I was thinking this morning about my method and an idea occurred to me that has the potential to reduce the losses on losing trades dramatically.
Basically, I’ve noticed that when we have a maximum loss of 35 pips, the trade pretty much always seems to stall at entry point or thereabouts and then retrace to hit the stop. Often, it’s ok if the trade goes 15-20 pips into profit first because we can move our stop to break even, but the losing trades rarely go to 35 pips and then back forwards again into profit. It does happen sometimes but I could probably count on the fingers of one hand the amount of times that has happened.
Conversely, it seems that most of the winning trades seem to go into profit right away, like this afternoons, and just keep going.
So I was just wondering if it might be a good idea to set the initial stop loss a lot closer to the entry point… at say 10 pips? I know this seems very close but my thinking is that it seems for the vast majority of qualifying trades we are moving the stop to break even usually within seconds, or at most a minute or two of the trade going live anyway. Those trades that don’t go far enough for us to move to break even tend to be maximum losers so why not make that maximum loss just 10 pips instead of 35?
Of course I know this means that there will be trades that retrace 15-20 pips before going on to make a good profit and on these trades we would lose instead of win… but I wonder how often that happens with my method. It’s not something I’ve actually monitored but it just occurred to me this morning that most winning trades seem to be straight forward winners without retracing first.
If this is true then reducing the losses on losing trades to 10 pips will significantly increase the profitability of an already very profitable method.
Of course, this is just an idea at present but I would appreciate it if those of you using my method could keep an eye on what happens during the initial stages of the qualifying trades and let me know if I’m right.