Take Profit at Good PIP

Hello Japikid! You are welcome here! But please don’t set your TP positions blindly! You need to study on market specially support/resistant levels! I set my stop loss and take profit positions according to the neatest support and resistant levels! In addition, you may try to use higher profit ratio like 1:3, 1:4 and more (minimum 1:2)! Don’t go for 1:1 profit ratio! Best of luck for your trading!

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That’s [B][U]dreadful[/U][/B] advice - [I]really, really[/I] bad. :58:

Sorry to be so outspoken, but trading is difficult enough for beginners/learners, without having to contend with nonsense like this, that’s likely to stack to deck even further against them, in a field of activity which has such low overall success-rates to start with.

R:R’s of 1:3 and 1:4 are [U]terribly[/U] difficult for aspiring traders to handle, because their win-rates, understandably, tend to be so low that the position-sizing (one of the most counterintuitive but important aspects of trading) is incredibly difficult for them to work out, without plenty of judgment and experience.

For inexperienced traders, aiming for a 1:3 or 1:4 R:R ratio is imposing a serious additional handicap on an already difficult situation.

It’s also going to reduce their trading-frequency dramatically (just when they most need experience), and disillusion most of them.

A 1:1 R:R ratio is [I][U]far[/U][/I] more convenient, sensible and beneficial to them. It makes the calculations and position-sizing much easier, reduces their risk of blowing accounts through impatience, and [B]hugely[/B], [I]exponentially[/I], reduces the sample-size required for their results to achieve any statistical significance worth talking about.

In my opinion, people advising newbies to try to trade with a 1:3 or 1:4 R:R ratio are typically just repeating what they’ve seen others saying, think that “it sounds good” and “seems to be widely recommended”, and that’s [I]exactly[/I] how [B]bad[/B] advice like this becomes self-perpetuating.

I’m currently putting together a plan and have a query about position sizing.

Part of the rubric I want to enforce is working backwards with each trade. Therefore, when the market conditions are right and adhere to my rules for a trade being opened, I will draw a P/L on tradingview based on my analysis.

The position size for the trade will be deduced by dividing No. S/L pips by 1% equity. As long as I stick to a rule of at least 1R on the P/L then I’m not really looking at the profit, and more the potential loss. Does this seem overly cautious? Too much focus on losses? I just feel if I psychologically attune myself to potential losses within the microcosm of each trade instead of the profit potential, then I’m never going to risk too much equity.

Interesting to hear your ideas about 1:1 R being convenient and anything over that being bad advice for beginners- I was initially thinking about no less than 2R in my plan, but I guess it really depends on the market fundamentals and analysis within each market at the time of tra

The position size for the trade will be deduced by dividing No. S/L pips by 1% equity.

This would actually be the other way around. 1% of your available equity divided by number of pips which you want to use in your SL (+average spread if you want be correct)

As long as I stick to a rule of at least 1R on the P/L then I’m not really looking at the profit, and more the potential loss.

Yes, this is a great way to start. Hence risk preservation (knowing what the worst case outcome will be)

I was initially thinking about no less than 2R in my plan

Personally, I would not look at anything less than 2R profit targets, this would he highly advantageous as 1R would require a fantastic win rate of over 50% (net of the cost of trading, so over 50% in reality) This may look easy on paper, in reality it’s not so much.

As a side point, don’t just set a profit target of 2R because ‘that’s what you need’ - rather tune it into the market and ensure it is actually possible, rather than using 2R as an arbitrary target. This is perhaps where the jump becomes clear from being a newbie to more experienced - potentially why Lexy suggested sticking to a 1R profit target [B][U]to start with[/U][/B]

Good work, and good thinking.

You meant to say “dividing 1% of your equity by the number of SL pips”, I think? :wink:

Absolutely not. It’s completely normal. That’s the correct way to work out your initial position-sizing (adding to winning positions - if/when you want to get into that - is another matter, and done after moving the stop-loss anyway).

