I agree and i only learned this lesson after 7 years of unprofitable trading, the switch to negative R:R fixed that problem. But currently the achilles heel to this style of trading are trades that instantly reverse on entry and hit SL, thats my current struggle hindering my consistency and ive been scouring research papers looking for the solution to that but so far nothing came up.
Finding the level by which the negative risk to reward should be is difficult and really only through forward testing can you determine what works best for the instrument you are trading. What I found that works is to measure volatility over the last 30 days and examine the market in terms of what the worst case and best case is that would be divided over that 30 day period. For example coming with Euro USD, in studying the roughly 20 years of history, I found it my worst case situation on a single month would be roughly 500 pips of movement, so by using that is my basis point, I'm able to develop a stop loss technique that will help me mitigate to stop losses but still provide a reasonable level when they do get hit. It should be noted that nothing is going to stop a stop loss and having a negative reward to risk racial at this level can be quite difficult so using more than one risk mitigation technique or even looking at the market with an early out opportunity using ATR or some other technique is extremely beneficial.
This is how insurance companies make fortune , they would take your $90 a month premium against a possible $30 000 risk on your car and guest what ? They are never out of business because They know only few drivers are gonna come for a claim , they accept a very small amount of money and it would all the time on the long haul
isn´t using a static risk reward ratio always like saying i have no clue when to take profits or stop losses because i don´t really know what im doing? . i never understood why people do this because i have tryed it 3 or 4 for times years ago when i was a beginner and by luck these trades (demo) where all profitable but the profits were take and the chart was still climbing and seeing potential profit thats not made is a worse feeling than making a loss for me.
When you are manually trading, this is very true and that having flexible take profit and stop loss can be beneficial. However, when you are automated trading and having a machine trade on your behalf, having clear and concise rules always guarantees you know when you're bot is working properly versus when something goes wrong. A fixed take profit and stop loss for automated trading gives you a clear and defined rule set that always works based upon how you program the bot to begin with. There's no guesswork should something happen like an internet connection failure or some type of disturbance within a program. Does clear rules make it easy to let you know when the program is working and when you need to actually take control of the situation in order to maintain a profit or prevent a loss. It is important to remember that no matter how advanced a program is, it will never have match the capabilities of the human mind and subsequently having these clear and absolute definitions makes it easier to maintain control of the entire process and mitigate your risks, especially if you are using a process that might have 100 or 200 open and active positions simultaneously. It's a matter of perspective in relations to how you actually trade and how your risk assessment and risk mitigation process goes in relation to your style. The worst thing that I have seen done in my own trading is trying to apply a manual technique to an automated process, whereby people think of the machine is going to behave on the basis of what the human mind can see. Even the most advanced strategists and AI-based systems can still never match the clarity and understanding that the human mind can process within a matter of seconds of looking at a chart. With automated trading, one of the most important things to really focus on is never chase profits and always have a clear plan that avoids fear or creating a situation that you're missing out. Let the absolute process of a flat take profit and stop loss take place and move on to the next trade, no matter what is left on a table or what that loss is, the absolutes are a guarantee of a rigid mechanical process that always play out in a long run for the machine in a way that can handle any market situation as long as you've done a careful case study of your instrument.
@@rapmd thanks for the long anwear. Funny that you talk about bots to me ^^because i´have written probably the best trading bot ever for bitcoin which made me 182x1% and turned my 1130usdt in 6082usdt in the last 3 month ( not even one day where i lost money at the end of the trading session). my bot has no take profit and stop losses. i have logged every trade with a screen shot and have screenshots for every day of my account balance. sadly i just can let the bot run only 8h a day because reason i can´t explain but if this restriction wasn´t there i would make much more % in a day. statisticly i make 1% in 3,22h
every trade I take has a different r:r sometimes i risk 1 to make 5, sometimes risk 4 to make 1, sometimes risk 3 to make 2. a fixed r:r is stubborness and keeps you trapped
100% agree. Small consistent wins will take you much farther than inconsistent big wins 📈
I agree and i only learned this lesson after 7 years of unprofitable trading, the switch to negative R:R fixed that problem.
