Even though I’m a grid trader by nature I read a lot of non-grid posts and was recently curious about support and resistance… So, I’ve set about experimenting with this strategy that is completely alien to me and have had to do some research on it.
My query is this…
I noticed during my search that a lot of advisers here are suggesting a fixed risk/reward ratio but surely this doesn’t work because if I’m using a support and resistance strategy then the tp/sl is determined by those levels… Anything else must just be a arbitrary number.
Agreed. You can’t force a decent RR, you take what you can get from the market. Or to put it another way, you take what the market gives you.
If you insist on a RR of 1:3 for all your trades then you need to have the patience to wait for those setups. Otherwise, you can go for 1:1 or 1:2, keeping in mind you need a higher win percentage to survive with 1:1.
S/R can be very subjective because there can be so many different levels, and it also depends on the time frame you’re looking at, and whether or not you use the wicks (I do for the most part, simply because price has been there).
Here’s an example of a trade based on SR levels on the 2H chart, where if it goes my way I would see a R:R of 1:3:
Never used risk reward as a criteria in my trading ever.
When I get a signal I take it - sometimes they work sometimes they don’t.
I do however have a fairly robust exit strategy that helps me capture the meat of short term moves, and allows me to bail if the trade is wrong.
Also I do monitor how much my % r is
But attempting to figure out what your % r
is going to be before you enter I believe is fraught with psychological risk, and doesn’t let you ride the large winners because your out at 2 to 1or something equally as poor
In today’s volaile climate, price action around Supply and Demand zone breakouts are tradeable. As for RRR I never consider it. Either I’m cutting losses early or letting winners run to breakeven, taking 80% profit and letting 20% run from a breakeven S/L
I’ve found - whatever they write in books - top traders scalp off profits ranging from 50% - 80% and let the balance run from breakeven. Of course they’re trading in $0000’s, not a small account like most of us…
Adherence to r:r ratio arises from over-concentration on the single unique trade - taking advantage of an unconnected isolated event, possibly a lucky opportunity - and getting out quickly before it reverses. It also confirms the belief that the entry signal predicts the profit potential, therefore that more profit comes from better entry signals, which leads to the demand for ever more exotic candlestick patterns and technical indicators. Further, it suggests dependence on one good chart with one good entry pattern and to hell with whatever else the markets are doing.
All helping explain why new traders who follow these “rules” don’t make money.
I think you can have a fixed risk for sure and aim for a certain reward that fits into your strategy. You can’t “know” before hand if it will hit that reward level but you can aim for that.
The guy who taught me how to trade drummed into my head early on, “Ya gotta aim for at least 2:1, that way you can be wrong more than 50% of the time, and still make money”. lol…what a fkn dunce he was. Still trying to shake off that mentality, and plenty other crippling habits he instilled in me to this day.
Path of Least Resistance, between Horizontal Supply and Demand zones is where it is at. If your RR between your entry point and the start of logical resistance against your trade is 1.72:1, then fkn well take 1.72:1, Don’t go stretching your TP out just to make 2:1, or deepening your TE level lower than it logically needs to be…end up with an awful lot of winning trades turning to losers or scratchers that way, or with missed trades due to having entry too deep in order to buff up rr, or worst of all from sitting to deep with entries, only ever getting filled on the losers.
If you mean ‘sitting too deep’ with entries, then I am not sure where the jargon is.
If you mean the other ‘jargon’, then if you don’t understand what it means, then you are not a trader, and last I checked, nobody is paying me to teach you.
Touchy! Jargon was a poor choice of word, sorry, I did not mean to ruffle feathers. I was simply interested in what was meant by ‘sitting too deep with entries’ since I read your post as possible words of advice —my mistake perhaps— I certainly was not asking you to teach. Be well.
It was more the emoticon that had me questioning to the tone of your post.
Yeah, ‘Sitting too Deep’ with entries is exactly what it says on the tin. A classic one is the 61.8% retrace entry. Every trader and their dog ‘knows’ to place their entries on a 61.8% retrace entry when following a trend…
…so what does the market do? It retraces LESS than 61.8%, on most pull backs. Of course, when the trader is wrong, and the market is going to move against his anchor point, from which he is drawing his 61.8% retrace, then he will get his ordered filled every single time.
Thus sitting too deep with entries, means when you are right, you usually miss the move, sometimes catch the move, but always without fail, get run over when you are wrong.
Hi,
I’ve been around Forex for about 15 years and have not heard of that expression. I just googled ‘Sitting too Deep’ with entries and the first few hits were about sitting upright not to get a bad back.
Well, it isn’t really trading jargon though is it.
It is just using everyday English language to explain a phenomena that most traders will instantly be able to recognise, namely frequently missing good trades due to placing entries at too large retracement levels, thus experiencing a disproportionate number of losers, as a trader who buy’s on retraces, will always get filled on his losing trades.
I’d say if you know everyday English then good chance you’d know a Mondeo, and if you were to meet a Mondeo man then a reasonable chance that English would be his first language.
Good point ! - But as in all things “trading” - It depends ! - in this case it really depends on the timescale you are gambling on.
On an hourly or daily - yes you might be pressed to make a 1:2 work - especially if (as I do) You tend to be “In too early - Out too early” - but on a weekly or monthly - you may equally well be able to double the account for a 10-20% risk !
Yes, for the past 65 years.
I do agree with you, by the way. Taking trades at levels that are popular with conventional setups is asking for trouble. The banks don’t have to work too hard to take out all the stop losses, especially if there is “news” where they can do as they please and not have to explain price action by any means other than "it was the news that caused the price to [go up / go down / stay the same].
Here is a Sunday joke to lighten the mood, with reference to ‘Mondeo man’ and everyday English.
Two nuns were having a pleasant walk in the countryside - when they were accosted by a flasher. Of course, they went to the police station to report this dreadful incident. When asked by the woman police officer -
“Did he have an erection ?” They replied -
“No, he had a Cortina”.
but I’d love to know what you mean by that
