Timeframe - bottom line $ profit/loss

JTrader · Jul 11, 2007

Hi

If a trader were to switch from trading a strategy on lets say a 60min chart, to trading basically the same approach on daily charts, they will likely need to adjust their SL size, and trade/stake size.

Because their profitable trades on 1440min charts, will catch more pips/points than on the 60m charts, at first sight, one might expect overall profit levels of each individual trade to be around the same levels, regardless of timeframe.

Sometimes, on a 60m chart, a strategy can be racking up a series of losses, but on a 240m chart at the same time, the strategy may have been in one single profitable trade for the duration etc......

So lets say you switched from trading eg. USDCHF on a 60m chart, to trading basically the same approach on a daily chart, adjusting maximum SL size, stake size, and baring in mind profitable trades will catch more pips. Over the duration (of lets say 2 months or more), can one expect to attain the same level of $ profit levels?

At first sight, i would say it would be possible, to attain the same level of profit per instrument traded, because the same $ profit level per trade, should be fairly even, when still only risking the same 1%-2% capital per trade.
But then you also need to consider the consequence of fewer trades within a space of say 2 months, on the daily charts.
But then as i mentioned, while a 60m chart might be racking up a series of losses, a 240m chart (longer timeframe) can be in one profitable trade......

There seems a lot of variables in play here that might affect bottom line $ profit levels, and gaging this does not seem easy.

If switching from say 60m to 1440m, due to there being less trrades per instrument on the higher timeframes, would the only way to be able to attain similar bottom line $ profit levels be to trade more than one instrument at the same time (whereas on the 60m chart you only needed to trade the one instrument to attain that level of bottom line $ profits)?

Has anyone gained experience of drastically increasing timeframe from something like 60m to 1440m on an instrument, but basically trading the same strategy with different parameters?
If so, what effect did it have on your overall bottom line $ profit levels?

Many thanks.

JTrader · Jul 11, 2007

If trading from 60m charts, you can tally up $ profit/loss at the end of the day or week.
If trading from daily charts, you need to tally up $ profit/loss over maybe a month or more.
If trading from weekly charts, you need to tally up $ profit/loss over maybe a year or more.

But what i am getting at is, at the end of that day/week/month/year, regardless of timeframe, should $ profit/loss per single instrument traded, average out at around the same $ profit/loss level for each day/week/month etc. of the period covered?

Therefore if you trade GBPCHF on 60m charts, and make 300 pips per month, using 40 pip SL's. If you increase timeframe (to 120m, 240m, 480m, 1440m etc.) and adjust your numeric paramters (SL, trade stake size) accordingly, should you still be able to make the same $ profit level as you were making when trading GBPCHF on 60m charts, and make 300 pips per month, using 40 pip SL's?
Or does the fewer trade signals on the longer timeframe mean that in order to achieve the same profit levels that you attained on 60m charts, you will now need to trade multiple instruments/pairs consecutively?

Cheers.

trendie · Jul 11, 2007

unless you are using an automated execution, the comparisons are not strictly equivalent.
whereas an EOD system trades "all" the time, trading a 60-mins system perhaps is only run manually while the trader is awake, hence maybe 16-hrs at most per day.
some traders may be selective about only trading during the potentially volatile periods and close all positions at 5 or 6pm.

and of course, the cost of trading, spreads and commissions, remain the same, and are proportionately greater for many smaller trades than for fewer larger trades.

but, conceptually, I believe the principle is correct, as I think the markets are generally fractal.

Hoggums · Jul 11, 2007

JTrader said:
Hi

If a trader were to switch from trading a strategy on lets say a 60min chart, to trading basically the same approach on daily charts, they will likely need to adjust their SL size, and trade/stake size.

Because their profitable trades on 1440min charts, will catch more pips/points than on the 60m charts, at first sight, one might expect overall profit levels of each individual trade to be around the same levels, regardless of timeframe.

Sometimes, on a 60m chart, a strategy can be racking up a series of losses, but on a 240m chart at the same time, the strategy may have been in one single profitable trade for the duration etc......

So lets say you switched from trading eg. USDCHF on a 60m chart, to trading basically the same approach on a daily chart, adjusting maximum SL size, stake size, and baring in mind profitable trades will catch more pips. Over the duration (of lets say 2 months or more), can one expect to attain the same level of $ profit levels?

At first sight, i would say it would be possible, to attain the same level of profit per instrument traded, because the same $ profit level per trade, should be fairly even, when still only risking the same 1%-2% capital per trade.
But then you also need to consider the consequence of fewer trades within a space of say 2 months, on the daily charts.
But then as i mentioned, while a 60m chart might be racking up a series of losses, a 240m chart (longer timeframe) can be in one profitable trade......

There seems a lot of variables in play here that might affect bottom line $ profit levels, and gaging this does not seem easy.

If switching from say 60m to 1440m, due to there being less trrades per instrument on the higher timeframes, would the only way to be able to attain similar bottom line $ profit levels be to trade more than one instrument at the same time (whereas on the 60m chart you only needed to trade the one instrument to attain that level of bottom line $ profits)?

Has anyone gained experience of drastically increasing timeframe from something like 60m to 1440m on an instrument, but basically trading the same strategy with different parameters?
If so, what effect did it have on your overall bottom line $ profit levels?

