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These are great comments, and a very viable way to trade, but it may not be suited for everybody. I consider this style favorable to those that need to frequently feel "right". With this approach you probably have a very high win rate, but you probably don't get very many large runners that are winners, except for those times where the market goes parabolic.
I'm interested, if you enter, and immediately it doesn't move in your direction, or even starts moving against you, do you then get out as well for a small loss? Or do you wait for the stop loss to hit? I'm just curious as to how much room you give a trade before bailing on it.
Many people make good money with low win rates, because they are holding on for the big moves. It just all depends on what style fits your personality, and that's why there's no "one size fits all" trading style. As for my IB backtesting, I'm finding best results with targets about 1.7-2.0x the size of my stop loss, so I don't mind having a < 50% win rate. Also, on CL, checkout out IBs on the 20min time frame, works better than the 15min, per my testing.
I definitely agree with your point of view. That's the key to trading, everyone has to find what works for them. There's no single way or no secret setup. To answer your questions, my stop depends on what kind of setup I'm entering on. Some have 3 ticks on ES while others 6-8 ticks. On crude that's the one I just bail if it doesn't go my way. Keep in mind I'm going for scalps right now so I'm not worried about big runners. They're hard to get and I find just getting 1 pt reliably can yield more than getting that one big runner and stopping out on all the others. My goal is to get consistent with 1 contract with tight stops getting 4 ticks and then I can add a 2nd and go for 6-8 ticks. In fact I'm in that phase now trading bund & ES with 2 contracts. Then when that is consistent I can add a 3rd and go for more on the best setups.
In my opinion context is the most important thing in trading and just taking inside bars without regards to context is not going to be optimal. And context is very discretionary. So if we're balanced or imbalanced I'll trade differently.
For scalping, being "right" frequently is definitely very important.
As far as context goes, it definitely helps, but the reason I think you can still succeed without context is that an IB is a pause, and most of the time the next move of the market is 50/50 and if your loss is x and your profit target is y where y>x, on a 50/50 setup, over time, you make money. The key is time frame: how long of a pause is a good pause? It has to be long enough to allow larger time frame traders to push the market in the next direction. If it's too short then your moves won't have enough energy behind them to matter.
I've been looking at reversals for a while, and for these you definitely need context. I figure I need at least 3 lower lows to precede a long reversal bar, or 3 higher highs to precede a short reversal bar. Here's a SIM trade I took on CL today, though it didn't work out, but almost did. Also, as far as volume goes, it seems that if the reversal bar has higher volume than the previous bar, it doesn't work out as well. Otherwise if you get big volume in your trend bars and you get a nice reversal bar with less volume that those tend to work out better. What think ye of my thinking on this trade?