Smaller profits yields better results?

[brownsfan019]

Hey guys,
Great responses already, thanks!!!

I will take the ideas into consideration.

In response to particular posts:

	Quote:
	Try entering an ES position with 3 targets: 1.25pts, 2pts, and 4 pts +. Use 1/3 position on each target with a reasonable initial stoploss of, say 2 pts ( 8 ticks). When your first target is met, move the stop loss to breakeven (entry). If the second is met, move your stop loss up to entry + 1.25pts, and trail your stop from there. Assuming that your entry criteria and trading plan is valid, you should be able to at least get your first target, right?

Cooter - I've considered a setup like the suggestion many times over. What I have found, for the way that I trade, getting the 1.25 pts over and over is easier and more likely than catching the +2 or +4. I'm not saying that trades don't go there (eventually) but I'm much more interested in grabbing the 1.25 and then looking for a reason to jump back in if one presents itself.

	Quote:
	Ok Brown ¡¡ welcome to the scalpers school ¡¡ thats what scalping its all about... not getting greedy on the exits but making eventualy some more trades... on the same aproach having a decent RRR... Brown, you want to take a look at "flips" exits", you will notice two types of exits being dwelt with... one is the scalper exit, wich would be this 1-2 scenario you present here... and the other is the runner exit that cooter is mentioning if you can scale your position... thus with this runner you can cover better the next potential stops... Obviously if you can get good at reading momentum... you can discretionally close your entire position on the scalper exit when market is slow and you are taking trades that are not pretended to make super moves... Let me tell you Brown... you can perfectly do a daily target there that will make you ... Certainly this aproach its not suited for all traders... but good sincere considerations here... cheers Walter.

Walter - Yeah, I guess by most definitions this way of trading is more scalping. I always considered scalping going for 1-2 ticks, but anyone could argue that 5 ticks is scalping. It won't be easy at first, but time will tell if I can make it work.

	Quote:
	Brownsfan019, It's seems that you have discovered your style of trading and a comfort level that meets your goals. One suggestion, if I may, is that you incorporate in your trading techniques, "high odds" trades vs. "low odds" trades. High odds trades have a natural tendency to be associated with low risk (good technical stops based on price action) and good reward potential if successful and low odds trades in a simple form can be viewed as the majority of every thing else. A significant number of traders understand Reward-to-Risk or Risk-to-Reward ratios, but may not apply them to their daily trading routine. So the more trades you experience and take, if the % is more low odds trades then for example, you will need to ensure that you let some of your high odds trades reach their target in order to offset the losses from the high number of low odds trades, breakeven and then try to make some additional profits. Hence it's very crucial to understand whether you are taking a lot of "high odds" trades or a lot of "low odds" trades. Once you reduce the number of "low odds" trades you will see significant improvements in "FREE" trades and your profits.

Leroy - in my opinion, I'm not sure that any trades have a real high or low odds scenario when going for 1.25 ES points. What I mean is, just about any trade can realistically hit that profit target. I've often thought of ways to filter trades but in the end, I come back to just take all your setups, esp if just looking for a 5 tick pop in your direction.


Thanks for the feedback guys and I will do my best to post some statistical updates here as well!

[TinGull]

browns, have you changed the timeframe (or...volume frame I guess) you're watching now that you've narrowed down your targets?

[Nick1984]

Good question TinGull, exactly what I was thinking.

Its a very interesting topic, and I'm glad someone put this up in such a coherent manner.

Question: If your jumping in and out that often to chase your 5-8 ticks over a few different trades, doesn't that small number of ticks get eaten up by commissions?

[brownsfan019]

	Quote:	TinGull
	browns, have you changed the timeframe (or...volume frame I guess) you're watching now that you've narrowed down your targets?

I'm still using a 5000 VBC Chart. Entries are little more 'flexible' now, but so far, well worth it.

	Quote:	Nick1984
	Question: If your jumping in and out that often to chase your 5-8 ticks over a few different trades, doesn't that small number of ticks get eaten up by commissions?

Nick - commissions are important when taking 1.25 on the ES. That's for sure. My current negotiated rate is under $3.00 round trip and that will be changing soon after the broker sees the trading over a longer timeframe.

As time progresses however, I will have to look at just getting a CME seat for purposes of lower fees. If anyone has info on this, please start a thread!!