But currently the achilles heel to this style of trading are trades that instantly reverse on entry and hit SL, thats my current struggle hindering my consistency and ive been scouring research papers looking for the solution to that but so far nothing came up.
Finding the level by which the negative risk to reward should be is difficult and really only through forward testing can you determine what works best for the instrument you are trading.
What I found that works is to measure volatility over the last 30 days and examine the market in terms of what the worst case and best case is that would be divided over that 30 day period.
For example coming with Euro USD, in studying the roughly 20 years of history, I found it my worst case situation on a single month would be roughly 500 pips of movement, so by using that is my basis point, I'm able to develop a stop loss technique that will help me mitigate to stop losses but still provide a reasonable level when they do get hit. It should be noted that nothing is going to stop a stop loss and having a negative reward to risk racial at this level can be quite difficult so using more than one risk mitigation technique or even looking at the market with an early out opportunity using ATR or some other technique is extremely beneficial.
This is how insurance companies make fortune , they would take your $90 a month premium against a possible $30 000 risk on your car and guest what ? They are never out of business because They know only few drivers are gonna come for a claim , they accept a very small amount of money and it would all the time on the long haul
very interesting sir
isn´t using a static risk reward ratio always like saying i have no clue when to take profits or stop losses because i don´t really know what im doing?
. i never understood why people do this because i have tryed it 3 or 4 for times years ago when i was a beginner and by luck these trades (demo) where all profitable but the profits were take and the chart was still climbing and seeing potential profit thats not made is a worse feeling than making a loss for me.
When you are manually trading, this is very true and that having flexible take profit and stop loss can be beneficial.
However, when you are automated trading and having a machine trade on your behalf, having clear and concise rules always guarantees you know when you're bot is working properly versus when something goes wrong. A fixed take profit and stop loss for automated trading gives you a clear and defined rule set that always works based upon how you program the bot to begin with. There's no guesswork should something happen like an internet connection failure or some type of disturbance within a program.
Does clear rules make it easy to let you know when the program is working and when you need to actually take control of the situation in order to maintain a profit or prevent a loss.
It is important to remember that no matter how advanced a program is, it will never have match the capabilities of the human mind and subsequently having these clear and absolute definitions makes it easier to maintain control of the entire process and mitigate your risks, especially if you are using a process that might have 100 or 200 open and active positions simultaneously. It's a matter of perspective in relations to how you actually trade and how your risk assessment and risk mitigation process goes in relation to your style.
The worst thing that I have seen done in my own trading is trying to apply a manual technique to an automated process, whereby people think of the machine is going to behave on the basis of what the human mind can see. Even the most advanced strategists and AI-based systems can still never match the clarity and understanding that the human mind can process within a matter of seconds of looking at a chart.
With automated trading, one of the most important things to really focus on is never chase profits and always have a clear plan that avoids fear or creating a situation that you're missing out. Let the absolute process of a flat take profit and stop loss take place and move on to the next trade, no matter what is left on a table or what that loss is, the absolutes are a guarantee of a rigid mechanical process that always play out in a long run for the machine in a way that can handle any market situation as long as you've done a careful case study of your instrument.
@@rapmd thanks for the long anwear.
Funny that you talk about bots to me ^^because i´have written probably the best trading bot ever for bitcoin which made me 182x1% and turned my 1130usdt in 6082usdt in the last 3 month ( not even one day where i lost money at the end of the trading session). my bot has no take profit and stop losses. i have logged every trade with a screen shot and have screenshots for every day of my account balance. sadly i just can let the bot run only 8h a day because reason i can´t explain but if this restriction wasn´t there i would make much more % in a day. statisticly i make 1% in 3,22h
every trade I take has a different r:r
sometimes i risk 1 to make 5,
sometimes risk 4 to make 1,
sometimes risk 3 to make 2.
a fixed r:r is stubborness and keeps you trapped
Don’t trade with 100% of your capital on each trade.