Hi Aquarius,
Apologies for the long post!!
I know that everyone takes something different out of learning, but for me the "Ah-ha" moment thanks to Nigel isn't "let your profits run". For me the concept of taking several small bites at a position rather than one big all or nothing attempt is the biggest change of thinking. Consider any of your favourite reversal signals from D1 or W1 timeframes. Maybe you trade pin bars, engulfing bars, piecing bars, inside or outside bars etc. Normally you'd put your stop behind the price action, take an entry of the break of the signal bar and go for 1:1 or 2:1. If you "let your profits run" you may even make 3:1 or 4:1.
Lets say your traditional stop is 90 pips and you risk 2%. Now instead consider taking a trendline break on a lower timeframe with a 15 pip stop and splitting your 2% risk into 4 equal "attempts" each risking 0.5%.
If your first 2 tries are stopped out you've lost 1%. Maybe now the original signal is no longer valid and instead of losing 2% you've only lost 1%. If the signal is still valid, lets say your third attempt sticks and you get to your first target of 90pips. With 0.5% risk you've just made a 3% account gain (0.5 x 90/15), minus the 1% loss of the first 2 attempts = 2% profit. The same as if you'd taken a full 2% position with a 90pip stop, but you've been given 3 attempts at much lower risk to achieve it! If you're first or second attempt had stuck you'd be doing even better. Now what if you'd moved your stop to BE on the first 2 failed attempts? For every time you get your stop to BE, you are essentially getting a "free life" (just like old school Mario Bros). You can have another attempt at no additional cost (Maybe you actually take 5 attempts, but 3 are moved to BE before being stopped out, so we'll just consider the 2 loss entries in this hypothetical).
Now what if you get to your traditional "2:1" target, 180 pips? With your new 0.5% risk 15 pip stop entry, this will now return 6% profit (0.5 x 180/15). Discounting for your 2 losing trades this will still be 5% profit net. If you'd taken this only with a 2% position and 90 pip stop you'd only make 4%. If you really get onto a runner, you can see how your 0.5% account risk with a 15 pip stop will out do a 2% risk 90 pip stop entry at every step. If you make it to 270 pips profit then instead of 6% gain (3:1 at 2%), you bag 9% minus loses = 8%.
I know this isn't exact. If you don't get in the trade until the 3rd attempt then maybe your entry price isn't as good etc. But if you're buying on a trendline break sometimes you'll be entering on a retrace at a better price. And sometime the trade will go no-where but you'll lose either a smaller amount or nothing compared to a traditional entry.
Finally a trend line break is confluence. You can enter on a price action signal confirmed by a trendline break (or H&S neckline break or double top break etc) and increase the chances or a successful trade. You are taking your normal price action signal, and combining it with another confirming signal that you may not usually consider.
So for my own trading, the first change I'm making isn't to shoot for multi-week multi-pip wins. I'll stick with looking for bleedingly obvious pin bars and long wicks and shooting for traditional 1:1 and 2:1 targets. However, I now try and get more out of each trade by taking multiple attempts at much smaller risk, smaller stops and getting to BE to claim my 'free life' ASAP. With time I may gradually learn to hang on longer and shoot for bigger MWMP trades, but this isn't as much of a priority for me. Taking good setups and amplifying the gains with less risk but the same targets (in pips) is enough for now!
BUT conversely, if all you do is hang onto trades longer (let your profits run) and still use D1 or W1 based stops, without reducing your risk with much smaller stops and getting to BE quickly, I _personally_ believe you will find it very hard to be profitable. I actually think that taking a traditional D1 entry with a large stop based on D1/W1 price action and S&R, watching it run to 1:1 or 2:1 and then come back and stop you out at BE while you wait for a multi-week runner will be a less profitable and much more stressful strategy than just taking your 1:1 or 2:1 exits. It is only when these rare MWMP runners are amplified by the small stop entry position that they become extremely profitable and outweigh the low probability of their occurrence. And it is only when you get your stop to BE quickly on small risk punts that your account will stop haemorrhaging while you wait for the elusive MWMP play.
I'd love to hear Nigel's thoughts though.
