Using Fibo to define resistance levels?? What for you make the simple process complicated? Resistance levels are obvious points on any time frame. Instead of using Fibo’s in that way it can be used for measuring strength of trend comparing and deducing average value.
Just going back to your original post. Without knowing your trading style, plan or goals its hard to point you in the right direction.
Here are a few of my personal views on some of the comments I have read so far.
First if it ain’t broke don’t fix it. At a 56% win rate with RR at 1:1. you already have a solid strategy. Lets not change that. Rather lets try and figure out why there are losing trades. Example, if you trade with a smallish SL say 20 or 30 pips and your trade is open at the time of a major news event then there is every chance it will be stopped. If you find this is occurring then maybe a good exit strategy could be to simply close the trade prior to the news event.
Letting profits run, translated, greed. Cutting your loses short, translation, fear. Two powerful emotions that will ruin any traders account. By default when you set your SL and TP you are saying this is how far I will let my profit run and this is where I will accept loses. My belief is this saying was invented by marketers. Like a casino, brokers know that the longer they keep you in the trade the greater your chance is of losing that trade is. Have faith in your system
Fib lines and retracements. Again another system exploited by marketers. Trying to predict how far the market will move is another newbie mistake. No-one knows. How many have been stopped out by using a fib level only to then watch the market move back in their direction or miss their TP by one pip. Plenty. Drawing fib levels on the chart is such a subjective exercise and as I said prior we tend to draw them so we can see what we want to see, therefor get it wrong. One final thought, the golden ratio and Fibonacci sequence is a phenomenon of nature not man. The Forex market is not natural.
Is your system a trend following system. Trend is just another term for market bias. Are your losing trades, traded against the trend. Remember that the market in motion will continue in that motion until such time as a significant event occurs to reverse that motion. That significant event will be a fundamental event and only the major players can influence that reversal. There is not a technical indicator out there that can predict this.
So in summary my view is that your time is better spent on post trade analysis to understand why your trades lose rather than developing different exit strategies. Hope this helps
yes, I agree that “if it ain’t broke don’t fix it.”
I have been very cautious and not making any modification to my trading system easily, but still, continuous effort is putting in finding ways for improvement. Any changes will have to supported by sufficient historical data to prove the effectiveness to enhance profitability.
As I stated last post, there is no existing method to predict the magnitude of trend. Thus when my system indicates that a trend is starting, I set my profit target at 1-1 of the stop loss, which is the minimum required to achieve the positive expectancy. But it sometimes make me feeling uneasy because none of my books teaches to set profit target this way.
1-2 and 1-3 profit target didn’t work according to backtest. As for setting profit target at resistant level, the resistant may be too significant and make the price reverse before hitting your target. 1-1 profit target is the most profitable exit strategy by far, no changes will be made unless I can convince myself. ( I’m very hard to be convinced)
Figuring out why some trades failed is not easy, it may due to unemployment or non-farm payroll released, but for most of the time, it just failed. Still, sustain trough the worse period, sooner or later the edge will get back close to expected value. Another thing is I couldn’t really measure the effect of big news on my trading.
I get a pretty decent result from trading this method (ie significantly better than expected result). I trade only hourly charts on usdjpy , except sleeping I’ll check my charts every hour for almost every waking hours.
bobbillbrowne,
There is a major believe that one should follow the main trend during trading. My question is how to determine the validity of the above statement. For example I put a ma on daily chart, go long only when price is above daily ma and my signals agree, vice versa. From my research, the chances for both direction to succeed is about the same, when you think of reducing trading frequency by 50% you have to think twice. This will reduce your trading income ALOT.
I have develop a reliable trading system, it’s been profitable since I put this method in live, but I’ll not stop improving it.(or at least trying). I have my focus on exit strategies now, although no changes will be made any time soon, but I believe it plays an important role to enhance my overall trading success.