Risk Reward Myth

[hoodoo man]

I'm confused as puke in hell how anybody can argue about abstract RR mumbo jumbo stuff just to make your self out to be some bleeding expert opinion on a thread because you turned $10K to $40K on a demo account using your trading system.

I am going to print out your comment and frame it. Yes, I turned $10k into $40k in under three days, trading just the EUR/USD at 100:1 leverage. Whatever you can say about this - insufficient sample size, not real money, too risky if I lost, etc, etc - the fact remains that I did this by knowing how to place the correct trades at the correct price and time. I had one losing trade for a few pips and the rest were winners.

I see you take part in the forex competition here every week. I don't expect you to double twice in three days as I did. If you can double once in the full week allocated to you, and keep your profits, I shall answer your questions and not before. You really do have some nerve calling me out on my trading ability when you could not do it yourself. Every time I have looked at the leader board in this competition you are at a net loss. You even stubbornly shorted the market in the wrong place and took a big hit the other week. The uncomfortable fact for you is that I know how to trade profitably and you do not.

I'll tell you something about your psychology which is an ultimate flaw in your trading ability imo. - You can not tollerate being wrong or even to be perceived to be wrong. You must always be right otherwise you become disturbed and imbalanced. There is no charge to this piece of advice but I'm happy to accept donations from your $40K portfolio when you realise its real value...

Don't care how I am perceived by you, or other Monday Morning Quarterbacks here who probably don't trade successfully, and who likely make "a living" doing something else.

I am wrong often. I am glad to be proved wrong as I learn something. I will go on record as saying that I make mistakes every day, I am wrong often, and most days I have losing trades. Sometimes I will finish negative on the day. Sometimes I get it very wrong indeed.

I don't wish to give you donations - don't beg on the Internet - go and earn your own money.

R:R is here to stay and anyone who argues against it is chasing their tail to make an obtuse point. Maybe an interesting point but three quarters of this thread is all ego **** and the other quarter useful stuff to reflect on.

Of course it is here to stay. The market needs losers to pay for the industry, infrastructure, employees, technology, taxes, and of course the profits of the winners. Anything that is effective at making newbies jack away their money helps to sustain the industry. And the effective traders who understand why this ******** is marketed to newbies are doing anything but chasing their tails - this is the behaviour of uninformed gamblers and professional forumites.

I don't have the time to spend having arguments on this forum with people who don't have a clue. I was called out by another wanabee last week - a character who seems to specialise in causing trouble - I believe the term is internet troll. No time for this, not enjoyable. I'll leave you guys to it.

 

[hoodoo man]

Hi hoodoo man,
Sorry to interupt the thread.

Just to say that I write most of the Stickies and FAQs on the site and, although I try my hardest to get things right and to be balanced, I'm not perfect and I don't doubt there are some mistakes and a few misleading comments here and there. So, please bring them to my attention and I will correct them. To my mind, that's the great benefit of a 'community' website like this, traders with more knowledge and experience than me can help to ensure that the site content is the best it can be. Of course, if you're just expressing an opinion, then the Stickies and FAQs are all open threads and you're more than welcome to post as, indeed, I see you've done here: Essentials Of First Steps

Needless to say, these comments apply to everyone. I welcome any constructive comments on how to make the Stickies and FAQs better / more accurate / factually correct etc, etc. Thanks for you help.
Tim.

Thanks timsk - happy that my brief contributions have been of assistance to some. I've had some free time in the last few weeks, but busy going forward so I don't have time to contribute here any longer. I was looking to add CMC to my list of execution venues for the EUR/USD so I was on here frequently waiting for replies from Mr Cruddas - in between I was able to make quite a few posts. I now have a feel for the community and it is not somewhere I would have the time or inclination to stay for long.

