Smaller profits yields better results?

[brownsfan019]

So I resisted starting this thread initially, but for whatever reason, felt like sharing today.

In my pursuit of a better exit strategy (as evidenced in my time at the WRB thread) I've looked and re-looked at just about everything - Fibs, pivots, trailing, fixed, etc. etc. And for me, I came to this conclusion - simpler is better and taking small bites out of the market is much easier than trying to devour the elephant at once. Yes, we'd all like to take one trade a day and let it run on trending days and stay out during chop or whatever, but you don't know what type of day is ahead of you till after the fact. And since you can't win if you don't play, that's no use to me.

So I went back and forth on this topic over and over recently - the topic of how/when to best exit for me and my trading methodology. And while I had been using a +2 point target before and during my WRB analysis, one thing stood out and the light went on - getting +2 on my trades with no risk to my initial stop was pushing the limits some days. Some days +2 is just not there. And then I realized that +1 - +1.5 was very achievable time after time. So then I asked myself if those extra ticks were worth the additional risk and stress to get. I of course thought probably not.

And then after realizing that taking +1.25 was achievable over and over, and then realizing that sometimes you just have to jump back onto a trade if another valid signal arises, I was able to become more nimble this week, esp today (Wed 6/6).

In a nutshell, I found for me that taking LESS in profits MADE me MORE money (at least this week and some previous backtesting). I realize that this could blow up in my face at a later date, but I'm going on record here with my observations. The WRB thread helped immensely not b/c I realized that WRB's are not going to work for me, but with the comments others made, esp in the last few pages, I realized that I could take less in profits each individual trade and make more money each day. Or it at least has the potential to do so.

The downside - some would say that I am 'over-trading' now. And at first glance, I get that. But if I told you that I could show you a way to make some money every day in the markets taking 3-7 trades or you could possibly make substantially more but would require many, many more trades (more on that later), would you be interested? I'm all about maximizing my work time. If I could take one trade and make a ton of money, I would. I have not found that however. What I have found is that for me (and this might not work for you, so please keep that in mind) taking multiple trades during the day and going for realistic targets is much easier. And to be perfectly honest, it's more fun. I'm active all day and really feel like I am doing my job. I don't know about others here, but taking 1 or 2 trades a day when you are a daytrader sucks. I know that if that works for you, then great and all that stuff, so please spare the lectures on why taking 1 or 2 is better. If it works for you, great, start your own thread.

I've attached a couple very, very simple scenarios of how I have seen this way of trading work better for me. Please bare with me as these were drawn using SnagIt and I did it quickly for purposes of sharing here.

Scenario 1 - Tending Day


Scenario 2 - Non-Trending Day


Basically, by going for more realistic targets on the ES, my profits are taken out much more often and being flexible provides a way to get back into a trade if need be.

The key for me by looking for smaller targets is that on choppy or more range bound days, I can actually take some profits out of those moves. By going for +2 and/or a WRB, it wasn't always there on some of those days.

That's probably enough for now. I could go on and on some more, but I'll try to post some updates/stats of how things are going here. I would strongly suggest to those looking for a possible exit plan to consider bringing your targets CLOSER vs. going for more!

[cooter]

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?

[walterw]

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.

[lrushing]

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.

[walterw]

	Quote:	lrushing
	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.

Hi Irushing ... interesting that last term "FREE" trades... what would that exactly mean ? thanks Walter.

[lrushing]

A lot of traders accept that day trading is a game of "odds". So the more trades you can get that go from a risk-based trade with some predetermined stop loss amount to a trade with a breakeven stop,(i.e, FREE trade) the better your chances of making profits consistently.

[walterw]

	Quote:	lrushing
	A lot of traders accept that day trading is a game of "odds". So the more trades you can get that go from a risk-based trade with some predetermined stop loss amount to a trade with a breakeven stop,(i.e, FREE trade) the better your chances of making profits consistently.

Ok I got it... thanks for that Irushing... by the way do you do scalping or more day trading yourself ?

[lrushing]

Both, If the market is demonstrating a sideways consolidation, I use scalping tactics. If the market is clearly demonstrating a trend, then I will day trade and swing trade the markets.

[walterw]

	Quote:	lrushing
	Both, If the market is demonstrating a sideways consolidation, I use scalping tactics. If the market is clearly demonstrating a trend, then I will day trade and swing trade the markets.

Is it possible to ask you a critic of my "flip" trade... I would be delighted to hear your opinion on it... http://www.traderslaboratory.com/for...oles-1714.html would really apreciate that.... cheers Walter.

[cooter]

	Quote:	lrushing
	A lot of traders accept that day trading is a game of "odds". So the more trades you can get that go from a risk-based trade with some predetermined stop loss amount to a trade with a breakeven stop,(i.e, FREE trade) the better your chances of making profits consistently.

Exactly.

Hit your first initial target (in this case 1.25 ES pts - 5 ticks).

Then move your stop up to breakeven.

The rest is gravy, far as I'm concerned.