Automatic Loss Recovery System (ALR) - read this first

[Dewey McG]

I added another feature to help find the "sweet spot" for each trader in determining how many turns to use. Later I need to add more tabs so you can do a full comparison, but the point is that you can risk more per trade with less turns because the SL will be smaller. If you sue more turns there is a chance you might never hit a Stop Loss, but because it is larger you will need to use a smaller lot size.

[wealthmaster]

I added another feature to help find the "sweet spot" for each trader in determining how many turns to use. Later I need to add more tabs so you can do a full comparison, but the point is that you can risk more per trade with less turns because the SL will be smaller. If you sue more turns there is a chance you might never hit a Stop Loss, but because it is larger you will need to use a smaller lot size.

Please bear with me.. I am still unable to understand the whole logic behind it.

Fact
1:3 risk reward system are not 70% accurate not even 40%. I would say around 30%.

lets use the example from spreadsheet of 50 pips sl and 150 pips tp balance 20k and 2% risk total turn = 10 so win size is 44.44(i.e 0.22% of 20k)

use 30% win example from my experience.

$44.44 X 3 =$133.32
0(breakevens) x 7 =$0

$133.32 from 10 sets of trades.

and lets assume that we get a loosing trade of ($400 i.e 2% of 20k) every after 30 sets of trades.

$133.32 x 3 =$399.9 ( closed profit after 30 sets of trade)
$-400 X1 = $-400 ( assuming we get a looser from 31th set of trade)

The above result are very realistic and it is breakeven. If you are good and can win more than 35% and your loosing trade comes in around 50th trades(unrealistic, Mkt can get choppy) then you are still up around 2-3% of your account also assuming those 50th trade would take a whole year to close it out.

Am I missing something?

[Dewey McG]

Please bear with me.. I am still unable to understand the whole logic behind it.

Fact
1:3 risk reward system are not 70% accurate not even 40%. I would say around 30%.

Here is where I think you are looking at it the wrong way. This is not a 1:3 risk reward system. The TP needs to be 3 times (or more) the level where we begin using ALR for it to work.

Look at it this way instead. There are many systems that have a high win rate, but they fail because the SL’s are so big and happen too often. With ALR we are going to try to see if we can keep the high win rate but all but eliminate the losses. Unlike a martingale, we can set this so the losses don’t wipe out your account.

lets use the example from spreadsheet of 50 pips sl and 150 pips tp balance 20k and 2% risk total turn = 10 so win size is 44.44(i.e 0.22% of 20k)


use 30% win example from my experience.

$44.44 X 3 =$133.32
0(breakevens) x 7 =$0

$133.32 from 10 sets of trades.

and lets assume that we get a loosing trade of ($400 i.e 2% of 20k) every after 30 sets of trades.

$133.32 x 3 =$399.9 ( closed profit after 30 sets of trade)
$-400 X1 = $-400 ( assuming we get a looser from 31th set of trade)

The above result are very realistic and it is breakeven. If you are good and can win more than 35% and your loosing trade comes in around 50th trades(unrealistic, Mkt can get choppy) then you are still up around 2-3% of your account also assuming those 50th trade would take a whole year to close it out.

Am I missing something?

My experience is different from yours. I simply would not use a system with such a low win rate so it doesn’t make sense to me to start from that point. Before my broker closed I had made 299 profitable trades out of a total of 352 or 84.94% for the year. I am not saying that to brag, just to point out that 30% seems so incredibly low. I have heard of traders who will make all their profits from just a handful of trades and take small losses on the rest, but I don’t know anyone personally who has the stomach for that. In any event I don’t think that is the right way to use this.

Perhaps it is the 1:3 that makes you believe a decent win rate isn’t possible. How about this: There are plenty of EA’s that only break even or lose money with a 70% or better win rate, but have large SL’s that wipe out the profits. Look at any of the back tests from those and look at the large SL’s and see if using ALR would not have yielded better results.

Spider offered to do a simple version of this with a simple strategy> I think once we have something to play with it will make more sense.

[wealthmaster]

Please bear with me.. I am still unable to understand the whole logic behind it.

Fact
1:3 risk reward system are not 70% accurate not even 40%. I would say around 30%.

Here is where I think you are looking at it the wrong way. This is not a 1:3 risk reward system. The TP needs to be 3 times (or more) the level where we begin using ALR for it to work.