[TinGull]

With your 5000V charts, how are you placing your stops differently than before? I assume you're taking on a little less risk for a little less reward than before?

I only ask because this is something I was grappling with for a while...time frames. I used to trade an 89 tick chart looking for 50 point moves, and then realized the minutia I was seeing wasn't conducive to my targets. I would love to have a couple 20 point trades a day on average, and getting even 20 points off an 89t chart wasn't something that was easy. When I moved to even a 5 minute chart I was able to take out noise and get bigger profits, but had to take on more risk...but got stopped out less.

So...maybe its the opposite for you now. Taking smaller profits, smaller risk...but still the same timeframe? Im but only a teeny fish in the pool, and you're tons more experienced than I, but just thought I'd pose the Q since that was an issue I recently worked out with my coach.

[cooter]

	Quote:	brownsfan019
	commissions are important when taking 1.25 on the ES. That's for sure. My current negotiated rate is under $3.00 round trip and that will be changing soon after the broker sees the trading over a longer timeframe. As time progresses however, I will have to look at just getting a CME seat for purposes of lower fees. If anyone has info on this, please start a thread!!

1.25pt on the ES is 5 ticks, right? At $12.50/tick, that's $62.50 gross profit per contract before commissions.

Let's say, for the sake of argument, that your rate is $3 r/t all-in per car.

That's $59.50 net per contract. So then, what is the RRR on your setup that would lead you to seek an even lower commission?

[walterw]

	Quote:	cooter
	1.25pt on the ES is 5 ticks, right? At $12.50/tick, that's $62.50 gross profit per contract before commissions. Let's say, for the sake of argument, that your rate is $3 r/t all-in per car. That's $59.50 net per contract. So then, what is the RRR on your setup that would lead you to seek an even lower commission?

He can do ok with 5 tick target and 3 tick stop.... anyway I would add a runner for momentum conditions and let this runners profit absorb future stops...

[brownsfan019]

Tin - my initial stop placement has not changed that much to be honest. Here's how it's worked for me:

> Initial stop was always good in my opinion, some as little as 1-2 ticks.

> When to exit was causing concern b/c of the fact that my stops are 'closer'. So, in order to get that +2 or +3, I might have to be willing to accept some heat on the trade, which was fine; however if you have a 2 tick stop and going for 8 ticks, the Risk/Reward looks incredible, but that 2 tick stop can be EASILY taken out.

So, I thought, keep the stops at 4 ticks or lower (about 3 on average) and go for 5 ticks. I understand that the risk/reward may not be textbook or what others would call ideal, but for me, it works so far.

In the end, you need to know where your break-even point is. In other words, what % of your trades can you win and still make money. For me right now, it's approx. 40%. Well, hitting 40% is not the problem. Now it's a matter of how much over 40% I want to get!

You bring up some good points for consideration though when trading for smaller profits, but more often (I'll start a list here and we can update as needed):

KEYS TO TRADING WITH A SMALLER REWARD, HIGHER FREQUENCY TRADING PLAN:

1) Commissions are important here, negotiate the lowest rate possible. At some point, need to consider a seat on the exchange.

2) Initial stop placement is critical. While risk/reward is always a consideration, in this setup your risk/reward is going to be closer to 1 to 1. If you can't accept that, do not attempt this.

3) Higher frequency can mean A LOT of trades for some people. I'll update my stats from this morning shortly.

4) Smaller profit targets SHOULD AND MUST increase your win %. If you are still not hitting profit targets after bringing them, something needs adjusted.

[brownsfan019]

Here's today's actual stats to help with the questions:

NUMBER OF TRADES: 29

GROSS ES PTS: 15.00

NET ES PTS: 13.6 (2.32 COMMISSION RATE)

WIN %: 67.8%

-------------------------

That's my numbers from the AM session.

Some might like that, some might not.

I am personally cool with that.

The key here is that I was extracting profits when there wasn't huge moves taking place. For example - I shorted 3 times near the open. Two of these produced profits. Take a look at your ES chart at the open - there's not much movement there for shorts, right? Well, taking 1.25 twice and one loss of .75 yielded profits. Going for a larger profit and that would have been a full loss. I prefer to make money.

[walterw]

Brown : I dont know if you will ever share your setups, but I would love to learn them... should you consider this thread about sharing.. http://www.traderslaboratory.com/for...-why-1871.html as too my experience I had only been capitalized sharing my entire setups... cheers Walter.