My posts will be available for others to read and I'd like to think that I've made some interesting points that future speculators / readers can benefit from. I do fear that it has been drowned out in the ad hominem attacks and generally incivility I have encountered - albeit from perhaps a minority of bad eggs. I haven't spent much time on trading forums as a whole - I'm sure they all have their benefits and drawbacks - but in terms of other communities I belong to I find Dr Victor Niederhoffer's "Daily Speculations" site to be a very serene arena where like minds can engage in intelligent and civil discourse.

You seem to be doing a stellar job in highlighting interesting threads and in your stickies sections. While there are some errors / faulty thinking in some of what you have posted, I agree it is a good resource overall. If you are inspired to do so, perhaps you could read over my contributions here and use anything you may have learned to improve / update the stickies. I was going to contribute further in those sections but I simply do not have the time, sorry.

 

[Atilla]

I am going to print out your comment and frame it. Yes, I turned $10k into $40k in under three days, trading just the EUR/USD at 100:1 leverage. Whatever you can say about this - insufficient sample size, not real money, too risky if I lost, etc, etc - the fact remains that I did this by knowing how to place the correct trades at the correct price and time. I had one losing trade for a few pips and the rest were winners.

I see you take part in the forex competition here every week. I don't expect you to double twice in three days as I did. If you can double once in the full week allocated to you, and keep your profits, I shall answer your questions and not before. You really do have some nerve calling me out on my trading ability when you could not do it yourself. Every time I have looked at the leader board in this competition you are at a net loss. You even stubbornly shorted the market in the wrong place and took a big hit the other week. The uncomfortable fact for you is that I know how to trade profitably and you do not.



Don't care how I am perceived by you, or other Monday Morning Quarterbacks here who probably don't trade successfully, and who likely make "a living" doing something else.

I am wrong often. I am glad to be proved wrong as I learn something. I will go on record as saying that I make mistakes every day, I am wrong often, and most days I have losing trades. Sometimes I will finish negative on the day. Sometimes I get it very wrong indeed.

I don't wish to give you donations - don't beg on the Internet - go and earn your own money. Your sense of humour is astonishing you dim wit.



Of course it is here to stay. The market needs losers to pay for the industry, infrastructure, employees, technology, taxes, and of course the profits of the winners. Anything that is effective at making newbies jack away their money helps to sustain the industry. And the effective traders who understand why this ******** is marketed to newbies are doing anything but chasing their tails - this is the behaviour of uninformed gamblers and professional forumites.

I don't have the time to spend having arguments on this forum with people who don't have a clue. I was called out by another wanabee last week - a character who seems to specialise in causing trouble - I believe the term is internet troll. No time for this, not enjoyable. I'll leave you guys to it.

You are a joke you know that? I didn't contact you, you contacted me you troll.

How old are you? You come across as a 7 year old playground twit.

What kind of an idiot trebles his capital in three days and thinks he is a trader?

How much money did you risk to be able to do that?

Trading is about consistent returns.

Demo competition is just a bit fun for traders to have a laf.

You don't have a clue as to what you are doing.

You touting for business aren't you - and that's what you were trying on with me.

Mr I've trebled my capital in three days... I can show you how you can trade like me too. It's easy.

Sod off and leave me alone you clown. :spam:

 

[Jason101]

Evening Atilla,

How do you ensure range bound verses trending markets is not skewwhiffing your results and how are you incorporating true range into the sample trades.

 

[hoodoo man]

What kind of an idiot trebles his capital in three days and thinks he is a trader?

This is the best comment in the entire forum. Pure comedy gold! Invective from a committed loser.

I'll give you the reason. We will be trading thirty five million euros per click by the end of next year. That is approximately £2,100 per point in spreadbetting terms. Mr Cruddas, MD of CMC Markets is a member of this forum and answers questions about his new spreadbetting platform. I was wondering if a Maltese resident could have an account, and if so whether they would accept 10 million euro positions - £600 per point - in the EUR/USD spreadbet market - and in a single click. Mr Cruddas replied that they would be happy to take that business, and offered me contact details to speak to his team about dealing with them and lodging alternative collateral.