Look at it this way instead. There are many systems that have a high win rate, but they fail because the SL’s are so big and happen too often. With ALR we are going to try to see if we can keep the high win rate but all but eliminate the losses. Unlike a martingale, we can set this so the losses don’t wipe out your account.

lets use the example from spreadsheet of 50 pips sl and 150 pips tp balance 20k and 2% risk total turn = 10 so win size is 44.44(i.e 0.22% of 20k)


use 30% win example from my experience.

$44.44 X 3 =$133.32
0(breakevens) x 7 =$0

$133.32 from 10 sets of trades.

and lets assume that we get a loosing trade of ($400 i.e 2% of 20k) every after 30 sets of trades.

$133.32 x 3 =$399.9 ( closed profit after 30 sets of trade)
$-400 X1 = $-400 ( assuming we get a looser from 31th set of trade)

The above result are very realistic and it is breakeven. If you are good and can win more than 35% and your loosing trade comes in around 50th trades(unrealistic, Mkt can get choppy) then you are still up around 2-3% of your account also assuming those 50th trade would take a whole year to close it out.

Am I missing something?

My experience is different from yours. I simply would not use a system with such a low win rate so it doesn’t make sense to me to start from that point. Before my broker closed I had made 299 profitable trades out of a total of 352 or 84.94% for the year. I am not saying that to brag, just to point out that 30% seems so incredibly low. I have heard of traders who will make all their profits from just a handful of trades and take small losses on the rest, but I don’t know anyone personally who has the stomach for that. In any event I don’t think that is the right way to use this.

Perhaps it is the 1:3 that makes you believe a decent win rate isn’t possible. How about this: There are plenty of EA’s that only break even or lose money with a 70% or better win rate, but have large SL’s that wipe out the profits. Look at any of the back tests from those and look at the large SL’s and see if using ALR would not have yielded better results.

Spider offered to do a simple version of this with a simple strategy> I think once we have something to play with it will make more sense.

Okay, so you are thinking the same like Dustin pass ALR concept, ALR 1:3 only comes when you hit our stoploss. Before stoploss we can take let say 50 pip stop and 30-40 pips gain( less tha 1:1) in order to increase winning percentage. And 1:3 only applies when we hit our stoploss (ie. ALR mode)

[Dewey McG]

Okay, so you are thinking the same like Dustin pass ALR concept, ALR 1:3 only comes when you hit our stoploss. Before stoploss we can take let say 50 pip stop and 30-40 pips gain( less tha 1:1) in order to increase winning percentage. And 1:3 only applies when we hit our stoploss (ie. ALR mode)

Yes, the 1:3 only comes into play for using ALR. In fact I remember on one of his videos he said to use your normal TP, but it would change when ALR took over the trade.

[garyfritz]

Fact
1:3 risk reward system are not 70% accurate not even 40%. I would say around 30%.

1:3 system needs 25% wins to break even (not counting costs). 75% of the time you lose 1, 25% of the time you win 3.

In a random market you should get 25% wins **with random entries**. Good traders can do considerably better than 25% wins for a 1:3 system.

[Dewey McG]

Another update to play with:

I made different tabs for numbers of turns so you can test everything from risk size, number of turns, win rate etc.

Each person will have their own comfort zone. Use enough turns and you may never see a stop loss again, but if you ever do it will be much larger. if you use this approach please don't go crazy just because the odds are 1 in 180,000 that you won't. Chances are you will be that one, so make sure it doesn't blow your account. Use less turns and the SL is much smaller but you will get more. The size of your account should be factored in as well.

Update also in post 1

[Kruspe]

Hi guys,

thanks for your hard work. I´m still skeptical about it. Do you consider spread, swap, slippage etc? I guess there will be something what can kill it (sooner or later).

K :hi:

[Dewey McG]

Hi guys,

thanks for your hard work. I´m still skeptical about it. Do you consider spread, swap, slippage etc? I guess there will be something what can kill it (sooner or later).

K :hi:

Here is how I tried to account for that. The trades that go into ALR actually close for a small profit. I didn't count those, even though they can add up. I am hoping that will be enough to cover for slippage and spread

[garyfritz]

That's basically what I did too. This isn't a Grail -- it's a Martingale, and if you aren't careful, it will blow up like any other Martingale. But you can set this one up so it doesn't blow up as often as typical Martingales. I am still skeptical of it, but it looks better than the typical Martingale.