How can two trades in the opposite direction both be profitable?
In this post I said:
So how is this possible?
An example is the easiest way to demonstrate. In summary, the traders have a smaller target than stop loss.
Let's say that both traders are trading the ES and have a target of 1 point profit. Both traders use a 2 point stop loss.
The trade goes 1.5 points in one direction which causes one of the traders to exit at their target of 1 point and the other trader has had a draw down of 1.5 points. The market then reverses and moves at least 2.75 points in the other direction causing the second trader to exit at her profit of 1 point.
Two traders can enter opposite positions at exactly the same time and the same price (i.e. they buy/sell from/to each other) and they can both make a profit off the trade yet they are using completely different strategies that have them trade in different directions.
So how is this possible?
An example is the easiest way to demonstrate. In summary, the traders have a smaller target than stop loss.
Let's say that both traders are trading the ES and have a target of 1 point profit. Both traders use a 2 point stop loss.
The trade goes 1.5 points in one direction which causes one of the traders to exit at their target of 1 point and the other trader has had a draw down of 1.5 points. The market then reverses and moves at least 2.75 points in the other direction causing the second trader to exit at her profit of 1 point.
Also, all it takes is ONE trader with two different accounts to profit both ways.
Originally posted by neath
Also, all it takes is ONE trader with two different accounts to profit both ways.
And a good way to get whipsawed twice trying to trade "noise".
Originally posted by Big Mike
Originally posted by neath
Also, all it takes is ONE trader with two different accounts to profit both ways.
And a good way to get whipsawed twice trying to trade "noise".
1) Noise is in the eye of the beholder ;-)
Personally, I only trade ranges that allow me to be anywhere else than beside the monitor for a few hours - or days even.
2) Yes,this is an excellent way to get whipsawed if you trade with stoplosses in place.
JMO
2)
2)
if you look at your charts from august 5th, you will see a remarkable answer to your question. two etf's triggered the .886 on opening gap on 5 that i have written about in ''notes''; both closed near hod....yet one was a bullish etf, the SPY, and one was a bearish etf, the TZA.
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