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Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Tech/Pav

Aaaha - A light bulb moment for me, for sure.

From your previous posts I understood to be proactive and skew the results into my favour by lifting the initial stop loss (1 Risk) towards or to breakeven fairly quickly to reduce our initial risk.

I was skewing the initial risk BUT NOT the exit, doing both does make a big difference on results as you say.

I know the exercise I've done below is very basic but it does illustrates your point of being proactive both ends, start of the trade and end of the trade.

If I tossed a coin 2 times for 1 win and 1 loss (50% Win Rate)

Won $1 for the win and lost $1 for the loss (1:1 Profit Ratio)

That's breakeven trading putting all other costs aside for the time being.

If I could then skew the results by reducing that initial risk down to half, it would mean I only lost .50 cents and still had my $1 win. So Win Rate was still 50% but my Profit Ratio was now 2:1 because I'm now winning twice as much as I was losing. This now has me above the breakeven line.

But now, if I can skew the exit (light bulb for me) and improve this $1 win to say $1.50 the results are very good.

Win Rate still 50%, now winning $1.50 and losing .50 cents which pushes my Profit Ratio out to 3:1.

A very good system indeed.

I know we probably won't get a 50% reduction on our initial risk and a improvement of 50% on our winnings as in the perfect world but I get the idea of skewing both ends and see that it does have a dramatic affect on the end results.

We might or might not get a 3:1 system but it does get us away from that breakeven line.

I get it! I look forward to your charts and ideas on skewing both ends.

Thanks again Tech and Pav, appreciate your work.

PS. Do you trade long and short?