How do you guys decide your stops/limits?

[sharesr4us]

So what would you call it barjon? Also what would you class as a strategy?

 

[barjon]

Well it'd be a strategy as you first put it - enter, set take profit, set stoploss. But you don't actually do that - as you have confirmed, you are just thinking to exit somewhere between +50 and -50

 

[sharesr4us]

Okay, but my point in starting this thread was to find out how other experienced traders would do it...could you share or give me any idea of how you trade or would trade?

 

[darktone]

hi and thank you everyone for your help and contribution.

Listen. Its same ole same ole. Youre aiming to trade like everybody else.
Theres just one problem with that, your likely to get the same results as everyone else.

-----

2 traders standing side by side, same market.
Joe Blogs and Jimmy Balodimas are both looking to buy. Jimmys buying as the market dips to 20 and more still on a spike down to 10. Joes sitting waiting for the break at 30.
The market pops 30 and Joes all in with a stop at 20, just like any 'good' trader. Jimmy the 'gun slinger' has scratched his excess size on the way back up and averaged at 15. Both are now sitting, waiting.

The market pops 40. In a flash Joes in with a stop at 35 to lock profits! Jimmys limited out of most of it from 35-40 but missed the 42. The market turns on a pin and fills Joe at 34, before idling up to 38 as Jimmy getting out of the final few. Then whoosh, down at 20.

'+4' smiles Joe smugly :smart:
'Well done ʄućk face!' says Jimmy

 

[barjon]

Okay, but my point in starting this thread was to find out how other experienced traders would do it...could you share or give me any idea of how you trade or would trade?

bit like you described, but based on price action and not a set amount of points and with more of the gaps filled in

 

[darktone]

could you share or give me any idea of how you trade or would trade?

you asked that in your other thread

so what do you think?

 

[Cubed]

Hi everyone,

I'm just wondering, how do you guys know how much your stops and limits to take profit should be?

For me it's 50:50.

So for example if I place a bet of £2 on GBP/USD @ 5000 that it's going to go up, I place a stop at 4950 and limit at 5050. Some occasions my stop/limits can be even more.

I know everyone has different strategies, but my reason for large stop/limits is that the market can fluctuate too quickly which means if I placed a stop too close to my opening price, it kicks in too early.

I'd appreciate it if you can give me your stop/limit amounts so that I can gauge what most traders use.

50:50? Don't you mean win ratio because you might as well use 1:1 if you mean risk reward

 

[sharesr4us]

WOW! Thanks very much for sharing guys for sharing your charts and strategies.

@ barjon - I'm going to be honest and say that I don't understand the picture you've sent me mate.

@ darkzone. Sorry I didn't realise you had replied on the other thread. I somewhat have a better understanding of your methodology, but like barjon's chart still somewhat confused by the terminology you used.

I use ig index demo for the moment. When you say "Stack limit orders", would I have to manually set these up or does the platform do it for me? Any ideas on how I could set any one of these techniques. Lastly I noticed that you guys go very short term, but I tend to leave my trades to play out upto a whole day.

@ cubed - yeah sorry..still learning buddy.

 

[darktone]

WOW! Thanks very much for sharing guys for sharing your charts and strategies.

@ barjon - I'm going to be honest and say that I don't understand the picture you've sent me mate.

@ darkzone. Sorry I didn't realise you had replied on the other thread. I somewhat have a better understanding of your methodology, but like barjon's chart still somewhat confused by the terminology you used.

I use ig index demo for the moment. When you say "Stack limit orders", would I have to manually set these up or does the platform do it for me? Any ideas on how I could set any one of these techniques. Lastly I noticed that you guys go very short term, but I tend to leave my trades to play out upto a whole day.

@ cubed - yeah sorry..still learning buddy.

stacking orders just means setting separate limit orders one after the other. you do that manually. most platforms allow you to drag them around on the chart.
scratching means (to me at least) to close a trade you no longer want.
No need to think on it too much. just get stuck in with a demo.Its simple stuff.
Trade small time frames for practice. When you get the jist you can trade any timeframe / market. it doesnt matter much.

