DislikedHi Oldtraderman, I'm glad you are keeping well despite lockdown and Covid. I've been wondering how your mechanical entry experiment was going because the result was so great in a few starting weeks. Now we have the conclusion that it is not a successful experiment but for sure it is a valuable lesson. Regarding your discretionary exit strategy, may I ask when you let the price run past the initial target +1R then do you have minimum points you expect to take, say like you will not take profit less than +1.3R or +1.5R or something like that? Because...Ignored
Hi diamond1011,
Nice to hear from you again, hope you've been keeping well.
Your post to me contains three separate issues which I'll deal with each in turn:
1) The mechanical entry experiment was a failure in that the mechanical entry unfortunately showed no material long term edge on a basic 1:1 R:R exit, but I was able to trade profitably with the mechanical entry. This apparent paradox I think is explained by the fact that it did occasionally set up trades with profits significantly in excess of 1R without having to accept losses of greater than 1R to achieve them. If you could run those profits you have a profitable edge. My issue with it at the end of the day was a personal one: 1) I am not good at running profits; and 2) being mechanical, it does necessarily create deeper drawdowns during times when market conditions are against it, and I am not good with that either. So, for someone else for whom these things are OK it could well be a fine system; for me, not.
2) Your question about profit taking touches one of the raw nerves of trading: there is no definitive answer and it boils down to a classic greed vs fear argument. From the above paragraph you may deduce I am on the fear side of that equation! Once a trade gets to 1R I get very trigger happy and rarely do I get a much bigger winner as I tend to quickly book the profit, no matter how hard I try to stick with it for more. As a result of this, I tend not to move the stop to 1R should price get past this point, I generally just wait for the expansion move that took it past 1R to run out of steam and I quickly take profits then. Again, very much a personal psyche thing. It causes me a lot of stress to run for big R multiple profits so I tend not to do so. Some people just love sitting there and watch the profits grow, each to their own. If you do want to shoot for bigger profits then you do need to develop a trailing exit strategy of some sort that protects you from giving it all back should the market reverse.
3) In one sentence, for me profitable trading is: Making consistent profits in an acceptable way. The bits there to consider are what constitutes 'consistent' and 'acceptable'? Consistent I think is just can you do it month after month with only the odd inevitable blip here and there; and acceptable means with stress you can live with + drawdown you can live with. No point making money if you are always a bundle of worry & nerves heading for breakdown!
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