100% Initial Risk level

I was asked a good question on this 3min DAX DP trade, and that was “when to use the 100% initial guideline” to bring the stop to break-even. As you can see, this long DP trade did exceed the 100% initial risk level, but traded back to break-even before then rallying to reach the first projected profit target. (Yes we did then swap to the ATRStop where a +2.3R profit as made).

So why should you not have used the “100% initial risk guideline” in this example ?

Well, it is all about the “larger degree” trend. As I have said many time before, we only use this guideline when we are unsure about the larger degree trend. In this example the DAX was rallying off a Wave 5 low, so the larger degree trend was clearly up. Hence we could take longs with confidence so there was no need to look to protect profits quicker, so the 100% initial risk guidelines should not have been used.....

Thanks and I hope this helps ?

Steve

Manual DP sell

Later in the Day there was a brilliant “manual” DP sell on the 3min YM.

As you can see, this nailed the high of the day absolutely perfectly.............. The YM then declined into DP support, just before the close, for a very nice +3.6R Profit (ignoring slippage and commission).

Yes this was a “manual” DP level so is for the more Advanced users among you. But do you all see how this profit, at +3.6R is much bigger than the -1R loss from the NQ example below. Small losses and Big Profits, this is the key to long term trading success.........

Thanks

Steve

Yes losses do happen

Hi Everybody,

Unlike most vendors and Gurus in this business, I do talk about losses.............. And here is an example from Friday on the 3min NQ. It is important to understand that losses can and do unfold, but the trick to a successful approach is to keep the losses small (not avoiding them). This loss at just -1R is small to the last few days where we have had a number of +3R Profits on the US e-minis.

Small losses and Big profits, this is the key to a successful approach to trading........

Thanks

Steve