Mr Cruddas then suggested that I try the platform to see if I found it suitable. We will be executing trades across several liquidity providers in FX, and have special software written to automate the order entry. I would need to update this software to work with CMC.

The current single order limit in the EUR/USD at CMC is £200pp. I needed to test how quickly multiple orders could be entered, and most importantly whether positions larger than £200pp could be closed immediately from trade management.

To do this, I had to trade the account up above £30k in order to have margin to trade £200pp. By mirroring my live trading in the CMC demo, I was able to do this in under 3 days.

My own accounts are not leveraged 100:1, and therefore I do not triple my real accounts every three days.

So having the ability to quickly compound a trading account to a desired size in order to achieve an objective makes me an idiot?

You are a joke you know that?

You come across as a 7 year old playground twit.

Trading is about consistent returns.

Demo competition is just a bit fun for traders to have a laf.

You don't have a clue as to what you are doing.

You touting for business aren't you - and that's what you were trying on with me.

Mr I've trebled my capital in three days... I can show you how you can trade like me too. It's easy.

Here are some facts. I posted a screenshot showing you were at bottom of the league in the T2W trading contest. Every time I look at the leader board you are showing a loss. Even as a bit of fun you cannot do it and when you try you do not get it right. You work a day job because you are not good enough at trading to financially support yourself, let alone make yourself rich from the markets.

You say I don't have a clue, but I am the one liaising with multiple liquidity providers and growing my account each week. I am the one who showed a 270% return in 3 days here on this site.

You accuse me of touting for business - I have not done so and would not choose to do so. If I were touting for business, I would not work with an individual such as yourself as not only are you a committed loser you have a bad attitude and very poor manners.

So there you have it. I can - you can't. I trade full time - you make your living doing IT. I have an institutional background - you are a hobbyist. I trade for real and make profit - you play at demo and make loss.

I have no intention of spending any further time here, but saw the priceless opportunity to show you up for what you are to everyone here. Can't say fairer than that. Personally I think your behaviour is awful and the mods should give you a warning. Professional traders who can achieve outstanding returns aren't going to hang around sites like this when the likes of you have free reign to post your invective.

 

[Atilla]

Evening Atilla,

How do you ensure range bound verses trending markets is not skewwhiffing your results and how are you incorporating true range into the sample trades.

Hi Jason,

Not sure I understand your questions but for the first part of your question when you say range bound it depends on your time frame. This BB breakout can be used pretty much in any TF. The effect is - shorter the time frame smaller the pips for RR.

I don't understand what you mean by true range. But the Risk is determined by the TF and width of the BB effectively.

I attach diag to explain. Instrument date and time not important really but this diag is for EURUSD - 30m chart. . I've picked it as it has ingredients of system I use. For example:

1. I would place a LONG market entry order at 1.45600 with [email protected], [email protected]
2. I would place a SHORT market entry order at 1.44900 with SL @ 1.45600, [email protected]

In each case the Risk is determined by the width/range of BB. In this example it is 700:1400 points

This determines the LIMIT/Reward using the 1:2 ratio. That's it in a nutshell.

 

[Atilla]

This is the best comment in the entire forum. Pure comedy gold! Invective from a committed loser.

I'll give you the reason. We will be trading thirty five million euros per click by the end of next year. That is approximately £2,100 per point in spreadbetting terms. Mr Cruddas, MD of CMC Markets is a member of this forum and answers questions about his new spreadbetting platform. I was wondering if a Maltese resident could have an account, and if so whether they would accept 10 million euro positions - £600 per point - in the EUR/USD spreadbet market - and in a single click. Mr Cruddas replied that they would be happy to take that business, and offered me contact details to speak to his team about dealing with them and lodging alternative collateral.

Mr Cruddas then suggested that I try the platform to see if I found it suitable. We will be executing trades across several liquidity providers in FX, and have special software written to automate the order entry. I would need to update this software to work with CMC.

