Enter a trade with R less than 1?

Would anyone ever enter a trade with an R less than 1. For example if the setup was perfect for your strategy but the closest resistance or support line for your stop loss is further from the buy/sell position than your potential take profit S/R?

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If price is in a consistent trend I ignore s/r levels (if price wasn’t in a consistent trend I wouldn’t be entering anyway).

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I struggle with this issue too. Maybe this is an issue more of the strategy than anything else. You know, forcing the parameters of your SL.

I don’t have a clear answer for you on how to fix that though.

I used to put my stops very close to my entry point and sometimes I would get stopped out and I would then take the next available entry point. But this drains your account unnecessarily. As they say, “death by a thousand cuts”.

Of late I don’t worry about RR anymore. If there are several levels close to each other where price could turn I take the first available level and put my stop above or below the last level. This has improved my win ratio and it has allowed me a more hands free approach to trading. It is difficult for me to monitor my trades since I’m at work all day.

The concept of RR may be one of those things that needs to be re-evaluated IMO. It is useful if you don’t know where price is going and if you use a fixed ratio for TP. But I never do that. I have a TP order or scale out orders in place before hand in most cases.

EDIT: I recently took a EUR trade for approx 35 pips and my stop was >90 pips away from my entry. Total risk was about 5% if I would have been stopped out.

Anyone can enter any trade at any risk to reward but the question is: is that method profitable in the long run. Only you can back test your strategy and check it. If it works out then fine crack on. As long as you make money, no one can say you are wrong. But if you dont know whether its profitable or not then that is wrong and you should find out before trading like that. Weekend coming up, use it to do some back testing and stats analysis. :+1:

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My strategy cannot be backtested, at least not automatically. I will be journaling it though and I’ll know in time whether or not it will be profitable. But it will be difficult to compare it with what I have been doing in the situations described. A comparison is what is required to determine whether I should continue to use it or not.

I have also missed potentially profitable trades because I would place my entry order at the last available level, based on my analysis and many times price does not make it to that point but does make it to the previous levels.

I’ve tried to write an EA for my strategy but it is very difficult to do that. I gave up after writing copious amounts of code and still falling short of describing many edge cases which we as humans can spot right away but attempting to codify it in software is a tad difficult. And I keep refining the strategy so it gets even more impossible to capture it in code.

If I give up my obsession for being precise i might be able to write a partial EA that will automate my entries and exits if I mark out the regions for it in advance but what’s the fun in that?

So, as you can tell, it’s a little more complicated than it might appear at first blush. I will be exploring AI and machine learning algorithms once I can give up my job and trade full time.

If you dont have rules to enter by, means you are a discretionary trader. Therefore you wont be able to back test as you dont know what you wouldve taken. Looks like you’re still working through it so let’s see if you are able to refine it. You can get away without stats for discretionary trading but im guessing your using technical analysis and in that without stats analysis how can you be confident it works? Best of luck with it.

I do have rules for entry. They are based on price action not on TA. What I described above relates to a particular case where there may be multiple possible entry points all closely placed together. It will be difficult for me to explain it without giving you background info and showing you charts to walk you through a typical scenario.

I do refine the rules as I learn more and experience teaches me to recognize additional intricacies and micro patterns.

No further action on this thread @joeword12 but I wanted to come back and add a further thought.

Which is -
ignore r:r
don’t set a TP on a trend-following position
stay in the position until you get a weak daily candlestick on the chart
the weak daily bar is both an exit signal and a re-entry signal
exit at the close of the weak day and set a new entry order at the high if in an uptrend, the low if in a downtrend
Repeat, repeat, repeat

If the significant forex charts were showing more “trendiness” I would recommend pyramiding but for months now this has been an unlikely prospect.

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Hey tommor.
Interesting technique and it makes a lot of sense. I’ll 100% take that in mind when looking at entries next week. Thanks a lot!