What does matter MUCH is psychology. Thats where the real work is for about 99% of us.

 

[barjon]

............@ barjon - I'm going to be honest and say that I don't understand the picture you've sent me mate............

ok - the green diagonal line represents an upward trend culminating in the green candlestick which represent the last one in that up trend and the red ones a pull back to that trend. My strategy is to look for at least a test of the high point after the pullback has ended. I will assume the pullback has ended if the high of a pull back candlestick is taken out (the green line labelled "entry target".

I will look at price action as it comes to that level (the yellow KZ1 zone) to decide if I will take the trade. If I do, I will put in hard take profit and stoploss orders at the same time.

If trade goes against I will watch price action as it approaches the stoploss level (the yellow KZ2 zone) and will exit within that zone unless there are strong reasons why not (technical price action) or if the stoploss is hit.

If trade goes well I want to ensure I get at least a 1.5R reward to my 1R risk so I watch that level (the yellow KZ3 zone).

If it reaches near my target level (my take profit order) and will exit within the yellow KZ4 zone unless there is good momentum to take it further (I might remove my order then but not to confuse matters)

Hope that makes it more understandable

 

[sharesr4us]

Thanks very much for clarify that barjon. Out of curiosity, what what kind of trades do you do? very quick/short time 1 or 2 pips or are you willing to wait for larger amounts/long time.

 

[barjon]

i trade off daily charts so they usually last a few days or occasionally up to a couple of weeks

 

[malaguti]

Thanks very much for clarify that barjon. Out of curiosity, what what kind of trades do you do? very quick/short time 1 or 2 pips or are you willing to wait for larger amounts/long time.

out of interest mate, have you ever gone over your historic trades and seen just how high your trades did go had you not exited at 1:1? Could they be better than 1:1 and are you potentially exiting too early?
also, have you considered taking half off (of your £2 stake) and letting the remaining ride until you get an actual exit signal? Possibly raising your stop loss in the mean time

its pretty pointless asking what others do, mainly because my strategy is going to be different to yours. I know that I have a 70% win loss ratio with an average profit ratio of 4:1
so If i said to you, stick to 4:1 how would that work, if your strategy never gets to 4:1 do you see my point?
if your strategy only ever reaches max 2:1 then taking profit at 4:1 clearly won't work. so no point asking the question

perhaps what you need to do (and i'd advise this) is go back over your historic trades and work out what your average profit ratio ACTUALLY is.
just a few suggestions of course

 

[alexaherself]

I'm just wondering, how do you guys know how much your stops and limits to take profit should be?

Apart from one very specific type of trade (only a small minority of my trades, the ones described here), my initial stop-loss level is determined by the principle of "If I'm wrong and the price gets to here, then I don't want to be in the trade any more because it didn't work out for me and my entry failed".

In practice, that "here" is very often going to be a couple of pips under the last swing-low (if I'm entering long) or a couple of pips above the last swing-high (if I'm entering short). So the difference between that "here" and the current price (or the difference that "here" and the price-level at which I've decided to enter, if my entry is a stop-order rather than a market order) determines the size of my initial stop-loss, and if that's too wide for comfort, I might even give the trade a miss, or at least reduce my position-size accordingly.

If the price moves in my favour, I'll then move the stop-loss manually (i.e. only ever in the same direction as the price), again often to positions determined by more recent swings-high/low.

I usually don't have a fixed "take-profit" level in mind, and am generally erring on the side of trying to catch the occasional big profits, when it turns out my entry was luckier than I expected. So I like to keep the risk on the small side and let the profits run (even knowing that the really big wins, that way, will be few and far-between). But when I do that, I'm also keeping an eye on possible reversal-points (such as lines of earlier support/resistance, "00" numbers, and so on, and I'm willing to close there if the price looks like not going through that level, even without my manually trailed stop-loss being hit.

