Trading Code is Open: ST Patterns of the Forex and Futures Exchanges, 100% Profit per Month, Proven Market Strategy, Robots, Scripts, Alerts by Vladimir Poltoratskiy

Author:Vladimir Poltoratskiy
Language: eng
Format: epub
Tags: forex, futures trading, forex trading, day trading, currency trading, forex strategy, forex trading strategies, forex for beginners, trading forex, fx strategies

The Profit Target Order

The Take Profit order, also called Profit Target, is set after the position is opened. The Profit Target should be set at a distance from the opening price that is a multiple of the distance to the Stop Loss. Back in the stylized model in Figure 12, and in the remaining examples, the ratio of profit to loss will be taken as three to one. In many trading books this is called reward-risk ratio and written as 3:1. Larger values for this ratio can also give positive results, but they require the trader to have additional patience, and they make the equity curve less stable. You can experiment with this ratio for yourself, but definitely do not set the profit target at the same distance as the stop loss because that will surely lead to a steadily losing system.

On average, more than half of the trades in this ST Strategy are winners. According to brokers’ statistics, successful traders win only about 40% of their trades. You might wonder how that is possible. The answer is a simple mathematical formula called expectancy:

Expectancy = percentage of winning trades * average winning value – percentage of losing trades * average losing value.

To illustrate, suppose you make 10 trades where you lose $1 seven times (right at your stop loss), and you have three winning trades that earn $2, $3, and $4. Add it up: you lost a total of $7 but won $9, so you are ahead. You might complain that you aren’t ahead by much, but don’t worry, you can work with such a system by either increasing your trade frequency or your position size, or both. The point is, you must have an expectancy greater than 1.0 to be profitable. OK, there are actually two points here. The second point is that the winning percentage alone does not determine if a trading system is successful. In the example just given, the win rate was only 30%!

Losses in the market are as natural as inhaling and exhaling. Regardless of your overall winning percentage, it is very important to strictly limit your losses by determining in advance the percentage of each single loss you can tolerate. But it is equally important to receive all of the target profit on every trade. As soon as we enter the market, we are already losing money on price slippage and the spread (or commission). Obviously, a system with a reward-risk ratio of 1:1 is doomed to failure.

For most people, taking losses is psychologically difficult. Therefore, some players choose strategies with a high percentage of winning trades and place Stop Orders far from the entry price. If the possible loss exceeds the planned profit, then in the case of several unprofitable trades in a row, you will have to replenish the deposit. You can quickly tell if a trader understands his craft simply by looking at the ratio of profit to loss in his trading system.

In all the ST Patterns presented here, the Target

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.