Many thanks.

I think my thread Backtesting technical indicators will provide some answers to this question.

JTrader · Jul 11, 2007

It is a difficult one, and maybe the only way of knowing for sure is to have made the switch to a much higher timeframe for yourself.

I suspect that to get close to achieving the same level of overall $ profits that is possible trading only one instruments/ccy pair on 60m charts, if trading from 1440m charts, one needs to trade multiple instruments/pairs simultaneously.............due to the lesser number of trades on the higher timeframe, meaning the process of compounding any profits would also be slower, and fewer and further between due to there being less trades on the higher timeframe/s...how many pairs "multiple" pairs equates to, i am not quite sure!

JTrader · Jul 11, 2007

GammaJammer said:
I also think that it's not quite as simple as adjusting a few ratios - you're into the realms of trading on the fundamentals now (as that will increasingly be a factor in the price movements as you move up the time scale).

So imho your whole approach to trading, idea generation etc needs to be looked at, not just your fairly mechanical money management rules. Sadly imho that's probably the simple bit.

Not a reason at all not to do it, just something you might like to think about.

Just my $0.02 as always

GJ

Thanks GJ as always.

I think that increasing TF, has the effect of making the fundamentals LESS important. Taking this idea to its extremes, if you were trading monthly charts, you wouldn't really care too much about the NFP on a friday afternoon once every four weeks or so. I'd be much more worried about exposure to the NFP if trading on a 60m chart, than i would if trading from a 240m chart, and likewise if trading from a 1m chart v's a 60m chart.
And, fundamentals can work for you or against you, regardless of whether using 60m, 1440m or an even bigger timeframe. and theres' no reason to suspect why this fundamental for/against ratio should be any worse than a 50/50 split.

JTrader · Jul 11, 2007

If i do suspect that i need to trade multiple pairs on the larger timeframe to make the same returns as trading one pair on a smaller timeframe, i think what i need to do is backtest several pairs, and for each pair find out -

Average trade length
average pip profit per pair/trade
average optimum SL sized used

From that i can get an overall average of all the pairs tested combined on these 3 factors. From this i can get a better idea of how such a multiple pair portfolio will "on average" perform, and how i can expect my portfolio to perfrom, and through compounding of profits, the rate at which to expect my capital to grow.

jacinto · Jul 11, 2007

GammaJammer said:
Sorry mate but couldn't disagree more. NFP is not the only or even the major fundamental driver of the markets - larger themes like trade imbalance, interest rate outlook, cross border capital flows etc are ultimately the ocean swell that drives the market in its broadest sense. If you're going to start looking at positions lasting longer than a few hours this stuff starts to become important (just ask anyone who's tried to pick the turn in the carry trade recently based on chart patterns).

Just my opinion as usual, but I guarantee you I'm not alone on this one. Take your point about NFP, just think it's an over simplified one.

GJ

got to agree 100% on this one. the larger the timeframe, the less technical vs the fundamental. NFP day becomes only a piece of the puzzle if you trade based on the monthly chart

JTrader · Jul 11, 2007

An advantage of trading a strat on longer TF's is the distance = perspective asspect, and spreading the risk over several instruments that have the most positive expectancy.

JTrader · Aug 17, 2007

GammaJammer said:
Sorry mate but couldn't disagree more. NFP is not the only or even the major fundamental driver of the markets - larger themes like trade imbalance, interest rate outlook, cross border capital flows etc are ultimately the ocean swell that drives the market in its broadest sense. If you're going to start looking at positions lasting longer than a few hours this stuff starts to become important (just ask anyone who's tried to pick the turn in the carry trade recently based on chart patterns).

Just my opinion as usual, but I guarantee you I'm not alone on this one. Take your point about NFP, just think it's an over simplified one.

GJ

Yes i think i can appreciate what you meant.I can see that on a daily forex chart, price is likely to be more stagnant, trading within price ranges/zones, dicatated by the fundamentals.

The fundamentals dictate where the IMF, World Bank, government, UN, EU etc. assert where the currency pairs price should be.

fibonelli · Aug 17, 2007

As part of my learning and observing, I recently decided to look at 30 min charts instead of 15 min charts as I was not comfortable with the excess noise ("wood for the trees").

I can still see the trading setups in the 30 min chart as in the 15 min chart because the market is fractal in nature. I would look at a 15 min chart to fine tune entry/exit.

I also intend to trade higher timeframes to take advantage of larger pip moves with acceptable risk.

Hope this helps.

DDI · Aug 17, 2007

I traded only on daily charts which frustrated the hell out of me: my entires where good and I was profiting in most trades but gave them back.

In trading I find sitting in a profitable position the hardest challenge. What to do when you are in the money.

I now use 15 and 30 min charts. I trade more and my profit targets are reached more often and am happy to exit.

Remember the longer the time frame, the more fundamentals come into play and thus technicals get thwarted. Then again very short time frames (1-5 min) you get a lot of noise). Therefore I have reached the conclusion to use 15, 30 and sometimes 1 hr charts, although I do look at daily and weekly to get the major levels and gauge the major trend.

Timeframe - bottom line $ profit/loss

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