Any examples of a trade with P/L ratio of 3:1 or better?

I'm just looking at my trading strategy and am looking at past technical data for the s&p500 since 2004 Jan. I'm finding that I keep getting a P/L ratio of 1:1 or worse which is no good. Am I analysing something wrong here or do people look more at equities rather than Indicies to get a 3:1 P/L ratio?

Any example would do. Just trying to get my head around a few things.

Viks

vchohan said:

I'm just looking at my trading strategy and am looking at past technical data for the s&p500 since 2004 Jan. I'm finding that I keep getting a P/L ratio of 1:1 or worse which is no good. Am I analysing something wrong here or do people look more at equities rather than Indicies to get a 3:1 P/L ratio?

Any example would do. Just trying to get my head around a few things.

Viks

Click to expand...

Oh dear.

Perhaps your strategy rather than the instrument may be less than perfect.

buy oil at $40,stoploss $0, target $120 dont say i never gave you anything for christmas

Let's say for example I bought the S&P Nov 2004 at 1147.3. Stop Loss at 1059.7. So the spread there is 87.6.
I'd need the S&P to hit at least to hit 1410.1 which happened Dec 2006. That's two whole years!

Am I looking at the wrong markets?
Surely there are markets you can get a 3:1 P/L within a few months?

There is nothing wrong with the S&P. You are looking at it from the wrong way. Go back to the drawing board and read more....

Would you, for example in the case above, lower the gap between the stop loss and the buy price?

nope i would lower the time frame i use to find a trade, to one which doesnt involve a couple of years for a 3/1 win considering you could find something with similar odds a million times on the snp in those two years maybe thats just me though and ive got the idea all wrong

Give me an example

ive got a little story, which someone might find interesting, when working for a bookies one of the more animated chaps told me how in his 40 years as a bookie manager the customers he disliked most were a group he referred to as the "4/1 crowd". They use to come in and start on either horses or dogs picking 4/1 chances, sticking £100 on them, as soon as they got a winner they would stop for the day. If the first 4 didn't win, they would increase their stakes to £200 etc etc. He said the most he ever had to take off them for one bet was £400, when not only did they get back all their loses, but also left with a tidy profit and the manager F'in and Blindin. In the end he had to refuse to take their bets after a few weeks of them cleaning him out. Doubt anyone found that as interesting as i did maybe because it sounded better coming from a character, who everyone use to refer to as Mr. Bean.

vchohan said:

Give me an example

Click to expand...

http://img.skitch.com/20081222-p64kfy7pgy8bmhmek31eswp2r6.jpg

inside bar at an extreme low, divergence on macd, lower low on less volume etc, plenty of reasons to take this.

10 or so ticks risk, depending how long you held this it would have got you way over 30 ticks.

vchohan said:

Give me an example

Click to expand...

Go and find your own examples, there are plenty out there....

Ok.... just to say some people on here are rookies.

Tried to look for some examples but with my strategy am failing to do so.

Thanks for your help though.

vchohan said:

Ok.... just to say some people on here are rookies.

Tried to look for some examples but with my strategy am failing to do so.

Thanks for your help though.

Click to expand...

I assume you didnt design the strategy (cos if you did, you'd know what its trying to achieve).

Its not really necessary to achieve 3:1, 1:1 or even less can still be profitable, perhaps your strategy is based on achieving a very high hit rate at 1:1 with far more winners than losers. You cant just consider the reward and risk in isolation, you need to consider the win rate as well.

Perhaps if you tell us a bit about the setup your using, and post a few charts people might be able to give a bit more advice.

The Myth Of Profit/Loss Ratios

It sounds sweeter coming from the lips of grace cheng

Hey I'm new to this so read at your own risk! In your example you mentioned a trade that would take 2 years to make 3x profit to risk and you seem to be struggling to understand how you could do this on a smaller time frame. The following is not a trade I did take, nor would take, Just an example of how you could trade looking for 3x profit to risk. So on the 1 hourly charts we have a stock that appears to be trending - its made higher lows and well, not really made higher highs but this is just an example. Say you thought yesterday (22nd) that it had made a new low and was finding support at the trend line I've drawn in there. You could enter a long trade here, lets say we enter at about 385 (I've drawn a horizontal line there). You then pick a point where you would deem the trade to have failed. I.e. If the prices moves to this point, it has not found support at the trend line and your trade has failed. Lets say we choose 375 for this. 10 point between your entry and stop loss and you have an initial target of 3 x your risk (3x10=30). So we have a 30 point target. 385+30=415 so we want our trade to go to 415. As you can see it nearly reaches this price on the day and it may well do today (who knows). You can do this on smaller time frames too but you always need a reason for entering the trade. The reason in this case being that we thought the stock would find support at the trendline. Hope this help. I'm sure other members will point out if this is a bad example. Good luck,

Sam.

Rossini said:

Go and find your own examples, there are plenty out there....

Click to expand...

Plenty of Hindsight examples.

Split

You have to adapt your strategy to fit your examples.

I'm inclined to wait and see what I have made and keep my win rate to, at least, 1:1 by using a stop loss. That is easier said than done but, even at a loss of little more than the brokers spread I find that I stay ahead of the game---not on a daily basis--- but on most weeks/months.

3:1 rewards are there but so are the potential losses and more of them. You have to go go for a lower RR rate , IMO and, as zupcon suggests, improve the win rate. It's a guerrilla war, if you attack the market and stay in too long, the market will get it back.

Split