I said it once and I'll say 1000 times

Sorry about that...I didn't really mean to bring this discussion up in the chatroom...since I know the focus here is more about "not losing"...and learning to how to have a high hit rate. And I'm super grateful to be able to look over your shoulder with this style. I was just trying to give ddtrader some perspective about what to focus on here, which is "not losing" instead of trying to increase his targets. If you read the earlier chat, I am basically saying the same thing as you (for this room).  

I don't see either side being better or worse (low hit rate / high reward vs. high hit rate / low reward).  I think it's important to know there are differences and challenges on both sides of the spectrum.  Some of those challenges are psychological, some are mathematical.

You either win by frequency (being right most of the time) or you win by magnitude (when you're right, you win big).

That's really the two sides of the spectrum.

The reason I like this room is that it's rare to have someone try to show you how to win by frequency...most people will talk about about magnitude.  To me they are both right.

For the individual trader with a small account it's probably better psychologically to focus on frequency like you are saying, but neither side is right or wrong in my opinion.

Maybe this is where the confusion is...when I say 3 to 1...or 5 to 1...etc...I don't really mean that I have a profit target sitting out there at 5 to 1. That would be silly. I'm more concerned of creating a game that is skewed in my favor. I have no idea if they will run to 10 to 1. I'm just concerned about the risk side of the equation. And the profits will take care of themselves. The way I take care of the risk is always having a stop and pulling to breakeven at an amount that will give a trade room to breathe. That's all. When you do your final calculation you may have a 3 to 1 risk to reward...but you have no idea on an individual trade basis.

Of course you know that you need above a certain risk reward to make the math work after you have a general idea of your win rate.  That's all I'm saying.

This thread is getting very interesting. I too am confused with this issue of volatilty or what at least traderAllen implies as volatility.

As I see it traderAllen's initial stop is little different from Bob Volman's. Bob places his if he can behind technical swing points on the 70 tick chart and preferably behind clustering price action which is why the dd is less safe than the SB which is less safe than the BB. As the cluster gets stronger the resistance to a move against it gets greater so the trade is safer. Whereas Bob has intitial stops of say 5, 6, 7 and possibly 8 pips, traderAllen's needs to be greater for he will wait for the extra confirmation of the signal/breakout candle to close. As confirmation costs traderAllen's stops are 10 or possibly a little bit more to clear the cluster or swing point. ( Note that Allen is possibly getting more than just candle close confirmation but it may also be giving him extra seconds in the judgement of order flow. Remember what he said recently about a big candle with correspondingly large order flow). Arguably his stop is out of the range of volatility, but it really depends on your perception of volatility. It's ok to have a range or channel bounce trade with the stop outside the range and say that is outside volatility, but for a breakout of a range/channel, a volatility based stop would have to also be also outside the range, making the stop huge. This is what is implied in Tim LuCarelli's book and how in my opinion Allen describes it in his video's which is most confusing given using a standard 10 pip stop or slightly more can hardly be outside of volatility. The initial stop is in a technically significant position and to me that is it.

Now as the trade progresses Allen's stop, stays put outside the initial technically significant position whilst Bob's is trailed at his tipping point, which is where Allen can argue his stop stays outside of volatility. Now Allen also starts taking profits at 3 then 6, inside the likely swing length of the move, gauged from the length of the prior moves on the chart to what is most likely this time. Bob's target stays at 10 but has possibly reduced his stop loss somewhat. At 6 pips Allen's stop moves to break even, an absolutely abhorrent decision according to Bob, unless it is itself a tipping point and actually right inside the volatility. But at this point although Allen has broken his own rules on volatility on the third part of the trade, he is happy that is targets of 3 and 6 have been met inside volatility and the last trade can't lose ( ignoring slippage). He is now in a psychologically strong position, where he can either let his target of 9 get hit or hold out for a bit more. I wouldn't dare say he is letting his profits run, but if he chooses to take profit outside of his pre-determined volatility, that is what he will be doing. He can close the trade early however if he feels the market has exhausted its present move and take smaller profit, so there is discretion so room for psychological flaws, but at least he's protected.

Now I don't know Bob's actual strike rate, but if he hits only 50% of 10 pip targets and stops out for only 5 pips, he will make good money averaging 2.5 pips per trade profit. Allen however has divided his trade into 3 parts so to compare, his targets need dividing by 3. So he makes 1 pip on the first part of the trade, 2 on the second and possibly 3, 4, or 5 on the third. If he takes the third trade for 3 he will have a total of 6, far less than Bob so needs a greater strike rate to profit. Also because there are many other ways for Allen to close a trade, his totals will often be much less than 6. Let's say he averages a 5 pip gain with a 10 pip stop (which could be way out as only his true figures will reveal). He will need a strike rate of 66.6% just to break even. To equal Bob's 2.5 pips per trade he will need to win 5 out of every 6 trades or 83%. Now this is only hypothetical as only Allen and Bob know their true figures, but it does go to show, given that both are highly successful, that there is more than one way to skin a cat.

Again to me what both these successful traders are able to do is enter at the most ideal time for a likely push in the market and to consistently manage their trades in a way that has proven to work for them within the technical framework of the chart (volatility if you like) and within their own psychological boundaries (stops to BE or Tipping Point).

Just my thoughts on the matter.

Hi Allen,
This piece of your reply cought my eye: ".. having your stop properly placed outside volatility(by the way volatility is not something I make up, as mentioned above, it is a measurement, that can be duplicated over and over on any chart)...".
When you have some time, could you please elaborate a bit more on that interesting concept of putting the Stop Loss away from volatility? If possible, a chart showing what you mean would be of great help.
I can see the concept of volatility on higher TFs, sort of what they call zones of demand/supply on those D/S forums, but I cannot figure it out how they can be seen on our 70 ticks charts.