CatFx50 - page 80
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This R/R thing is a myth, or at least it is poorly understood. The ratio between target and stop loss means nothing by itself. It doesn't show how profitable a system is. Take 2 systems, A and B. System A has a target of 100 pips and SL at 50, but it only wins 3 out of 10 times. System B has a target of 20 pips and SL at 100, but it wins 9 out of 10. Out of 10 trades, you would lose 50 pips using system A (with the "good" RR ratio) and win 80 using system B (with the "poor" RR ratio).
If Nina's entry is followed by a +10 pip move 6 times more often than a -30 pip move, then for every 7 trades you would make +60 - 30 = +30, a VERY good system in spite of the so called bad RR ratio. If, on the other hand, Nina's entry leads to -35 pips twice as often as it leads to +60, such a system would lose 10 pips for every 3 trades (on average of course), and it would be bad even though the RR ratio sounds good. This is just a theoretical example, I am not saying that it is the actual way Nina's system behaves.
The only way to determine the best settings is to test various pairs of RR on historical data, at least 50 trades. Then I suggest going to the simulator at http://hquotes.com/tradehard/simulator.html - please read the explanations there, enter the values for Win/Loss and Win Prob - and see what your expectations should be using the system.Ok, for a moment I was stumped becoz I thought you are trying to say that R/R is not a criteria.
LOL,, Lazy, BTW system A is not valid in anyway, simply becoz :
It has a "NEGATIVE EXPECTANCY", no matter what MM you use it wont make money.
As to system B, let me say this: it has to win over the long run simply becoz it has a positive expectancy and over the long run the profits are larger than the losses even though the % might be less.
I think you have totally got it mixed up about risk/reward ratio and win/loss percentages.
Ninas system cannot survive if you go for 35pipSL and 10pip wins even if you get 70% win/loss ratio.
7 wins = 70pips
3 losses = 105pips
P/L = -35pips
Correct me if I am wrong. I dont want to go into a debate about this.
Maybe I can suggest reading up on "The Trading Game" by Ryan Jones.
IT is supposed to be the bible on this kinda thing.
With this system there is no kinda backtest to acertain the Stats.
It is dependent on 50MA which is infact a trend indicator and if you do not catch those long trends , I dont know how it will cope with those ranging days when the prices simply shuttle above and below the MA.
BTW,, from what I have heard the best systems over a long time are 60% profitable. There are exceptional systems ofcourse but its unlikely we will get to trade them. You do the math.
Thanks again guys.
Keris,
I think there are lots of topics on which we can spend countless hours debating and never get anywhere.
Yea, I read the ICWR manual and have all the indicators, but dont have the patience to follow it. If you use discretion, you add many more Variables into the equation and make it complicated. How it will affect the systems performance? Maybe favourably or not depending on how you percieve the information and use it. Each time you use discretion, can you tell me how it increases the odds in your favour? If you used discretion and not entered the trade and it was a runaway winner,, how would it affect your next decision to trade the setup? Would you use discretion then?
Anyway, lets just get on with this sytem and tweak it so that we can get maximum outta this system. Lets leave the arguements for another sunny day by the beach when we have made our first million. LOL.
The best thing about these forums is we can agree to disagree and still get along just fine.
If I could make money using discretion , I would, but believe me, I have been more often wrong than right.
No feedback on the chat yet?
Ninas system cannot survive if you go for 35pipSL and 10pip wins even if you get 70% win/loss ratio.
I'm afraid you didn't read my post carefully. Trust me, I know what I'm talking about. I said 6 wins out of 7 trades, not 7 out of 10. 6 out of 7 means over 85% winning probability, and Nina's system has that kind of winning probability if your target is 10 pips and your SL is 30.
My point is very simple: the expectancy is given by a combination of 2 factors - the RR ratio AND the % of winners. Merely having a better RR ratio doesn't make a system profitable. You have to actually test various pairs of RR on your charts and pick the combination that leads to the best expectancy. There are systems that work very well with a 5:1 RR, and others with a 1:5 RR, because the % of winners is so different.
I tested the 10 pip target, 30 pip stop loss combination on Nina's entry and the % of winners was over 80%. Please visit the link I posted in my previous message and enter 0.33 as Win/Loss and 0.8 as Win Prob, and see what a nice curve you get. Please test your suggestion of 70 pip target, 35 SL and see what you get. You will find that it has an inferior expectancy.
And the system CAN be backtested, very easily. The indicators used like EMA don't back adjust their position. You can simply go back in time on your charts and manually record all entries and exits using a preset of RR and see how it would have performed.
I'm afraid you didn't read my post carefully. Trust me, I know what I'm talking about. I said 6 wins out of 7 trades, not 7 out of 10. 6 out of 7 means over 85% winning probability, and Nina's system has that kind of winning probability if your target is 10 pips and your SL is 30.