The current single order limit in the EUR/USD at CMC is £200pp. I needed to test how quickly multiple orders could be entered, and most importantly whether positions larger than £200pp could be closed immediately from trade management.

To do this, I had to trade the account up above £30k in order to have margin to trade £200pp. By mirroring my live trading in the CMC demo, I was able to do this in under 3 days.

My own accounts are not leveraged 100:1, and therefore I do not triple my real accounts every three days.

So having the ability to quickly compound a trading account to a desired size in order to achieve an objective makes me an idiot?



Here are some facts. I posted a screenshot showing you were at bottom of the league in the T2W trading contest. Every time I look at the leader board you are showing a loss. Even as a bit of fun you cannot do it and when you try you do not get it right. You work a day job because you are not good enough at trading to financially support yourself, let alone make yourself rich from the markets.

You say I don't have a clue, but I am the one liaising with multiple liquidity providers and growing my account each week. I am the one who showed a 270% return in 3 days here on this site.

You accuse me of touting for business - I have not done so and would not choose to do so. If I were touting for business, I would not work with an individual such as yourself as not only are you a committed loser you have a bad attitude and very poor manners.

So there you have it. I can - you can't. I trade full time - you make your living doing IT. I have an institutional background - you are a hobbyist. I trade for real and make profit - you play at demo and make loss.

I have no intention of spending any further time here, but saw the priceless opportunity to show you up for what you are to everyone here. Can't say fairer than that. Personally I think your behaviour is awful and the mods should give you a warning. Professional traders who can achieve outstanding returns aren't going to hang around sites like this when the likes of you have free reign to post your invective.

You are soooooooo funny

People know me well enough thank you for your exposure. I wear my heart on my sleeves and not on pretentious blogs like you.

Now sod off and stop spamming me dude... :spam:


Don't you have billions to make or what ever you have to hooodoooo :cheesy: pun intended...

 

[Jason101]

Hi Jason,

Not sure I understand your questions but for the first part of your question when you say range bound it depends on your time frame. This BB breakout can be used pretty much in any TF. The effect is - shorter the time frame smaller the pips for RR.

I don't understand what you mean by true range. But the Risk is determined by the TF and width of the BB effectively.

I attach diag to explain. Instrument date and time not important really but this diag is for EURUSD - 30m chart. . I've picked it as it has ingredients of system I use. For example:

1. I would place a LONG market entry order at 1.45600 with [email protected], [email protected]
2. I would place a SHORT market entry order at 1.44900 with SL @ 1.45600, [email protected]

In each case the Risk is determined by the width/range of BB. In this example it is 700:1400 points

This determines the LIMIT/Reward using the 1:2 ratio. That's it in a nutshell.

Ahh, got you now on the true range; I now see how you are deciding your R/R. I probably did not explain myself as to the rest.

What I am trying to say is that in a test purely devised to testing R/R, by placing 2 orders either side of the bb’s are you not opening yourself up to being taken out twice in a range bound market and thus unwittingly incorporating a test of range bound markets verses trending markets within your RR samples.

If on the other hand you entered only in only one direction on a bb breakout, either always in the same direction or on the toss a coin, then a range bound market would not skewwhiff your results putting a bias against your original prognoses.

 

[Atilla]

Ahh, got you now on the true range; I now see how you are deciding your R/R. I probably did not explain myself as to the rest.

What I am trying to say is that in a test purely devised to testing R/R, by placing 2 orders either side of the bb’s are you not opening yourself up to being taken out twice in a range bound market and thus unwittingly incorporating a test of range bound markets verses trending markets within your RR samples.

If on the other hand you entered only in only one direction on a bb breakout, either always in the same direction or on the toss a coin, then a range bound market would not skewwhiff your results putting a bias against your original prognoses.

Yes it is a possibility to have both trades go againts one. I've experienced this as mentioned.

