Originally Posted by azmel

OzFx, welcome back from your holiday Hope you had a good rest.

I've been looking at the pairs, and I must say each of them has their own unique characteristics: some are big swingers, some are ultra-volatile, and some are just sitting around watching the sun goes by.

Do you use the same principle on all pairs? Or is there any pair treated differently? Or any pair you tend to avoid alltogether?

Originally Posted by azmel

OzFx,

I have an idea about the moving SL, and would like your thoughts whether this is more profitable:

Once we got a signal, open the usual five trades, each with their own TP values of 50 pips distance from each other, except the fifth trade, of course.

Once the first TP is hit, move the remaining four's SL to BE.
If the second TP is hit, move the remaining three's SL up by 50 pips.
Do this until the first four TP hits. The last trade will let loose until the next signal emerge.

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Originally Posted by tman378

Hi Lac_raz,

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IMO, it doesn't matter how good a system is in picking good trades for you, you can lose much of your profit if you don't have a good exit or profit taking strategy. And, in my humble opinion, protecting your profit is not just about greed or wanting to squeeze everything out of a trade. It's also about having that profit become a cushion for you when you encounter a few consecutive losses, as you mentioned. Hence the reasoning behind the saying: cut your losses, let your winners run, protect your profit.

....

... I still have two concerns when it comes to risk/reward management.

1. As you mentioned, the maximum drawdown per trade is big because of the lot size necessary to achieve a scale-out profit-taking strategy that yields acceptable returns.

I've been thinking a lot about this as this was my only primary concern with the Oz method. Even with the phenomenal win/loss rate (about 85%), it still scares me to think of the size of a losing trade. However, after more thinking, I concluded that there's really no way to avoid that without affecting the system's ability to generate big wins. The core components of this system that allows it to generate big wins, in terms of $ amount per trade, is the average pip gains and the initial lot size....

...Then I would focus my attention on maximizing the profit we get from the winners, since this system's primary virtue is in its ability to pick high probability winners. I think if we can achieve absolute maximum per winner, most of our winners will be in the range of 200 pips, 300 pips range. That should easily offset the occasional 100 pip losers. This leads me to my second observation about possible enhancement on the current method.

2. With the current method, I see a lot of trades go as far as 150 pips on first 3 lots, then 0 on 4th lot and 0 on 5th lot. Imagine if we just pulled stop up to +50 after 2nd lot closes, or even 3rd lot closes. Even if the trend comes to an end after 3rd lot closes, and reverts back, we would still have 50 pip x 2 lots to add to the total winning, making it 250 pips gain rather than just 150. IMHO, I feel that, though we need to leave room for movement to allow the trade to progress as far as possible, 200-250 stop loss may not be necessary. And I think that the OzFx system has proven to perform superbly in detecting strong trends. I don't think a strong trend should range up and down in excess of 100 pips like that. Because if that's the case, then it means the system hasn't done a very good job at detecting genuine trends. That would be more like a range trading system. From past results that we all have witnessed with the OzFx up until now, I think it has shown to be a solid performer in picking strong trends. And aside from the few false trades that turned negative and stopped out very early, all of the winners so far have shown to have good momentum and minimal ranging behavior (most never exceeded 100 pips retracement at any given time).

After considering the above mentioned point, this is what I propose to the group, and maybe generate further discussions.

I've boiled it down to one simple variation on the risk/reward management aspect of the method. And that is to consider moving stop loss up from BE to 50 pips after 3rd target closes at +150 pips. That leaves the buffer zone of 100 pips, and growing as the trade progresses. I feel that if after doing that, the trade reverts back all that way to hit the stop, there's a likely chance that it was going to go on to hit BE anyways. This way we get to keep some of the profits (extra 100 pips).

Now, if we feel that 100 pips is a good size for trailing stop for a pair, we can trail that, either automatically by tick, or in increments i.e. every 50 pip progress in price, move stop up another 50 pips, to keep the distance at 100. For example, after price reaches 4th target at 200, move stop up to 100 and let 5th lot run with a by-tick trailing stop of 50 or even less, or no by-tick trailing stop and just close out at a logical final target (support/resistance, fibonacci levels etc.)

Another thing we can consider is what a few others have mentioned already, that is the possible use of Average True Range to derive the most suitable size for trailing stop for each pair at the time the trade is taken. In other words 100 pips may not be suitable for all pairs as a trailing stop, and the most suitable size for trailing stop might change for each pair from one week to the next.

Finally to sum this all up, I think that a potentially useful and profit enhancing EA we may consider experimenting with is one that does the following:

1. Calculate and apply the initial stop loss based on current ATR for the pair being traded.

2. Move hard stop to BE after first target closes at +50 pips. (as in the original method)

3. When lot 3 closes at +150, move hard stop from BE up to +50 pips (or 150 - ATR).

4. When lot 4 closes at +200, move hard stop up to +100 pips (or 200 - ATR).

5. When price reaches +250, apply a by-tick trailing stop and let the 5th lot run until it comes back and hit the trailing stop. Size of this final trailing stop to be determined, but should be tighter than ATR, since when price approaches the end of a run, it usually slows down to very small movements from what I've seen. (30-50 pips may suffice).

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