Do you agree that Stop Loss and Take Profit affects the performance of a trading system (EA) ? - page 2
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All systems have a Stop-Loss simply because no-one have infinite bankroll. What matters is having an edge. Someone answer me this: if two roulette players have a bankroll of $10,000. One person takes only $100 per-day to the Casino as Stop-Loss. The other person takes the entire $10,000. Who is going to perform better in the Long-run?
In one post, you say people don't need mathematical theories, in another, you say SL and TP are good optimising factor. Good SL and TP as standalone cannot perform unless you have good mathematical expectation of the trading system. :)
SL and TP aren't technically mandatory, BUT it's very risky to trade without SL. SL and TP orders are set on the server side, if you don't use them you have to use your EA to monitor your trade and close it by code. But what if you loss connection with trade server ?
Furthermore it's a good practice to set a SL, even greather than your real SL. Trading without SL is very risky, and lead sooner or later to big losses.
Exactly!! Since some people might think Roulette is bad example. Lets use Forex. How does $100 StopLoss & $200 TakeProfit (the classic 1:2 ratio). Does this person perform better (In the Long-run) vs someone without a StopLoss?
Sadly the answer here again is Neither. Asking a question about sl/tp without considering win/loss Value$$$ is pointless. And the Long-Run means what it means Longggg not 2-years back-tests but all years back-tests.
Notice that I used Value and not Pips/Points. Looking at win/loss from a static point of view is 1-dimensional.
Notice I said, not 2-years. But I'll go further, you'll need million (if not billions) of trades to validate your Long-Run and Win-Rates. Someone with a Directional-Based system simply cannot produce this number of trades even with 20-years of data. Also systems which are Curve_Fitted_On_History could pass a 20-years back-test, in the same manner someone who know the results of a 20-year roulette-wheel could create a back-test taking advantage of the known knowledge.
The answer to the above is Randomness, all probability tests from what I've noticed invokes randomness. I wouldn't produce a blackjack simulation without a random-shuffle. I wouldn't simulate how often the six_on_a_dice was rolled without randomness. A poker player would have to simulate randomness to in-order to generate probabilities on certain hand-combinations. The mathematicians amongst us could figure out the probabilities of certain outcomes without simulators but I'm not one of them.
So why the random-test (as if I haven't given enough reasons), because you need a range-of-all-probable outcomes. Most people who gets stuck on the fixed-trend-pip tests don't like this idea. They want to believe in their Ability to predict the market. I have no-problem with them....all_man_to_his_own, just don't try telling everyone that it makes sense statistically and not by luck.
The system developers who believe direction prediction is key, sorry this is not for you. However, for the ones who believe that the money-management and trade-management is more important this might resonate with. Trade-Management is a term I define is modifying your Position based on whats happening to it. Something simple as Grids_in_Ranges and Anti-Grids_in_Trends. Trailing Stops is another example of Trade_Management.
As always these are my_humble_opinions (subject to change in future).
Ps: RaptorUK, I think you're doing a great job explaining the break-even curve. :)
Ps: RaptorUK, I think you're doing a great job explaining the break-even curve. :)
In my opinion tp and sl does help period. The break even curve doesn't determine profitability since as raptor himself said its not for trading. Funny how people try to force me to follow their way by arguing everytime i express my opinion while im the only transparent guy here with trading proof i bet some people are not even trading or are losing but are number one at arguing trading systems. You cant know the worst if you haven't found the best.
Nobody is trying to force you to do anything. The purpose of sharing and discussion is to help each other . . . you cannot tell me I'm wrong without first understanding what it is I am saying. I have been transparent, I have said I do not yet have an EA worth trading, I see no point in trading an EA to lose money or even to break even. I haven't discussed or argued about trading systems . . . the chart I presented is an analysis tool, not a strategy or trading system.