Normal
Temjin.I agree with your observations and I to have pondered and tested similar thoughts (although I dont have an edge ratio).In line with 1 & 2 and also 3 being caught in trades which wallow in small profit to drawdown of initial capital has a detrimental effect.This also raises another questionWhen does an entry lose its validity You enter a trade on a signal off it goes then retraces below your initial entry but above all stops.The entry signal is now gone and you are in a trade which has failed to continue given its original condition/s.Should we stay in that trade in the hope it will continue in our direction? At what point is the entry signal invalid and if it is what are we doing holding the trade if its NOT in profit?Ideally staying in trades which continue to accumulate open profit is what we attempt to do.Trailing stops in my view should be widened as a trade matures in profit BUT with time and normal exit criteria still in place.This is where system design falls into a catagory of balance.You wont (well I havent) find perfect settings for every parameter. There will always be a give and take.Howards concept of objective function (Although we all do this to a degree have never seen it spelled out specifically) is a key element in what I or you would accept in our systems. Quite possibly different objectives/different settings/different money Management in the SAME system.
Temjin.
I agree with your observations and I to have pondered and tested similar thoughts (although I dont have an edge ratio).
In line with 1 & 2 and also 3 being caught in trades which wallow in small profit to drawdown of initial capital has a detrimental effect.
This also raises another question
When does an entry lose its validity You enter a trade on a signal off it goes then retraces below your initial entry but above all stops.The entry signal is now gone and you are in a trade which has failed to continue given its original condition/s.
Should we stay in that trade in the hope it will continue in our direction? At what point is the entry signal invalid and if it is what are we doing holding the trade if its NOT in profit?
Ideally staying in trades which continue to accumulate open profit is what we attempt to do.
Trailing stops in my view should be widened as a trade matures in profit BUT with time and normal exit criteria still in place.
This is where system design falls into a catagory of balance.You wont (well I havent) find perfect settings for every parameter. There will always be a give and take.
Howards concept of objective function (Although we all do this to a degree have never seen it spelled out specifically) is a key element in what I or you would accept in our systems. Quite possibly different objectives/different settings/different money Management in the SAME system.
Hello and welcome to Aussie Stock Forums!
To gain full access you must register. Registration is free and takes only a few seconds to complete.
Already a member? Log in here.