My point is very simple: the expectancy is given by a combination of 2 factors - the RR ratio AND the % of winners. Merely having a better RR ratio doesn't make a system profitable. You have to actually test various pairs of RR on your charts and pick the combination that leads to the best expectancy. There are systems that work very well with a 5:1 RR, and others with a 1:5 RR, because the % of winners is so different.
I tested the 10 pip target, 30 pip stop loss combination on Nina's entry and the % of winners was over 80%. Please visit the link I posted in my previous message and enter 0.33 as Win/Loss and 0.8 as Win Prob, and see what a nice curve you get. Please test your suggestion of 70 pip target, 35 SL and see what you get. You will find that it has an inferior expectancy.
And the system CAN be backtested, very easily. The indicators used like EMA don't back adjust their position. You can simply go back in time on your charts and manually record all entries and exits using a preset of RR and see how it would have performed.I think I read your post quite clearly.
Let me get to how the system will perform with 80% Win/loss ratio.
8 wins = 80pips
2losses = 70pips
P/L = 10pips
Averaging about 2 trade a day, that is 40 trades approximately in a month, lets see what we have : 80% profitable
i.e 32 wins = 320pips
8 losses 30pips = 240
p/l = + 80pips
Sometimes in a runaway trend you might not even get a signal for 2 days.
Ok, now how many wanna trade this system?? 80 pips with 80% accuracy?
I think its time to move on.
I agree that both R/R and win/loss are important. We know one part of the equation that its win/loss ratio is good, but what we need is to extract as much as we can.
Please dont get me wrong,, curve looks beautiful. But I doubt I would be trading this way.
There are plenty of guys who are willing to settle for 10pips a day and go back to sleep. I like to make more. Its just my nature.
That being said 10pips a day can make you enuff money to outperform a fund manager.
Anyway lets not juggle numbers around in endless circles. I am sure there is some way to extract more pips.
I will keep working.
My 70pip was just a suggestion, not optimum exit.
However, you just might have suggested something very important. IF we were to trade 3 pairs with same accuracy, it would just do pretty nicely and give very profitable returns every month. Looking forward to reading more on a followup on this kinda exit. I am open minded with a skeptics mind..lol.
Thanks for the link.
Hi,
Updated version of Fisher_org is here https://www.mql5.com/en/forum
Igor
OK, radicalmoses, I understand that most people just hate the idea of getting only 10 pips. But don't forget that you can use a lot size that makes those 10 pip count. It could be 10 dollars, or it could be 1000 or more.
Anyway I am not suggesting that RR ratio because I like it. I hate it too, but what if it just turns out to be the best we can get? I would also like to take hundreds of pips per trade if possible. I am only saying that from my personal backtesting the 10/30 performs best using Nina's signals. I would be very happy to have a different RR pair that yields more, e.g. target = 100 and SL = 50, but so far I couldn't find one with a good expectancy (I tested 4 different pairs). If you or anyone else can come up with a better exit for this system please share it. Building an expert advisor would make this sort of backtesting much faster, and it can be optimized to determine the best values for SL and target. My programming skills are not good enough to do it, but maybe someone else can write it.
OK, radicalmoses, I understand that most people just hate the idea of getting only 10 pips. But don't forget that you can use a lot size that makes those 10 pip count. It could be 10 dollars, or it could be 1000 or more. Anyway I am not suggesting that RR ratio because I like it. I hate it too, but what if it just turns out to be the best we can get? I would also like to take hundreds of pips per trade if possible. I am only saying that from my personal backtesting the 10/30 performs best using Nina's signals. I would be very happy to have a different RR pair that yields more, e.g. target = 100 and SL = 50, but so far I couldn't find one with a good expectancy (I tested 4 different pairs). If you or anyone else can come up with a better exit for this system please share it. Building an expert advisor would make this sort of backtesting much faster, and it can be optimized to determine the best values for SL and target. My programming skills are not good enough to do it, but maybe someone else can write it.
Thanks, atlast we are on the same page now. 10pips a days is a traders paradise, but it sucks to get 10pips and watch the market go up by 100pips more...lol. No matter how hard we try and stay neutral,, our emotions just dont deal with it. I will be happy if I can find a middle ground, say 30-40pips a day?? My programming skills are not that great either and I guess we will have to wait for a blessed soul to do it for us. Meanwhile, some one suggested CCI for confirming the entry,, however I think it can be used for exit and help us reach our target.
Try plotting 14 period CCI on the chart and use it as O/B and O/S levels to exit. IT looks great on the chart to pin point exits. See how the peaks and valleys coincide with the tops and bottoms of the moves. Here is a chart if anyone wants. Just an alternative till I find something better.
I know keris, I said I wouldnt use discretion,,lol.Sorry, I will put my foot in my mouth.
BTW,, no signals today yet. Its gonna be a long wait.
catfx50
can someone please please tell me what just happened on the gbp to have it jump that far ????? from 1.7825 to 1.7872 ????? was there some sort of news????
pat
GBP get close to S1 which is 1.7817. News will come out only at 15:30 GMT+2