(If it gives my vague comments any frame of reference, I'm always trading forex, intraday only, and my trades can be open anything between about 5 minutes and about 5 hours.)

 

[ffsear]

I used fixed, 10 point stops. And thats a "hard stop". Normally i'l close manually if a position goes against me before the stop actually gets hit, i.e the pattern i'm trading fails. If the pattern itself require more then a 10 point stop, i won't trade it.

Good example on the DAX this friday. Nice small bearish pattern in a good area. This can be cut quick if it goes against you.

I take small profits, and try to taken them often. 10-15 pips will do me, but often i'll take 7,8,9 pips. I spent far to long looking for bigger moves. I got sick of seeing 50+ point positions turn around and get stopped out.

I do get the occasionally big move, maybe twice a month or so. These always happen when i'm away from my desk!

 

[sharesr4us]

i trade off daily charts so they usually last a few days or occasionally up to a couple of weeks

But isn't the example you've given to me a very short trade?

out of interest mate, have you ever gone over your historic trades and seen just how high your trades did go had you not exited at 1:1? Could they be better than 1:1 and are you potentially exiting too early?
also, have you considered taking half off (of your £2 stake) and letting the remaining ride until you get an actual exit signal? Possibly raising your stop loss in the mean time

its pretty pointless asking what others do, mainly because my strategy is going to be different to yours. I know that I have a 70% win loss ratio with an average profit ratio of 4:1
so If i said to you, stick to 4:1 how would that work, if your strategy never gets to 4:1 do you see my point?
if your strategy only ever reaches max 2:1 then taking profit at 4:1 clearly won't work. so no point asking the question

perhaps what you need to do (and i'd advise this) is go back over your historic trades and work out what your average profit ratio ACTUALLY is.
just a few suggestions of course

I have and some my trades have gone much higher than I thought, but like professional traders recommend, I learnt that you can't be too greedy. Thats a great suggestion btw...

Apart from one very specific type of trade (only a small minority of my trades, the ones described here), my initial stop-loss level is determined by the principle of "If I'm wrong and the price gets to here, then I don't want to be in the trade any more because it didn't work out for me and my entry failed".

In practice, that "here" is very often going to be a couple of pips under the last swing-low (if I'm entering long) or a couple of pips above the last swing-high (if I'm entering short). So the difference between that "here" and the current price (or the difference that "here" and the price-level at which I've decided to enter, if my entry is a stop-order rather than a market order) determines the size of my initial stop-loss, and if that's too wide for comfort, I might even give the trade a miss, or at least reduce my position-size accordingly.

If the price moves in my favour, I'll then move the stop-loss manually (i.e. only ever in the same direction as the price), again often to positions determined by more recent swings-high/low.

I usually don't have a fixed "take-profit" level in mind, and am generally erring on the side of trying to catch the occasional big profits, when it turns out my entry was luckier than I expected. So I like to keep the risk on the small side and let the profits run (even knowing that the really big wins, that way, will be few and far-between). But when I do that, I'm also keeping an eye on possible reversal-points (such as lines of earlier support/resistance, "00" numbers, and so on, and I'm willing to close there if the price looks like not going through that level, even without my manually trailed stop-loss being hit.

(If it gives my vague comments any frame of reference, I'm always trading forex, intraday only, and my trades can be open anything between about 5 minutes and about 5 hours.)

I'd say that your time-scale on these trades fits similar to mine as I tend to usually trade between 30mins to 5 hours.

I used fixed, 10 point stops. And thats a "hard stop". Normally i'l close manually if a position goes against me before the stop actually gets hit, i.e the pattern i'm trading fails. If the pattern itself require more then a 10 point stop, i won't trade it.

Good example on the DAX this friday. Nice small bearish pattern in a good area. This can be cut quick if it goes against you.

I take small profits, and try to taken them often. 10-15 pips will do me, but often i'll take 7,8,9 pips. I spent far to long looking for bigger moves. I got sick of seeing 50+ point positions turn around and get stopped out.

I do get the occasionally big move, maybe twice a month or so. These always happen when i'm away from my desk!

