Revisiting 'Price Action'

This is a discussion on Revisiting 'Price Action' within the First Steps forums, part of the Reception category; I used to move my stop to B/E for 'safety'. I had a lot of 1 and 2 pip trades ...

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Old Dec 2, 2010, 3:59pm   #25
 
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Re: Revisiting 'Price Action'

nunrgguy started this thread I used to move my stop to B/E for 'safety'. I had a lot of 1 and 2 pip trades for my time.

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Old Dec 11, 2010, 1:54pm   #26
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Re: Revisiting 'Price Action'

I move my stop loss to break even after it has moved 12pts in my favour and I usually get stopped out, only for the trade to shoot off in my direction *sigh*. However, I believe this is the best approach to take because its a risk free trade. By not moving my stop loss to breakeven, I run the risk of turning a winning trade into a losing trade, which is sooooo bad psychologically for me.

You mentioned before that you used to move your stop loss to breakeven, but now you dont. May I ask why? - had you found out that it was in fact more profitable not to move it?

Thanks
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Old Dec 11, 2010, 2:23pm   #27
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Re: Revisiting 'Price Action'

Quote:
Originally Posted by Pi3141 View Post
I move my stop loss to break even after it has moved 12pts in my favour and I usually get stopped out, only for the trade to shoot off in my direction *sigh*. However, I believe this is the best approach to take because its a risk free trade. By not moving my stop loss to breakeven, I run the risk of turning a winning trade into a losing trade, which is sooooo bad psychologically for me.

You mentioned before that you used to move your stop loss to breakeven, but now you dont. May I ask why? - had you found out that it was in fact more profitable not to move it?

Thanks
The psychological part of it depends on how many losers you have over a given time. If you have good wins, it becomes easier not to move your stops to B/E.

I get a "feeling", when the trade starts to retreat, whether the trade will turn out to be a loser and, quite often, decide to cut it. I consider that trade to be a loser, even though I managed to close while in profit, even at B/E. Sometimes, I wish I had not done that but, in general, I believe that the market tries to take out stops in both directions. That, really, is all that the retraction, pullback, area--call it what you will--- is.

Your job, if you are not a scalper, is to get your trade out of that area. IMO, the only way to do that is to cut trades as soon as they reverse. Whether you open in the reverse direction afterwards depends on what your view of the longer trend is but I try not to change my original view. If I am wrong, then I try to keep my losses small and better luck next session.
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Old Dec 11, 2010, 2:24pm   #28
 
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Re: Revisiting 'Price Action'

Pi, an option you could try is to close half your position once price has moved in your direction the same amount of pts as your stoploss, i.e. if stoploss is 12 points, close half at +12. This ensures a risk-free trade but gives price much more room to re-test your entry.
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Old Dec 12, 2010, 1:54pm   #29
 
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Re: Revisiting 'Price Action'

nunrgguy started this thread
Quote:
Originally Posted by Pi3141 View Post
I move my stop loss to break even after it has moved 12pts in my favour and I usually get stopped out, only for the trade to shoot off in my direction *sigh*. However, I believe this is the best approach to take because its a risk free trade. By not moving my stop loss to breakeven, I run the risk of turning a winning trade into a losing trade, which is sooooo bad psychologically for me.

You mentioned before that you used to move your stop loss to breakeven, but now you dont. May I ask why? - had you found out that it was in fact more profitable not to move it?

Thanks
Are you really sure you want to move your stop to b/e?

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Thought 1, you do not have to enter after a bar has closed, repeat that, you do not have to enter after a bar has closed: this is in the realm of back testing, not live trading, of course you CAN trade this way. I've done it but it certainly isn't optimum, you greatly increase your risk by insisting on a bar closing for starters. You can back test trading that way and make it profitable, stop moving added but you need to realise that you're relying on luckily catching the occasional big run...but doing it live is different and there are smarter ways to trade.