No - not at all. This is[I] exactly[/I] what you should do. Position-sizing is about risk management. Dividing 1% of your account (if that’s your chosen risk parameter - and it’s often a good one) by the number of pips to the SL is what [I]should[/I] determine the position size. :cool:

It does.

But what matters is to go with whatever kind of R:R ratio is predicated by how you’re trading, and whatever R:R ratio you’ve proven to have a genuine edge, from backtesting, and forward-testing on a demo account.

Aiming for a higher R:R (e.g. 2+), especially when you’re starting, can make position-sizing hard, and can also produce long losing runs, which are the last thing you need when you want a relatively smooth equity-curve.

(It’s difficult to generalise, without knowing more about exactly what you’re proposing to do. For some people, for example, the target will be determined by approaching a level of expected support/resistance, a “round number”, or whatever.)

Nothing you’ve said above sounds “wrong” to me, anyway. (Many of my own trades have a 1:1 R:R, too.)

Edit: sorry - I was typing while Jezzode was posting and had not seen his reply above. :8:

I’m just a loose cannon Lexy, 1R trades don’t entertain me much these days. Then again, I’m very picky on when I can trade! Maximising profit or minimising risk, it’s always a tradeoff :slight_smile:

I agree with Carlos. You have to continue to use your strategy if it is profitable and increase your trade size.

Yea, I wrote that kinda late on and wasn’t thinking straight, but that is ofc what I meant to type :).

I’ve started using a position size calculator on MT4 to try and stick to that 1% rule, as sometimes that heat of the moment thing for opening a position can make those lot size calculations frantic, especially when dealing in pairs not at base or JPY. I’m still learning to get my head round them. It’s quite useful to be able to know exactly the lot size just by punching a few numbers in on my calculated risk factor, SL and TP.
Again I am really trying to psychologically force myself not to even look at the potential profit and just trust that if my analysis is right and position is at least 1:1, I can just focus on that 1% risk figure.

I realise there is also one here on babypips as well (calculator), and even a section in the school on position sizing which I’ve glanced through to get the gist of, but I’m actually still in the kindergarten…I am a kinaesthetic learner so need to be doing trades and trying out to pick things up as I go, whilst slowly working my way through the school.

How many people add the average spread to their risk % as Jezzode recommends? Interesting idea which I hadn’t thought too much about just yet.

This comment was more on the assumption that you are only ever looking at either the ask or bid price quote, as most platforms just display one of these for convenience.

Therefore if you want a true stop loss level you will have to incorporate the average/targeted spread for such currency pair.

Stop loss in pips + average spread = gross risk in pips.

In your example, 1% of your equity is divided by this number to gain your position size.

Hope that helps.

Wow, that is more than I can comprehend. I made it through this book and looking for more on reading and understanding the candlesticks. Any recommendations?


Plenty …

These are the books that most helped me, and enabled me to trade profitably …

Profitability & Systematic Trading (Michael Harris)

[I]Trade Your Way to Financial Freedom[/I] (Van K. Tharp) - an outstanding starting-point

[I]Beyond Technical Analysis[/I] (Tushar S. Chande)

[I]Understanding Price Action[/I] (Bob Volman)

The Mathematics of Money Management: Risk Analysis Techniques for Traders Ralph Vince (we all need some reliable understanding of what’s in this book, although not necessarily from this specific source, before trading with real money)

[I]Naked Forex: High-Probability Techniques for Trading Without Indicators[/I] (Alex Nekritin & Walter Peters)

[I]Daytrading[/I] (Joe Ross) (this is an updated re-issue of an earlier book - “Trading by the Minute”, I think it was called)

[I]Trading The Ross Hook[/I] (Joe Ross) (I keep coming back to this one again and again, because it’s simple and logical and helpful, and the whole concept is based on one of the soundest principles of price action trading, namely “buy the dips in an uptrend and sell the rallies in a downtrend”)

[I]A Mathematician Plays The Market[/I] (John Allen Paulos)

[I]Fooled By Randomness[/I] (Nassim Nicholas Taleb - very worthwhile!)

[I]Why People Believe Weird Things[/I] (Michael Shermer) - this book and Taleb’s, just above, are hugely helpful - albeit indirectly - for “understanding what’s going on in forums”!

