Comments for Trader Jedi's Weblog http://traderjedi.wordpress.com Looking for master Yoda of stock market trading... Thu, 29 May 2008 20:03:36 +0000 http://wordpress.com/ hourly 1 Comment on About E (expectancy) and R (R-Multiples) by traderjedi http://traderjedi.wordpress.com/2008/05/28/about-e-expectancy-and-r-r-multiples/#comment-3 traderjedi Thu, 29 May 2008 20:03:36 +0000 http://traderjedi.wordpress.com/?p=5#comment-3 Thanks for your comment John. That's exactly the point of this blog. I understand that "High probability and high expectancy are not mutually exclusive things" but when I said "I would rather have a high expectancy than rely on high probability to make money" I meant I don't want to rely on high probability part of the E equation alone and would rather learn how to increase my profits when I win than expecting just more wins. About defined risks, the problem is that, the 3% is still fuzzy. I don't enter a fixed stop loss. I continue monitoring and if I "feel" (dangerous, I know) the price will rebound to where I want, I sometimes let it go past 3% into negative territory and at times I will pull out even before it hits the 3% mark if I "feel" the stock is not going to go where I want it to. Btw, nice blog. And thanks for the comment. Looking forward to more in depth discussion on various topics. Thanks for your comment John. That’s exactly the point of this blog.
I understand that “High probability and high expectancy are not mutually exclusive things” but when I said “I would rather have a high expectancy than rely on high probability to make money” I meant I don’t want to rely on high probability part of the E equation alone and would rather learn how to increase my profits when I win than expecting just more wins.

About defined risks, the problem is that, the 3% is still fuzzy. I don’t enter a fixed stop loss. I continue monitoring and if I “feel” (dangerous, I know) the price will rebound to where I want, I sometimes let it go past 3% into negative territory and at times I will pull out even before it hits the 3% mark if I “feel” the stock is not going to go where I want it to.

Btw, nice blog. And thanks for the comment. Looking forward to more in depth discussion on various topics.

]]> Comment on About E (expectancy) and R (R-Multiples) by John Forman http://traderjedi.wordpress.com/2008/05/28/about-e-expectancy-and-r-r-multiples/#comment-2 John Forman Thu, 29 May 2008 14:55:09 +0000 http://traderjedi.wordpress.com/?p=5#comment-2 I think you've confused things a bit. High probability and high expectancy are not mutually exclusive things. Expectency is a function of your win % and your winner/loser ratio. As such, a high win % (high probability) method could mean a high expectency if the winner/loser ratio isn't too small. Of course, with a high winner/loser ratio you can get away with a lower win % and still have a high expectancy. But getting back to an earlier point about R and not having defined risks, it sounds like you do. You said 3% was your cut-off. That's basically your R. My concern is what kind of volatility 3% represents in your trades. If it's too small for what you're trading, you'll see you stop out level getting hit more frequently that you'd expected. I think you’ve confused things a bit.

High probability and high expectancy are not mutually exclusive things. Expectency is a function of your win % and your winner/loser ratio. As such, a high win % (high probability) method could mean a high expectency if the winner/loser ratio isn’t too small. Of course, with a high winner/loser ratio you can get away with a lower win % and still have a high expectancy.

But getting back to an earlier point about R and not having defined risks, it sounds like you do. You said 3% was your cut-off. That’s basically your R.

My concern is what kind of volatility 3% represents in your trades. If it’s too small for what you’re trading, you’ll see you stop out level getting hit more frequently that you’d expected.

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