SCOTT WELSH TRADING BLOG

The System I Want To Trade

The System I Want To Trade

August 7th, 2019

Deep down in places I don’t talk about at parties, I have a trading system I want to trade.

I was raised on buy-and-hold forever and am swayed by the eternal effectiveness of trend following.

I even wrote last week about the sizable benefits of using big profit targets.

But I don’t want to do any of that.

Not really.

What I want to do is scalp.

I want tiny little profit targets that I trade to every day.

Wake up, turn on the robots, watch them hit a bunch of little wins, turn off the robots.

And watch my account grow reliably each day.

I’m not asking a lot. The market can make a small target each day in any market environment. Even if I’m going Long in a bear market, I can make a small target, right?

Trading this way makes sense, isn’t greedy, works in all markets, and grows the account consistently so I can pay the bills.

It’s totally satisfying.

It’s the perfect way to trade.

At least, that’s what the little voice tells me.

But would that really work?

Without delving into any math, here’s what a sane person might argue.

One, how small is “small”?

Is small just one point of profit? Ten points? A certain percentage of the stoploss? We can’t make any decisions until we know what we’re talking about.

Two, what’s the stoploss?

Is the stop 2x bigger than the “small” target? 10x bigger? More?

Three, what’s the win percentage?

For sure, a small profit target will win a lot. That’s a given. But it’s also mandatory.

For example, if the profit target is 10 points and the stop is 90 points, the win percentage has to be over 90%. That’s asking quite a lot of a trading system. One small dry spell turns the system negative.

I hear that argument. I understand it. I know the ramifications of my dark desire.

And I don’t care.

I want a system that only goes for 5 points. Why 5? I’m not even sure, but that’s the number I’ve secretly wanted for years.

How could any trader resist this beautiful picture? Look at all of those wins!

I want my stoploss to be huge and, thus, never hit (or almost never).

And I want my win percentage through the roof because I like to win and see the account rise daily.

This is what I want. And no amount of trading books or logic can make me want it less.

But, again, does it work?

This week, we’ll put a 5-point target on a system and see what we get.

Is it the start of a new, validated era of trading for me? Or is it time to put this wish to bed?

We’ll find out in our next newsletter.

Talk to you soon.

 

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.