There is a saying "trend is king" widely spread in the trading market, then we can simply understand that most traders who can make stable profits basically use trend trading, so I believe in trend trading between the winning rate and the profit-loss ratio Players must first make a profit-loss ratio and secondly to increase the winning rate. The moving average is used as a trend indicator, so our topic today is how to use a single moving average to create a transaction with a high profit-loss ratio. (In the following articles, we will use a single EMA to do trading examples)
What is the profit and loss ratio? In short, the ratio of a single retracement amount to a profitable exit, through the high profit-loss ratio trading method to achieve sustained and stable income in the account, today we will divide it into three major sections to analyze the profit-loss ratio.
1. Execute strategy signals and determine the main trading cycle.
Before the beginning, I would like to emphasize the importance of transaction consistency. If the transaction is more random, the transaction results will also be more random, which also highlights the ancient Chinese wisdom "There must be a reason There is fruit, cause and effect reincarnation".
In the process of trading, you must fix your trading time period. One is to let you have a deep familiarity with the market pattern of the time period you operate; the other is to have a core foundation in the subsequent cycle switching, so that you will not lose your way in future operations. On the premise that the trading cycle is not fixed, what should you do if multiple cycles give you opposite signals at the same time? It is conceivable that your trading will be messed up, and you will not dare to place an order or you will be out of the game with a stop loss.
So you must fix your own main trading cycle, and then carefully analyze the market step by step. Then the cycle is fixed, and the next step is how to increase the profit-loss ratio.
2. Cycle switching, from short to long
After our main trading cycle is determined, cycle switching is naturally indispensable if we want to increase the profit-loss ratio.
The principle of period switching is that the span between time and time should not be too large or too small, and the selected time period should be relatively stable. Too small a time period may lead to frequent stop loss of the account due to noisy and unstable signals. The reference and operability of an excessively large time period are relatively low, but the stability is strong, and it is suitable for risk control by amateur traders or professional teams.
Take the EURUSD I use as an example, I will basically fix it at 15 minutes, and the auxiliary reference period is 1H and 4H. In the process of trading, there will be multiple cycles giving opposite signals, for example: 15min and 1H are in the same direction and 4H is reversed, 15min and 4H are in the same direction and 1H is reversed, 1H and 4H are in the same direction and 15min is reversed. Next, I will conduct case analysis to solve doubts.
1. When 15min and 1H are the same and reverse to 4H. We use the moving average to step back for 15 minutes to enter the market, because 15 minutes and 1H are in the same direction, so there is a high probability that this order can be obtained from the 15 minute level to the 1H level. The premise must be that the shape formed during the 15-minute operation is exactly the 1H entry signal or must have passed the 1H danger zone.
The above is the standard 15min and 1h reverse to 4h, so we have already entered the market at 15min, and we have also given a short signal when we get 1h, so we can get the 1h level for this order, so The profit-loss ratio has been greatly improved. Next, we can take a look at the results of this order as shown in the figure below.
2. When 1h and 4h are in the same direction and 15min is against the trend, we need to judge whether the space of our left transaction can meet our profit-loss ratio requirements. The premise must be that the profit-loss ratio is above 1:1.5. Trading.
There is also a situation where 15min and 4h are in the same direction and 1h is reversed. I will not give an example in this article. Traders and friends can try to study how you should deal with this situation when it happens.
3. The calculation method of the profit-loss ratio
Many people are struggling with this question before trading, "What is my profit-loss ratio, and is this order meaningful to enter the market?"
There are two directions to determine the profit-loss ratio. Contradictions are interrelated. First of all, when the trading entry signal appears, whether we should enter the market or not is very different in terms of execution. Let me give you a simple example: Suppose you have your entry signal at 1:00 in the morning, whether you will enter the market at this time, and if you enter the market, you need to keep an eye on the market to see if there will be any abnormal market. In the process of entanglement, you must think whether this order is worth staying up late to place, then you go back and calculate the profit-loss ratio of the order, if it is less than 1:1. My personal suggestion is that the body is the capital of the revolution.
Regarding the profit-loss ratio of an order that has not yet been traded, we usually look at the stop loss position and target position of the order. We don’t need to talk too much about the stop loss position (the previous article on the official account has a detailed introduction to stop loss Is your stop loss method correct?) Pay attention to explain your target exit position, the first target take profit position you can pay attention to a support pressure level in front of your main cycle, and the second target take profit position needs to pay attention to the big cycle support pressure level. Calculate your expected profit-loss ratio based on these and then decide your order.
The second method is to obtain the relative ratio based on historical order statistics. You need to conduct a review to calculate your average stop loss range, average profit points, maximum stop loss points, and maximum profit points, and then make statistical comparisons to obtain a high probability ratio. The premise of this operation must be that your transactions need to have continuity and consistency, and consistency is a very important reference value. Once the operation is relatively random, your data results must be random, which can have a reference value very low.
The profit-loss ratio is one of the necessary reference standards for trend traders, and there are many ways to improve the profit-loss ratio, but it still needs to be customized according to your trading model. There are many trading methods, what everyone has to do is suit themselves.
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