This is where the BB band comes into play with the TF and risk size. Smaller the TF, narrower the BB, smaller the risk and the gain. TF + BB handles this question and probability.

Also re: the trending sideways question to avoid the whipsaws I usually set the entry price to be outside of the BBs.

Crux of it is for the TF one picks BB narrowing is decision time and whether it goes up or down I would usually look to cancel the opposite trade once one entry order is hit. Would also manage trade with trailing stops. The EURUSD that lost $1000 was in profit to start with. I've left both the orders in for the demo account. Thus, once there is a catch on hook, cancel opposing entry order and look to establishing BEven etc. Once trade breaksout and establishes either current trend or reversal then the R:R 1:2 or even 1:3 is usually a good winner.

There is nothing to stop one setting only one entry on the direction of the MA from the longer time frame. However, that subsequently entails making decisions about direction. My point is which way market moves is immaterial as long as one sets & manages R:R.

Placing two entry orders also avoids the hang up traders have about being right and maintaining losing positions.

One more point - it is important not to guess the market but enter entry orders and not market orders. By placing Entry orders you are testing the BB breakout effectively. This could be a false one but such is life - you are either there to take it to BE or catch the reversal on the other side if the move was a very rapid one.

Not saying it is perfect by any means - and I don't have the answers to all possible questions / issues re:testing and developing a system. I like to keep it simple and use 1:2 to set my SL & Limits at the start and then manage the trades later.

This suits me as it is a fire and go system which doesn't entail watching screens all day. I like to think of it as fishing.

 

[Jason101]

OK, I was looking at this as a test on 1:2 R/R in its purest form rather than any form of legit trading strategy setting out to turn a profit.

I like your post, very informative on your views especially on your tailoring of your trading methods to correspond with your psychological analyst of your trading needs.

 

[Atilla]

OK, I was looking at this as a test on 1:2 R/R in its purest form rather than any form of legit trading strategy setting out to turn a profit.

I like your post, very informative on your views especially on your tailoring of your trading methods to correspond with your psychological analyst of your trading needs.

Cheers Jason, it is a test of 1:2 RR.

I'm not amending the trades once they get hit. That applies to both trades. I'm not applying my normal trading habit to this RR demo account. Although I do to the others which are in the competition.

1. All orders are entry orders.
2. All entry orders have 1:2 RR Stop/Limits preset.

The entry decision/system is immaterial imo. I prefer to use BB breakout that's all.

 

[DionysusToast]

that made me laugh.

I would say no not because I didn't have the stones but more because I don't have a clue as to what I'm doing or why?

I have no idea of direction nor do I care. I have no target no expectation.

I check the average range for the time period the BB state and click and go with R:R principal for each side of the trade.

In all honesty I placed those trade in anger with little or no mental effort to prove a point at being ridiculed. It takes me all of 60 seconds looking at chart with S&R BB lines to decide on two entry orders.

I do not claim to be a whiz but merely a rookie based on text books following MAs for trend, BBs for breakout and R:R for managing trades. Simple really.

Whilst I try to get some gold nuggets from all the experts at T2W I like to question and challenge the elite before re-appraising my understanding.




Re: your 10 losing trades - I'm thinking if I place 5 different pairs of instruments with 2 entry orders each (up & down) then there is the possibility markets can move in synch and take all 10 out. Probability of this happening -> I have no idea. I'm just saying I have had both trades go against me in the past during periods of high volatility and market moves sideways. NFP can have this effect.

NFP or other big news announcements can also yield big returns providing market agrees on outcome.


But fair enough we'll run with it.


Do I understand correctly that if the next 10 trades are not losers but have some winners you'd consider there is merit in R:R?

Alternatively if over say a period of 4 weeks account shows profit irrespective of losers & winners? imo its not about the numbers but merely strategy to make money which RR is key ingredient.

Actually, I'd say that there is no inherent edge in what you are doing unless you think the BB provides it.

