Question involving R:R on ES trade today

[spp]

Hello
I'm a new user and have a question regarding the Risk:Reward requirements that MTP recommends.

In the chart below is a TS3 signal on the ESH6 5-minute chart from today. The RR was only 1.2 from a standard entry one tick above the blue reversal bar high there @ 1263.25.

I wasn't going to take a trade with <2 RR. So when price printed at 1263.25, one tick above the reversal bar and therefore triggering a standard entry, I entered a limit order to go long from 1262.50 (horizontal purple line on chart). If filled it would offer an acceptable 2.17 RR. My plan was to cancel the limit order if price printed at the 100% Initial Risk level for my potential trade before triggering my limit order.

My limit order was filled & the trade was profitable as you can see on the chart.

Tony and/or Matt, what's your opinion of this tactic? Do either of you enter a limit order that would offer an acceptable RR - of course, only AFTER a price triggers a valid entry? If so, at what point do you cancel that untriggered order?
Thank you
Sean

[Matt Bowen]

Hi Spp,

There is no point in having an opinion right now because at this point it's nothing more than an observation. You need to have a good sample size (minimum of 30 consecutive trades) to see if this idea even holds water. Seriously, one observation is nothing, you need see what the expectancy ratio of the system is before getting all excited. Looking at some chart pattern (because it happen to fit the pattern for the day) is nothing but an opinion...that and $1.50 will get you a cup of coffee.

Time to test,

-Matt

[spp]

Hi Matt
Thanks for your reply.

Sorry, I gave you the wrong impression. I provided that chart with the example not because of great excitement or any kind of advocacy of this tactic but, rather, just to illustrate my question. A picture is worth a thousand words and all that.

To your valid point, I was asking you & Tony about it because I thought there was a chance that one of you or another user (or Steve but he's on vacation) might currently be incorporating such a tactic in your respective Trading Plans. In which case, you might have enough samples to have an opinion about it that you could pass along.

From your response Matt I infer that this is not something you are doing - fair enough.

Tony, if you come by this post perhaps you could let me know if you have any experience with this kind of tactic & what opinion you might have of it.

Saving that, I will post again following my own research on it.
Regards
Sean

[Tony Beckwith]

Hi Sean

A very interesting observation - thanks for posting it for all to see.

It isn't a tactic we've done much work on here - though the main advantage is you're clearly controlling the risk element of your trade well - you're stating you won't take trades <2x R/R at the 1st profit target - fine.

On the other hand, you're filling your order on a falling market, against the 'expected' direction - not we initially want to do for a long trade.

Sorry that's inconclusive...butp lease monitor it for yourself and we'll take a look here as well. Keep us posted!

Thanks again

Tony.

[spp]

Thanks Tony, good thoughts & will do.
Sean

[Matt Bowen]

Hi Sean,

I guess I see what you are trying to do here, but if I were trading the E-mini's and I came across this setup I simply would have passed it up based on the RR numbers. I think there are many more opportunities in the (using different time frames)

Personally, if you are trading the E-mini's I would go with 3, minute, 5 minute and 15 minute signals. I would not trade intraday from 60 minute patterns because you will need to carry the trades over night and most day traders will not do this because they don't want the over night exposure or they simply don't have the margin.

In any case, I can see what you are trying to do (and this might be better for Steve to comment on), but my initial thoughts are that these setups are based on the Elliott patterns reaching certain fib levels and modifying the entry to fit the pattern can be a very labor intensive project.

Having said that, I do like the fact that you are doing the most important part, by controlling the risk... this is by far the most important issue here and you have done a good job of making this the first priority. Let me know what becomes of your research.

All the best,

[spp]

Thanks for your thoughts Matt.

Sean