The second sacred cow: "Grow profits, cut losses" - page 4
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a complicated system. If the system has a fixed stop, then the "cut losses" principle takes care of itself, but how to implement the advice "grow profits"?
We should not close upon reaching a fixed profit, but upon the TS signals of a possible reversal.
By the way a fixed SL is not good either.
Add to this: The exit signal must be an entry signal in the opposite direction.
It is not necessary to make a reversal system. The exit signal may not be an entry signal to the opposite side, but the entry signal to the opposite side must be an exit signal (if there is an open position).
To close not on reaching a fixed profit, but on the TS signals of a possible reversal beginning.
By the way, a fixed SL is "not good" either.
a protective moose is needed in any case (from technical failures and news gaps), and the moose should obviously be at least halfway to the margin call
cutting losses is a must
i.e. i personally have only managed to make a semi-ideal (sometimes based on an indicator, sometimes based on a stop).
Then you have to at least determine - how small can we afford to put a fixed loss
i'm sure it depends on the accuracy of technical analysis i.e. a small moose is not good for rough analysis
it depends on liquidity and spread, but we have no control over these factors.
a protective moose is needed in any case (from technical failures and news gaps) and the moose should obviously be at least half way to the margin
it is necessary to cut losses unequivocally
i.e. i have only managed to reach a semi-ideal (sometimes based on an indicator, sometimes based on a stop)
as a rule, you need to at least define - how small we can afford to put a fixed loss
i'm sure it depends on the accuracy of technical analysis i.e. a small moose is not good for rough analysis
it also depends on liquidity and spread, but we have no control over these factors.
I do not question the need to use SL, I also think that it should protect the deposit in case of force majeure. Personally, I draw SL, but not on a fixed distance, and in calculated trajectory. Of course SL is not moved under any circumstances.
It is not necessary to make a reversal system at all. The exit signal may not be an entry signal to the opposite side, but the entry signal to the opposite side must be an exit signal (if there is an open position).
Your truth. If we add trailing TP and SL, which will cut off negative profit and prevent from a gap downwards, we obtain a normal TS. Once again I insist that TP and SL triggering is force majeure.
Well, let's put it this way: the entry is a strong signal, really strong so you can't go wrong. The input is rare, but accurate.
And the exit is a signal of medium strength, but qualitatively different than the entry. This is to prevent the reverse movement from eating up too much of the paper profit. The purpose of the exit is different than the entry.
Here's the thing about "strong signal", "medium strength signal" etc... After all, what is signal strength? Imho, it should be some non-discrete value X, calculated in the program, which can be both positive (buy signal) and negative (sell signal). I.e. we kind of calculate the potential at this point. And based on this, we already determine the direction of entry and calculate volumes of transactions (proportionally to X).
For example, we have X= -1, so we open SELL with volume 1.0. Then after some time we have X= -0.6, so we have 0.6 SELL lots remaining in the market, so we close 0.4 lots from the previous order.
I.e. exiting the trade is essentially no different from entering it on the opposite side. There is no "qualitatively different" signal here. The question is only the strength of the signal. And it seems to be qualitatively different only through our perception.
Once we close the position, it means that we believe that the price will not go further. And this means that it will go in the opposite direction with a certain probability. This share of probability is determined by the value of X
Here's the thing about "strong signal", "medium signal" etc... After all, what is signal strength? Imho, it should be some non-discrete value X, calculated in the program, which can be both positive (signal to buy) and negative (signal to sell). I.e. we kind of calculate the potential at this point. And based on this, we already determine the direction of entry and calculate volumes of transactions (proportionally to X).
For example, we have X= -1, so we open SELL with volume 1.0. Then after some time we have X= -0.6, so we have 0.6 SELL lots remaining in the market, so we close 0.4 lots from the previous order.
I.e. exiting the trade is essentially no different from entering it on the opposite side. There is no "qualitatively different" signal here. The question is only the strength of the signal. And it seems to be qualitatively different only through our perception.
Once we close the position, it means that we believe that the price will not go further. And this means that it will go in the opposite direction with a certain probability. This share of probability is determined by the value of X
That's convincing. But in my system the output is not symmetrical to the input. And I'm not going to make it symmetrical. And that's not how X behaves. At the entry into the sell it may be, say, -2, and then it jumps (not monotonically at all!) up to positive values. But I close only at some positive values, not earlier.
It's as if, after entering the pose, her power may "evaporate" along the way - but it won't be an exit signal. My exit is a much weaker one. So entering in the opposite direction will still have to wait.
There's a lot of thinking involved. It all depends on how we calculate this X, and on the system itself, of course.