Walters Aproach

[walterw]

RRR (Risk Reward Ratio) = live or die

Risk= how much you risk on a trade

Reward= how much you expect from a trade


without good RRR cant have success on trading.

[TinGull]

I completely agree, as will everyone else here, in your R/R. I, however, have a different question

You mentioned in a post in the Forex Room about using investor r/t and the VB indicator. This is how I trade as well, working mainly off of market profile levels and pivot points. Would you mind sharing how you're using IRT and the VB indicator? I'd love to see some charts too!!

THanks Walter,

Chris

[walterw]

Well Chris I must admit that I am experimenting with delta... I am very new to it and must say that from an intrinsic concept it does make sense... I do trade delta divergence setups, you can see them at charthub... with names er_110t also er_22T and some other experiments (green background) I was very inspired by the charts of "5pillars" (elitetrader) also lots of charts from him on charthub as es_317_VB he trades es ... My hardtime on this is that I am more a "Trend Trader" and delta divergence trades are countertrade... so it makes it hard to detect when market shifts from trending to cycling and viceversa... actually Delta Divergence Trades (DDT) realy work fine on cycling markets.... but will make you get run over on trending situations.... I am working in a method to "clearly" detect the change from trending to cycling... maybe we could aboard that topic on this thread.... I would like to interact on the issue, I believe that if you have a clear method to detect those shifts on the market stage would be very great... I did look your post here Chris and I find them very nice stuff... mp levels are so predictible.. combined with delta... you got a powerfull combination... hope we can keep interacting.... cheers Walter.

[TinGull]

Thanks Walter! 22T chart, huh? That's a fast moving chart, especially on ER2. Chris, 5P, was the one who got me hooked on it too! hehe, funny. He was a wealth of information and gave me some great tools to step up my game.

Let's definitely talk more about this...I'm about to leave to catch a flight home, though...so can't write more. I'll catch up maybe tomorrow with this.

Till then!

Chris

[walterw]

Well, I want to make some comentaries on this thread topic I did start some days ago on RRR (Risk Reward Ratio). On my personal experience, and I think most traders have the same tendency, we get to much enthusiastic about a technical aproach and become some how very "loyal" to it... the true fact after 11 years on trading I came to the sad conclusion that just about any trading aproach has 50/50 technical performance... there is no such 70 or 80 % performance as some "gurus" tell they have... when you trade with the real thing you come up with 50% success and 50% non-success trades... if you are having less than 50% success, then you are on "School mode" yet... you need the 50/50 to consider yourself a good trader... now, dont be mean on yourself trying to get that fantasy 70 or 80 % success... you will loose precious time... the key is RRR applied to the 50/50 performance, thats my story, and I can say now that I am happy with my 50/50 performace...
So... what REALLY is this RRR thing ?... well in my experience its not just a ratio, its more than that... its a STRATEGY that has to be embeded on your technical aproach.... where in simple words you have tight stops vs long runs.... so we are talking about "closing positions" more than opening.... HA¡¡¡ dont you spend hours thinking and studing how to "open positions" ? well thats fine but after you got a plan you say in lets say 10 minutes : I will close my position such and such... or I will see as it happens... well there you go... thats where any "analist" work goes to the toilet... well, this trader NEEDS a change of mind, when you study so many hours where you are going to "open" your position you MUST include in this study "simultaneosly" where are you going to place your stop and where is your aproximate target... thats more than chart reading or a simple RRR math... it is formulating a Strategy on your trade that will keep you alive during this very dangerous journey of being a trader.... where your fellow traders are big dinosaurs with thousands time more money than you, with greater technology and the worst.... they DO have a technical aproach with real RRR on action.... so RRR should be the center of your ecuation... doesnt care what technique you use, if its trendwise or countertrend, if its based or not on indicators, if it uses old fashion stochastics or new fantastic deltas.... doesnt matter, ALL of them eventually have a 50/50 performance... RRR inside your technique will make the diference to make you profitable...

[Pismo10]

The struggle here is that as you expect more on your winning trades, your win percentage will drop. Need to find a balance.

[TinGull]

Hi pismo...I'd love to know more about why you think the win % would drop if you expect to win more from your winning trades than you expect to lose on the losing trades?

[torero]

tin, it's proven at least from testing trading systems that if you have more winning trades than losing trades, the avg win vs avg loss is smaller. If you have a larger avg win than the avg loss, the winning number of trades are higher. This is to assume your strategy is a winning strategy. It's rare, but not impossible, to find a strategy that has higher percentage of wins over losses AND a greater avg win over avg loss. If you have it, you got the holy grail!

[trader273]

	Quote:	TinGull
	Hi pismo...I'd love to know more about why you think the win % would drop if you expect to win more from your winning trades than you expect to lose on the losing trades?

I agree with that comment as well. It just make sense to me. If I'm going for 4 pts on the es, the chances of price traveling 4pts w/o my stop being hit ( where ever that may be, thats an entirely different topic ) is a lot less likely to deliver when comparing it to a smaller 2pt profit target.

So its a trade off in my view. A bigger profit objective and lower win % or smaller profit objective with a higher win %. You could have the best RR ratio, but if the reward is hardly hit then what you have a just a theoretical RR ratio since your targets aren't generally hit. So what might start of as a 2 or 3 RR ratio, might just turn out to be a 1 or below by the time the trade is said and done.

Therefore, a trader would need to compare the initial RR ratio with what actually happened. I found that my targets were ambitious. When I put the trade on I was happy since I had a 2 or even 3 RR ratio. But watching price move in my favor and then retracing back so I get 1 or 2 ticks, reality sets in that my actual RR ratio isn't the same as my theoretical or initial RR ratio.

So I brought in my targets, my initial RR ratio is lower, but the targets are being hit more often. In turn, my actual RR ratio is congruent with the initial or theoretical RR ratio.

I thought about RR ratios from a lot of angles. I hope this helps, and not confuses anyone

[TinGull]

I think it makes sense to me now. I was thinking pismo was saying that if you expect to win more points on winning trades than lose on losing trades, your win % would drop. It was just a little confusing for my tiny brain, but I'm all straight now.

Thanks guys