More things to to think about:
You say it's psychologically difficult to see a win turn to a lose. How large a win? 10 pips?, 15 pips? Lots of punters feel the same way. Imagine someone with enough power to move the market knowing roughly where you entered, knowing roughly where you will start sh*tting your pants (when you have some profit) and that you will move your stop to b/e in order to feel safe. Where will they enter for less risk and more profit?

It's not a win until you close.

You had 15 pips on the table, got fearful, moved your stop to break even and the market rewarded your fear by taking away your profit. If you are fearful enough to ruin your trade in that way,take your profit. Why don't you take your profit? Fear AND greed, you are not satisfied with 15 pips and want more, you are also fearful of the market moving and missing out on a big run.

Are you sure your trade IS 'risk free'?. You risk your stop to enter. You then 'win' just enough to make you feel fearful of losing it. You then lose it. You then have to enter the market again, risking your stop to enter. Is this a free trade?

The more time you are in the market the greater your risk. There is always a time component involved.

How much more psychologically difficult is it to see trade after trade stop you out? And whoops, missed the entry on the one that turned into a runner.

Why does this keep happening?

Have you never analysed why?

Roughly how many pips are you targetting?
So far I've only shown 'trailing' logic to give you confidence to stay in a trade but what if the market actually generally moves to an area where it will be removing someone elses money from their pockets?
If we are in a long trade, at some point eariler someone else was in a short trade. The market generally moves in a way to ruin all participants. When all breakeven stops have been removed the market will tend to move to the next big level.

So if we think the market might give us 100 pips, we've risked 30, why are we cacking ourselves when the market has moved 10 pips in our favour and moving our stop?

Why is it that we are confident when we enter and fearful when we are in profit?
Where is the greatest risk? Why are we not confident when we are sitting with profit and fearful when not?

Why do traders enter the market, gain a small profit and then give it back. Likewise why do they enter the market having set their risk with their stop then when the trade doesn't work out sit there like rabbits in the headlights and wait for their stop to get hit, because they are giving the trade 'room to breathe', or it 'might come back'.
If the bar you enter on closes against you, you are wrong, get out. Either get out immediately or try to get out as close to b/e as you can get don't EVER take a full loss unless momentum blows straight past you and into your stop.

If your trade is in the red do not dare think about profit, think about minimising loss. If a trade is in the black do not think about loss, think about maximising profit.
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Old Dec 12, 2010, 2:22pm   #30
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Re: Revisiting 'Price Action'

gold H4 has a killer setup
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Old Dec 12, 2010, 2:34pm   #31
 
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Re: Revisiting 'Price Action'

Yes, you can think of it all rather differently.

Think of it that your bet is your stoploss size and not £x per point. So at £1pp and a 20 point stoploss your bet is £20. Let's say you see 60 points in the trade so that's odds of 3 to 1.

If it was a horse race with the bookie quoting FTSE Demon at 3 to 1 you might back it and you'd have to put the £20 up front. You'd then either not get it back or go down and collect your £60 winnings.

jon
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Old Dec 12, 2010, 4:00pm   #32
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Re: Revisiting 'Price Action'

Thanks for your response.

If I could just clarify a few things: I trade the Dow Jones & FTSE. Regarding my money management strategy - I use 3 lots on my trade. The stop loss is set at 20pts away. If the trade moves 12pts in my favour I will take one lot off the trade and move my stop to breakeven, leaving the remaining 2 lots to run. I feel that 12pts is a reasonable amount to let the trade 'breathe'.

I suppose all this boils down to is how risk-averse we all are. For me, I'd say Im fairly risk-averse, if the trade stops me out for b/e and continues to move in the opposite direction then I usually think *phew* at least I managed to get a few points. I think I will try MB325's idea though. This is perhaps the best compromise as it means not moving your stop loss (which is what you're suggesting) and at the same time ensuring a break even trade and minimising losses.

Could you just elaborate on the point you made about not ever taking a full loss (unless momentum pushes the price straight past your trade instantly)? Are you suggesting to use mental stops and hard stops then?

Thanks,

Pi
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