Trading Price Action Trends - Technical Analysis of Price Charts Bar by Bar for the Serious Trader (Al Brooks)
[I]
Trading Price Action Trading Ranges - Technical Analysis of Price Charts Bar by Bar for the Serious Trader[/I] (Al Brooks)
[I]
Trading Price Action Reversals - Technical Analysis of Price Charts Bar by Bar for the Serious Trader[/I] (Al Brooks)

“Warning”!: Al Brooks’ set of three textbooks is kind of badly written and very badly edited (especially considering who the publisher is), and pretty difficult to plough through, but their content’s excellent, so those are a kind of “mixed recommendation”: I think his online video course is much, much better and more helpful and more approachable, but it’s also more expensive ($250, I think - but that’s still very good value, though, in my opinion, for about 37 hours of instructional videos).

If that’s “too many”, I’d start at the beginning and take them in the order listed above. :wink:

Thanks, that would take me 10 years to read all of that. I understand the basics of the candlestick but want more. Looking for a candlestick and how to use the indicators. Can we narrow it down with what I’m after?
I hope you had that thread saved because that would take a long time to input.
Cheers

If you take out the last 3 books (which are admittedly slow going), I suspect it would take only a few weeks, really.

Some of those are really quite light and easy reading (honestly: not trying to be funny). :wink:

I’m not quite sure what you mean by “looking for a candlestick”, to be honest - sorry. :8:

I’m probably not the best person to help you with anything to do with indicators, I’m afraid: I don’t use them. (I don’t even use candles, to be honest: call me old-fashioned but I prefer “bars” - they do give exactly the same information, though, just presented with a different visual emphasis.) :8:

One observation that might help, though, if you come across them: stay away from Steve Nison’s books about candlesticks (they’re awful). Sorry not be more helpful than that, but in the light of your reply, it seems I understand less about what you’re asking than I at first imagined. Apologies! :8:

I read this same book when I started out and,imho,the free school here is much better

Looking for a candlestick was that I am looking for more eduction in learning the different signs of the candlestick charts. Like short long wicks, skinny fat bars, triangles all there is to know and reading of the candlestick charts.
Thanks

I am using a fib trading strategy that I am practising with. The strategy advises to take profit at the areas where price is most likely to react and number them like profit areas 1,2,3. With the profit area 1, profit area 2 and profit area 3, how do you advise to take profit? Do you advise to close a third part trade at profit area 1 and close 2/3 at profit area 2 and 3/3 at profit area 3 (closing entire trade). Or would you advise to watch the profit take areas (1,2) and move your stop loss to breakeven and let the trade run?

Welcome to the forum.

I would use whichever of those methods you [B][U]prove[/U][/B], through testing, to make more profit than the others over a large, statistically significant number of trades; and I would know the answer through testing [B][U]before[/U][/B] starting to trade.

Anything else is just going to be a [I][U]guess[/U][/I], isn’t it?

And you surely wouldn’t want to trade on the basis of guesswork?! It’s hard enough to make steady profits with proof and knowledge and practice … guesswork leads only to the poor-house.

Sorry to say it so bluntly, but it is what it is … :33:

just got a few questions on stop loss calculations which i am practising on a demo account;

want to trade a mini account 0.1 lot (£1 per pip)

1% risk of an account of lets say £10,000 is £100.

No of pips to be stop out= 16 pips

£100 risk /16 pips =6.25 lots. is this correct? isn’t this a bit high?

I thought the 1.0 standard lot is £10 per pip…Confused. HELP PLEASE!!!

ps Do i put 6.0 lots into volume space of meta-trader as there is not the exact 6.25 lots in the options?

Hi, you’re partly right.
On, say, eurusd a 1 lot trade equates to $10 risk per pip movement.
So, if the spread is 1 pip you start off $10 down and a 9 pip move against you would cost you another $90, losing you your max risk of $100 in total.
A 6 lot trade would cost you $60 per pip movement

Very useful features, in my view, especially for newbies, and experienced traders could also review the basics as they say)