Read on Twitter
There's a lot of smart and sensical points and arguments being made in this thread and the comments.
In short, this is what it comes down to, in my opinion.
0/ https://twitter.com/Trader_XO/status/1336346543637540864
In short, this is what it comes down to, in my opinion.
0/ https://twitter.com/Trader_XO/status/1336346543637540864
Executability of these trade stoppage techniques depends on the following, to name just some:
- risk profile / risk tolerance
- trading method/ trading timeframe
- trader's schedule and screen time/accessibility
- personality
- trading instruments/markets
- algo integration
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- risk profile / risk tolerance
- trading method/ trading timeframe
- trader's schedule and screen time/accessibility
- personality
- trading instruments/markets
- algo integration
1/12
How does stoppage technique affect your trading performance?
Bear with me through some context for a sec:
2/12
Bear with me through some context for a sec:
2/12
A pure measurement of your performance as a trader is your Expectancy value. Let's keep it simple and think of expectancy in terms of 'R' rather than $. A closer look must be taken if you're varying your $ risk over different trades, but I won't get into that.
3/12
3/12
Expectancy = Total PnL / # of Trades = Average PnL per trade
The 'Profit Factor' expresses the same idea.
Profit Factor = Average Winner PnL / Average Loser PnL
(View PnL in units of 'R')
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The 'Profit Factor' expresses the same idea.
Profit Factor = Average Winner PnL / Average Loser PnL
(View PnL in units of 'R')
4/12
These performance metrics are also a function of your Win Rate and Average Risk:Reward Ratio.
(Can we get a petition started to have it changed to Reward:Risk Ratio?)
Expectancy=Win Rate*Avg. R:R Outcome
=Win Rate * Avg. Win PnL / Avg. Lose PnL
=Avg. PnL Expected per trade
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(Can we get a petition started to have it changed to Reward:Risk Ratio?)
Expectancy=Win Rate*Avg. R:R Outcome
=Win Rate * Avg. Win PnL / Avg. Lose PnL
=Avg. PnL Expected per trade
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Note that your outcome R:R ratio will not be the same as your planned R:R ratio if you utilize soft stop losses.
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6/12
Adjusting your stoppage strategies with either discretion or statistics will alter the outcome of these performance metrics. Therefore, you have to be careful not to over-analyze or over-optimize them to increase planned performance.
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7/12
You don't want to get caught in a viscous cycle of changing your behavior based on metrics that change when you change your behavior.
8/12
8/12
I'm still exploring these ideas for the purposes of my own trading.
I suppose you want to change your behavior (i.e. stop-out techniques) to optimize your expectancy within the confines of your personality and performance/comfort limitations.
9/12
I suppose you want to change your behavior (i.e. stop-out techniques) to optimize your expectancy within the confines of your personality and performance/comfort limitations.
9/12
A low win rate and high average R:R outcome might give you the greatest expectancy in theory, but not if you get scared and fuck up the plan. Or worse... blow up.
10/12
10/12
There are many ways to go about improving your performance. This topic is just one of them.
11/12
11/12
But since we're on the topic, I would love to hear your thoughts on the above and about all the different ways you like to stop out or scale out of losers, preferable from manual trading standpoint, but I'm interested in everything.
12/12
12/12
Good addition to the thread: https://twitter.com/Tradermayne/status/1336443607503400960?s=19
