go to the P&L thread and look at how the big traders here earn their money ... I bet you won't find many trailing stops in search of long trends. If you're going to suggest that any of Jack's crap is better than targets then please point out who the big JH winners in the P&L thread are first. Otherwise its just crap.
Yes, must agree that was almost entirely understandable and to the point. Regards. One thing: I didn't say it was 'obvious' that a target for a longs' exit was a signal to go short, but rather that a signal to go short would be a good exit for a long position. In general this the same when we are always in the market, but we have the problem of whipsawing, so in practice a hysterese gap between long exit and short open is introduced. Being short or long at all times is imo not feasible. But I agree it is a good groundwork for a philosophy. Ursa..
None. I don't care. There is plenty of opportunity. Who in your followers is posting impressive results in the P&L thread?
what you speak of is the way it is for you. For SCT it is not that way. Think anti whipsaw as being built in to SCT. Listen to the min max camtasia and you will see the basis. Also listen to the four games camtasia on the DOM Then read through the If1 If2 stuff. Then check out the two pair part of the fine vernier on the tick analysis. Look over the five stages of gating in the 70 degrees of freedom on the automated coding references way back in the misc. invest. technical. This year we will move into intermediate and expert trading on this stuff. for sure at this point you need to get a display set up to see what the market is doing. Look at some of the snagits of the screens and the photos of the multiscreen set up that is being used. I would say that you only have about 25% of what you need to see to eliminate whipsaw. You may, at this popint, not even be able to differentiate betweeen a retrace and a reversal. Look at the problems Covel points out Dunn is having as an example. Dunn has problems and Covel does a misanalysis on them. If you cannot see these errors on both person's parts then you and they are in the same boat at present. As the year unfolds we are going to get way past the beginner stuff and move on to some real high velocity on the mark all of the time trading.