I'd say that 50 trades will prove it but if the next 10 trades are not losers, then it will pique my interest and merit a thread on looking at why that happened. My expectation would be 6/7 winners 3/4 losers.

In any case, the target you need to look at is above 66% with rate because that is what a 1:2 R:R would give you with a random entry which would also give you a break even over time.

 

[Atilla]

Actually, I'd say that there is no inherent edge in what you are doing unless you think the BB provides it.

I'd say that 50 trades will prove it but if the next 10 trades are not losers, then it will pique my interest and merit a thread on looking at why that happened. My expectation would be 6/7 winners 3/4 losers.

In any case, the target you need to look at is above 66% with rate because that is what a 1:2 R:R would give you with a random entry which would also give you a break even over time.

I would choose to use money and % return on monies to decide but 50 trades should be reasonable sample size I guess.

I'm more interested in % return as opposed to number of positive trades as trades on the bigger TimeFrames likely to be more successful than shorter ones.

Not sure how long it will take to reach 50 trades but its good to put some structure to the testing.

We'll analyse stats later.


Many thanks for all bloggers replies and interesting points.

 

[DionysusToast]

Atilla - good on you for giving it a go.

Whilst we chat here on what is right & wrong, I think that putting your money (or time) where your mouth is, is a worthy endeavour.

 

[Jason101]

Atilla,

I am actually with you on this one.
Thanks for the time spent, I am looking forward to see how this turns out.

 

[Atilla]

Atilla,

I am actually with you on this one.
Thanks for the time spent, I am looking forward to see how this turns out.

Cheers for all your support and to be honest I'm getting into it my self.

I'm now wondering whether I can make higher returns not interfering with the trades but simply holding on to the 1/2 RR rule till its climatic end...

I'll try and put up charts and place trades on to a spread-sheet too so we can work out patterns and stats more easilly.

 

[Atilla]

Here is the first two trades for this week.

https://www.forexdesk.com/traders/Atilla/accounts/193

With a chart showing narrowed BBs and two entry orders

1. Sell @ 1.05200 [email protected], [email protected]
2. Buy @ 1.05450 [email protected], [email protected]

200:400 RR

 

[Atilla]

Here is the second two trades for this week on EURUSD.

https://www.forexdesk.com/traders/Atilla/accounts/193

With a chart showing narrowed BBs and two entry orders

1. Sell EURUSD @ 1.43150 [email protected], [email protected]
2. Buy EURUSD @ 1.43550 [email protected], [email protected]

400:800 RR

 

[Atilla]

Temptation is really strong to take some scalps on small trades and move USDJPY to small trailing SL with some profit.

Three catches from last night and checking this morning before I go in to work and all is in profit. Will leave untouched as per test.

In contrast market order entries on demo account #5 showing small loss. I may have to re-appraise my trading system.

 

[timsk]

Hi Atilla,
An interesting test - well done for committing the time and effort into doing it.


One variable that will impact the result of the 50 trade sample is your decision as to when to place trades. Looking at the 2 charts you've posted above, based on my (mis?)understanding of your comments thus far, I was expecting to see an 'obvious' BB squeeze. Leaving aside (for the time being at least) what constitutes an obvious BB - to my way of thinking neither of the two pending trades qualify. The bands aren't anywhere near tight enough. For the benefit of subscribers to the thread who aren't aware of the significance of this, broadly speaking, the tighter/narrower the period of consolidation (i.e. the tighter the BB squeeze) - the more explosive the breakout is likely to be when it occurs. In other words, the more selective one is with the BB squeeze, the greater the probability of the 2:1 profit objective being achieved.

I think the test would be more interesting and more likely to produce a higher success ratio if the BB squeeze was defined as being say less than 50% of the ATR from X periods ago. The smaller the %age the better but, of course, that will impact the number of trades and the length of the experiment.

Let me know if this isn't clear and I'll rustle up some charts to illustrate what I'm banging on about!
Tim.