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If I can help you just a litlle bit with some simple common sence.
Lets say that you go for the 5 pips (wich is the max we can expect).
We need to deduct the spread (oanda) = 1.5pips. Is an average win of 3.5pips.
Now the stoploss (because this one is the most important-- not the profit). The smaller you will make your stoploss the lower your hitrate will be.
Lets say that we take a stoploss of 10 pips (2x times as big as your profittarget if you want a positive hitrate higher then 50%)
that brings us to the following total profit that you can expect.
Lets say that you would have a hitrate of 75% (wich is very high)
75 x 3.5pips = + 262 pips
25 x - 10pips = - 250 pips
total profit after 100 trades = 12pips.
For all this effort only 12 pips loss I think it is not worth the effort.
So we need more profit. The only way to achieve this is to make the stoploss smaller. BUT if we make the stoploss smaller the hitrate will drop dramaticly.
Lets say that we take a stoploss of 5pips (that is even without the spread)
At this moment stoploss and profittarget are equal.
At this moment we expect a positive hitrate of +/- 50% (wich is again very high)
50 x 3.5pips = +175 pips
50 x - 5pips = - 250pips
total profit after 100 trades = -75 pips.
Last example
Lets say that we make our stoploss even smaller (wich is a bit absurd). So lets say that we take a stoploss of 3 pips (and this is again without spread).
At this moment you can not expect a hitrate higher then 33%.
33 x 3.5 = + 115pips
66 x 3 pips= -198pips
total profit after 100 trades = -83 pips.
Conclusion= systems that go for very small gains are not profitable.
And thinking that you could keep your hitrate at 75% with a stoploss of only 3pips (without spread) is compleet unrealistic and not achivable.
Lets face it, we took already the highest profit, we took already the smallest transaction costs and we did not count the spread on the stoploss. And important we did not take any slipage in our calculations (if one wants to be realistic the slipage is at least 1/2 pip/transaction ).
regards...iGoR
Very well said, and real life trading, once you hit 4 -5 losses in a row you will re-read the post by IGor. Your only fooling yourself in the short term.
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