Risk:Reward question

[I'vereadthemall]

Exactly, if risking $100.00 constant with a 3 pip stop and bought 4 lots we would be at a greater risk of losing more than our $100 risk on a spike than if we had a $100.00 risk but in micro-lots.

Thats why i propose that if your stop-loss is tight enough that there is a real risk of a spike resulting in it being missed..you should lower the percentage of your account risked on the trade to factor in whatever possible damage a spike could cause.

 

[Mr Fox]

http://www.trade2win.com/boards/psy...80300-risk-reward-question-4.html#post2209312

Your footnote/P.S. serves as a blanket refutation of everything BeginnerJoe posts, ever.

You're welcome.

I'm sorry I didn't relise you were Beginner Joe, or are you just his jumped up patsy.
😆

P.S. There is a difference between listening to good advice, and not heeding the idiotic posts he posted earlier. I guess this is the post that you would take heed off from BJ..

.."I'd risk infinite amount so long as my reason for entering the trade remains valid. Other times I'd stay in the trade out of spite of not letting the other side win".

 

[BeginnerJoe]

I'm sorry I didn't relise you were Beginner Joe, or are you just his jumped up patsy.
😆

P.S. There is a difference between listening to good advice, and not heeding the idiotic posts he posted earlier. I guess this is the post that you would take heed off from BJ..

.."I'd risk infinite amount so long as my reason for entering the trade remains valid. Other times I'd stay in the trade out of spite of not letting the other side win".

No. We are distinctly different people. He's just trying to defend a fellow veteran against a newb attack.

Once you have mastery of trading, you too get to play with infinity. But it's a bit advanced. Like I said, no use trying to explain to a 3 year old (analogy for green around the ears). It'd take too long, and then value is lost when it is free.

 

[Mr Fox]

No. We are distinctly different people. He's just trying to defend a fellow veteran against a newb attack.

Once you have mastery of trading, you too get to play with infinity. But it's a bit advanced. Like I said, no use trying to explain to a 3 year old (analogy for green around the ears). It'd take too long, and then value is lost when it is free.

You need defending from a 3 year old.
😆

Since we are on a trading website, may I ask what you trade, over what time frame, and with what results, as you never know I might learn something from a veteran.
🙄

 

[BeginnerJoe]

You need defending from a 3 year old.
😆

Since we are on a trading website, may I ask what you trade, over what time frame, and with what results, as you never know I might learn something from a veteran.
🙄

No I don't need defending. But I am the kind of people who attract defenders.

Sure, you can learn from a vet. Go do your 3 pips trades, you'd learn a truck load in less than a jiffy. But you don't seem like the kind of people who is brave enough to learn. Too much wrinkles and can't afford the risks ? It can hold you back, you know ?

 

[Purple Brain]

I'm sorry I didn't relise you were Beginner Joe, or are you just his jumped up patsy.
😆

It's completely irrelevant who you were asking - this is an open forum and anyone is free to respond.

IP.S. There is a difference between listening to good advice, and not heeding the idiotic posts he posted earlier. I guess this is the post that you would take heed off from BJ..

.."I'd risk infinite amount so long as my reason for entering the trade remains valid. Other times I'd stay in the trade out of spite of not letting the other side win".

Then you guessed wrong. We probably share a similar opinion of the member in question, but there the similarity ends. Troll away. Let's see if I can get you to so another little dance. Both my posts to you contained a barb and had you been a wily fox you would have been wise to ignore them, but being a bottom feeder, you took the bait.

 

[Purple Brain]

No. We are distinctly different people. He's just trying to defend a fellow veteran against a newb attack.

I'm afraid not. You stand on your own two feet or not at all. I'm certainly not a veteran and based on what posts of yours I have seen, neither are you.

This thread had all the pythonesque hallmarks of the 5 minute argument with two trolls (or one troll with two mukltinics) - I'm really not sure why I jumped in other than the boredom of a frustrating Friday afterm0oon market and an aud/usd short which took an age to come into profit.

But it's there now, so I'll leave you all to have fun.

 

[BeginnerJoe]

I'm afraid not. You stand on your own two feet or not at all. I'm certainly not a veteran and based on what posts of yours I have seen, neither are you.

This thread had all the pythonesque hallmarks of the 5 minute argument with two trolls (or one troll with two mukltinics) - I'm really not sure why I jumped in other than the boredom of a frustrating Friday afterm0oon market and an aud/usd short which took an age to come into profit.

But it's there now, so I'll leave you all to have fun.

No use being provocative. I am not baitable.

If you are not a vet then I suggest the OP assign lower interest on your posts. While learning, it's best for him to have more of the fluff out of the way.

