S/L & T/P. A senssible compromise?

[WTB]

Hello everyone.

I have noticed a constant phenomenoum that is hurting my demo account badly. I am a newbie with a great deal to learn so I am reading books and articles on the net; the trading mantra I keep coming into is "Cut your losses via stop losses and let you proffits run". That sounds fair enough, but when I try to apply it something usually goes wrong.

Despite the fact that I might see and catch the market's trend (like the current EUR USD downtrend), I always get stopped out by my S/L limits as price fluctuates. I had figured that I might be setting my S/L band too tightly (usually I set a 40 pips S/L mark behind market price). However, if I up the S/L to, say, 60 or 70 pips, then I am having problems for the price actually reaching my T/P goals with a decent risk/reward ratio (I consider a 1.5 ratio to be the minimum acceptable) because prices usually bounce back before such wide T/P is hit.

What is a fair compromise between S/L and T/P levels considering that a minimum of 1.5 risk/reward should always apply?

Feedback appreciated.



Cheers!

[Blaiserboy]

are you enetering the trades manually, or are you using an expert to do that for you


and what time frame on your chart?

[tim_nn]

Hello ...

I intend no impoliteness at all and am replying to a couple of points only because you requested feedback.

Originally Posted by WTB

usually I set a 40 pips S/L mark behind market price

IMHO, thinking in terms of a fixed number of pips behind market price for stop-losses is not a helpful concept.

Originally Posted by WTB

I consider a 1.5 ratio to be the minimum acceptable

This is also part of the reason you're having problems. Again, that's not a helpful concept.

Originally Posted by WTB

What is a fair compromise between S/L and T/P levels considering that a minimum of 1.5 risk/reward should always apply?

What you have come up with is probably a fair compromise. The fact that you are still having problems with it demonstrates that you are asking the wrong questions, not that you are answering them wrongly.

[WTB]

Blaiserboy:
Yes, I am entering the trades manualy and based off 1 hour charts.

Tim_nm:
As I am still a freshman in Forex, I am afraid I did not understand your comments fully. Could you please elaborate as of why I am following the wrong approach? I genuily want to learn.


Cheers!

[Blaiserboy]

Perhaps you would be good enough to post one of your charts showing your indicators and what you would propose to be good trades.....

It may be that you are misreading the indicator....... or perhaps you have the settings in not such a good place........

I have found that I had to adjust the indicator parametrs and practise trade a lot to get things right..........

Often we have to put in a lot more practise time than we like, it gets tedious and monotonous, however that is the only route to mastery


Have a great weekend


dave

[q827]

And it's helpful to use 'trailing stops', that way your S/L can move itself as the price gets closer to your T/P, allowing you to lock in a minimum profit in case your T/P isn't reached.

[4xis2ez]

The thought of a fixed risk reward ratio to be sucessful trading is incorrect. Here is a link to the ebook by Rob Booker. Stop Losses are for Sissies Remember, the majority of the traders on Moneytec are losers, and their advice is bad.

[Blaiserboy]

In my brief experience, I don't find that I can look to anything fixed in trading. My best intentions regarding a take profit have often met with disappointment.... I have found that I have to watch each trade very closely and use my own judgement for entriesd and exits. hence practice.

Perhaps others have been able to be profitable by using predetermined fixed targets, I have not.....


dave