After reading the previous article "My understanding of profit-loss ratio (2)", you should be able to have many new ideas about the operation of stop profit and loss.
This article is more difficult. Please first review the first two articles "My understanding of the profit-loss ratio (1)" and "My understanding of the profit-loss ratio (2) "Have a certain understanding before watching, so as not to cause random operations.
If you have practiced at this time, you will feel that if the take-profit is small, you will not be able to enjoy the subsequent gains, and if the take-profit is large, the winning rate will be too low. This time I will use the moving index loss method as an example.
When making a transaction at the market price, the general handling fee is about 0.1%. After accounting for slippage, the handling fee may be between 0.1% and 0.13%. We calculate this by substituting the same value as last time into 0.13%.
Next, let’s discuss the methods of taking profit and stop loss.
3. Set 2% above your preset reversal point as take-profit and 1% below as stop-loss. The profit-loss ratio at this time is approximately 1.76.
Assuming the original winning rate is 60%, the original expected return of each transaction is 0.432%.
3-1. Assume that we change the take profit position to a trigger order and move the loss index to a profit and loss ratio of 1:1. At this time, the basic expected value of each transaction will be reduced to 0.224%.
〔(1+(0.0113×0.6))÷(1+(0.0113×0.4))−1〕
3-1-1. After moving the index loss, we have no way to take profit, so the transaction will become a 1:1 profit-loss ratio transaction, so it cannot achieve our expectations.
3-1-2. Therefore, we must add a trailing stop order after the trailing stop loss, so that the value will rise to a certain extent and then retracement will result in selling.
3-2. Assuming that the trailing stop loss is set to 0.5%, then we must set the order trigger and the stop loss movement at the same time, otherwise there will be a risk of being stopped when the price fluctuates and no profit is made.
3-2-1. Because the setting range is small at this time, if the instantaneous value fluctuates greatly, you can reach a higher point when the value rises at a high speed, but at the same time, if the value fluctuates greatly during consolidation, you will often hit the stop. Loss, often get the expected profit.
3-3. Assuming that the trailing stop loss is set to 3%, there is not much need for our trigger setting, because before and after our trigger moving index loss, the trailing stop loss point will not be greater than the original stop loss.
3-3-1. Because the setting range is large at this time, if the instantaneous value fluctuates greatly, we cannot reach the highest point when the value rises at a high speed, but at the same time, if the value fluctuates greatly during consolidation, as long as it does not touch us With the moving index loss, we can get longer swing profits.
Here you will find that although the basic expected value will be much lower, the upper limit of income will be much higher. The ratio of stop loss to trailing stop loss should be set according to your own needs.
This is the deformed use of stop-profit and stop-loss. If the general stop-profit and stop-loss cannot be used smoothly, it is not recommended to perform such an operation.