 

[BeginnerJoe]

P.S. Don't you think you would gain more respect if your post's actually contained more useful information.

Leave him be. Bad market, bad mood. Once you gain some experience, maybe you will start to appreciate what people have to go through.

 

[Mr Fox]

Leave him be. Bad market, bad mood. Once you gain some experience, maybe you will start to appreciate what people have to go through.

Well the markets are never bad, nor good, nor anything, the markets will move regardless of anything, but if you say he's having a bad day, I shall not presume that, but on your say so I shall put his idiotic posts down to him having a bad day.

 

[BeginnerJoe]

Well the markets are never bad, nor good, nor anything, the markets will move regardless of anything, but if you say he's having a bad day, I shall not presume that, but on your say so I shall put his idiotic posts down to him having a bad day.

No I am not a dog. See <------ that ? I am more of a cat person - agile, quick and razor sharp.

Perhaps if you spend more time learning trading and less time calling people names maybe you will get farther than where you are.

I can certainly see you like to quote what you read in books. They don't seem to do you any good. What you need is less in the brain and more in the balls.

See ? I give you value in every post. But it just flies over your head. You really must be short like a 3 year old.

 

[Shakone]

Why are insults being removed?

Is Mr Fox banned?

 

[zchawa1]

Interesting thread, (perhaps a little less of the abusive comments - cant we all just get along?) but.... has anyone considered the spread when applied to the initial question???

Risking 3 pips to gain 3 pips (1:1 ratio) is fine as long as,
1) Your system has an expected win rate over the long term of greater than 50% (if not you'll lose cash overall). This is only hypothetical however as,
2) You need to factor in the spread (which no-one has mentioned yet). This means your win rate in the above scenario actually needs to be significantly higher than 50%
3) You also need a way to deal with unexpected gapping and slippage (such as using fixed stops) as previously mentioned in the thread, to stop your account blowing up after an unexpected event (eg news, natural disaster, etc). Usually your spread would be higher for measures like a fixed stop, hence further increasing the win rate you'll need to make money overall.

Trading for such a small amount of pips would be classed as scalping. It can be done, it has been done, & it is being done right now...but its a tough game that takes a special type of trader in order to be successful over the long term.

Your main barrier to success with this scenario in real world is the spread. If the spread is 1 pip, actually you need to gain 4 pips each trade for every 3 pips risked in order to break even. This makes your risk/reward ratio significantly worse than 1:1. Compare this with risking 50 pips for a 50 pip gain - you need to gain 51 pips each trade for every 50 pips risked to break even. Again this leaves a risk/reward ratio of less than 1:1, but much closer to it than the scenario with 3 pips. This is why scalping is hard, there's a real uphill battle to overcome the spread, and thats before you take into account slippage and gapping.

 

[I'vereadthemall]

Hi Zchawa1...refer to the 1st post where it is stated that spread and slippage are already taken into account. I totally agree with what you are saying though.

 

[I'vereadthemall]

Also curious, when you say people are scalping successfully who are you referring to? Unless it is multi billion dollar HF with awesome algos and servers 10 yards from the exchange I haven't seen any evidence of a single person making money through scalping. I'd love to be see it if it exists.

 

[zchawa1]

Hey 'I'vereadthemall', thanks for pointing this out ;-) (just re-read the initial post!)

I guess then that risking 3pips to win 3pips would be fine, as long as your expected win rate is greater than 50%!

 

[zchawa1]

Sorry to disappoint, I havent any real world experience of people successfully scalping, and as a retail trader I dont have access to a multitude of trading contacts or links to the industry. Its certainly not my favoured way to trade, like you I see it as a hard uphill struggle. I do however believe it can be done, though as you imply unlikely to be done with any success by a retail trader. I remember once an interview I read in a trading magazine of a successful scalper...but take from that what you will, I cant prove theres any truth in the article! There are however as many ways to trade as there are traders (well maybe not quite!), and with a high enough risk/reward ratio and win rate a trader could overcome the spread. The real question is could you do that long term, its possible, but probably not without quite special personal circumstances.

So to sum up, my comment was not meant to be misleading, rather I believe that it can be done, is being done, etc!

 

[BeginnerJoe]

Also curious, when you say people are scalping successfully who are you referring to?

The OP has a Bank Of England trader friend, from whom I presume he got the strategy from. Such a trader would have close to 0 on costs and can front run all the retail joe's. It is not beyond possibility he could scalp for 3 pips. But if he were to join the retail crowd and loses his institutional advantages, he'd be a looser like the 99.9%.

 

[I'vereadthemall]

Befonnerjoe..exactly.

Zchawa1. Thanks for your response.

 

[I'vereadthemall]

Be gonner!

Predictive text will be the death of me!