Forex Software — Is it really awful to have a higher SL than TP?

Re: Is it really awful to have a higher SL than TP?

null@example.com (Popov) — Fri, 09 Mar 2012 23:31:08 +0000

SpiderMan wrote:

How do you display the trade distribution chart?

I'll publish an official Beta with Trade Distribution Chart soon.

Re: Is it really awful to have a higher SL than TP?

null@example.com (SpiderMan) — Fri, 09 Mar 2012 22:53:50 +0000

How do you display the trade distribution chart?

Re: Is it really awful to have a higher SL than TP?

null@example.com (krog) — Fri, 09 Mar 2012 22:22:13 +0000

Ha ha -- here is the screenshot with stop at 5, and the ending balance is better than at 30. Ha ha ha -- I have just found evidence contradicting my previous post ....

Re: Is it really awful to have a higher SL than TP?

null@example.com (krog) — Fri, 09 Mar 2012 22:16:53 +0000

It's a bit of trial-and-error to find the balance. The textbook says, the stop should be at the right level -- the stop should be wide enough to give a trade enough room to play out and become a winner, but catch and stop the trades that would run away and be a disaster. I suspect that point is somewhere around where the left tail flattens out. If it were a standard bell curve, I suppose that would be somewhere between 1.5 - 3 standard deviations. Since price data and thus trades probably have wider tails than a normal distribution, the "catch the disasters" might be a good idea because there are several trades that go to the fat tails and go to extreme distances.

I don't know, but my rough guess is around -30, or -35 on my screenshot.

How it would fail -- if you place your stop somewhere, and you see a lot of the winners disappear. This probably means stop is too tight, not giving trades enough room to find their way higher.

But, have to add -- ultimately best to try out a few stops to experiment to see what really happens.

Re: Is it really awful to have a higher SL than TP?

null@example.com (footon) — Fri, 09 Mar 2012 22:01:38 +0000

It's an intriguing feature, Krog! Can you give an example of how to make a strat better upon trade distribution chart?
Thanks!

Re: Is it really awful to have a higher SL than TP?

null@example.com (krog) — Fri, 09 Mar 2012 21:36:44 +0000

I hope the feature for a trade distribution helps identify the extremes. Here is a screenshot, this is a poor performing strategy with no fixed SP or TP:

looking at the Equity Balance line, it's hard to tell where the extremes are. But in this view, it shows the trades fall along some kind of bell curve, and the extreme losses start around -30, instead of something like -60 (would not cut off enough) or -15 (would attract too many trades). Then, you see on the positive extremes, it got lucky and has a couple over 100.

Also, stops tend to attract trades; these are the trades that would have gone past the stop and turned around to go back positive and closed at a price better than the stop. It's hard to tell -- the stop should catch those that would close worse than the stop amount, but not those that would close better than the stop.

Is it really awful to have a higher SL than TP?

null@example.com (dusktrader) — Fri, 09 Mar 2012 20:02:37 +0000

I've recently started "forcing" all my Generated bots to have SL/TP/BE. I find the optimal value manually, and then I let Optimizer have a go at it as well (it doesn't always outsmart me lol).

Only when I reach the END of a bots development am I able to see how these optimal settings will shake out.

On a couple bots that have really sexy equity curves, I am a little bit dismayed to see that SL is higher than the TP. Is this really such an awful thing? I'm curious your thoughts on this.

In some ways, I don't think it is relevant because the bot will still close positions before they reach their SL/TP levels (for example, I could turn off the SL/TP/BE and the equity curve would still look great -- so definitely not using SL/TP as a primary exit method). Those are mostly in place for the extremes I think. But traditional trading usually dictates that you would always have a TP higher than SL, and preferably much higher.

This seems loosely related to the concept of Expectancy as well, but again, it is not a perfect fit. I think Expectancy can really only be calculated when there are known exit levels. I would argue again that the permanent SL/TP/BE levels are more for extreme protection, and not typically reached under normal conditions.

What do you think?