Hmmm, interesting. How I read the initial post is that only R:R is being looked out without taking into account price levels, account size and position size.
Randomly moving your stop up to achieve a better pip R:R on entry (which is only a guess anyway) WILL result in more losers as stated.
Your stop should be placed where price dictates not at an arbitrary pip level. Then, if, with your stop at that level you are only risking x% of your account you may trade. If you are risking more than x% your account is not big enough for that trade, you are risking too much and you do not trade. R:R just based on number of pips is nonesense.
Also, the notion of R:R at position entry is only a guide you use to aid position sizing and for a notional target. Actual reward is not known until the trade closes. You only know THEORETICAL REALISED AVERAGE R:R from your system from back and then forward testing and I would suggest doing it manually.
For example do it over 200 trades and you should then see the risk/reward and win/loss you can expect to achieve. Your results should also be compared to what you would expect to see from your realised R/R and win/loss against random entry (casino type simulator). Compare against the WORST case scenario for P/L and drawdown. Did the simulator in the worst case wipe you out? If it did then I'm afraid all you did is get lucky in your testing. How many probable losing/winning trades in a row does the simulator say can occur? Did the number of losers happen in a row in your backtest? If not is suspect you got lucky.
The variables that have to be taken into account are account size, % account risk, % acount reward, wins, losses:these are actuals.
:idea:And here's a thought, if the win/loss ratio of your system dictates the requirement for a 2:1 R/R then when looking for an entry your target needs to be GREATER than 2:1 because that 2:1 is an AVERAGE over x trades.
This then gives you a framework to measure perfomance against when trading live. You KNOW when your system is working, you have the confidence to go through the losing runs knowing that the drawdown is to be expected. You know when the strategy is going bad if the number of losing runs exceeds what is probable. You know when to stop.
Without all of this you are just gambling.
What the poster in the thread suggests is moving the stop wider, to a position dictated by price (GOOD) but then having a negative risk to reward (on the face of it BAD if he talking about REALISED risk to reward). What he is actually doing, on the face of it is cutting his winners early and letting his losers run and he will eventually get wiped out.