Isn't 10 point stops too close? I find that unless I set 50 points or more, the market quickly triggers the stop and I end up with constant losses.

 

[ffsear]

Isn't 10 point stops too close? I find that unless I set 50 points or more, the market quickly triggers the stop and I end up with constant losses.

what markets you trading? I dont trade anything over a 1 point spread. The ftse takes about 20 mins to do about 10 points these days!

 

[VielGeld]

Once you have a defined idea of what your trading strategy is and what you're looking for in each trade, you can be very specific about your expectations of the trade. My best trades often have very little to no adverse movement. So what I do is set my SL a bit below a significant adverse level.

Let's say price is at 10.05 and my target is 10.3. 10, being a round number, is usually significant. Looking at price movement, my hunch appears correct. I then decide a good SL level would be around 9.95, volatility taken into account. I also subtract the spread from these levels.

So let's say the spread is 3 pips. It would look like this:

Market order: 10.065

Take profit: 10.285

Stop loss: 9.935

-----

Profit: (10.3 - 10.05 - .03) OR (10.285 - 10.065) = 22pips

Loss: (10.05 - 9.95 - .03) OR (10.065 - 9.935) = 13pips

Return/risk: 22/13 = ~1.7

Given this, I make 1.7 times more than I risk on this trade. If my win rate is a consistent 50%, I win in the long term.

-----

Of course, it's not this straightforward in practice. But the idea remains that you need to define your risk and the point at which you take profit. With experience, you get better at it. It's not an exact science, however.

 

[sharesr4us]

what markets you trading? I dont trade anything over a 1 point spread. The ftse takes about 20 mins to do about 10 points these days!

I usually trade between 2 markets majority of the time. First is GBP/AUD and second is Germany 30. Though now and again I also go for Germany 30 June/Sept etc.

The problem with going with FTSE for me is that I can't easily tell which direction it's going, but I seem to have an instinct in knowing which way my chosen markets are going.

So is FTSE the only market you trade in?

Once you have a defined idea of what your trading strategy is and what you're looking for in each trade, you can be very specific about your expectations of the trade. My best trades often have very little to no adverse movement. So what I do is set my SL a bit below a significant adverse level.

Let's say price is at 10.05 and my target is 10.3. 10, being a round number, is usually significant. Looking at price movement, my hunch appears correct. I then decide a good SL level would be around 9.95, volatility taken into account. I also subtract the spread from these levels.

So let's say the spread is 3 pips. It would look like this:

Market order: 10.065

Take profit: 10.285

Stop loss: 9.935

-----

Profit: (10.3 - 10.05 - .03) OR (10.285 - 10.065) = 22pips

Loss: (10.05 - 9.95 - .03) OR (10.065 - 9.935) = 13pips

Return/risk: 22/13 = ~1.7

Given this, I make 1.7 times more than I risk on this trade. If my win rate is a consistent 50%, I win in the long term.

-----

Of course, it's not this straightforward in practice. But the idea remains that you need to define your risk and the point at which you take profit. With experience, you get better at it. It's not an exact science, however.

Can I ask what markets you trade in? Also forgive me for asking, but do you go by a "hunch" or do you actually use chart tools to figure out and decide what way the market is going to go?

....I wish there was a video tutorial to show beginners how experienced trader setup their live trades so that we can understand what is going on...most of the video tutorials are not as straight forward to be honest.

 

[alexaherself]

First is GBP/AUD

That's the only one of the forex market's 28 major currency pairs that I don't and won't even look at, myself, because its dealing costs are normally so very much higher for me than those for any of the other 27.

I'm extremely surprised.

Do you mind my asking what's made you choose that one?

and second is Germany 30.

I'm beginning to understand why you want such wide stops.

I also used to trade the Dax when I first started off, until I started realising why that decision was making life so difficult for me.

If you're trading mostly one currency-pair and one index, is there any overwhelming reason why you shouldn't simply apply your methods instead to a much more convenient instrument (such as maybe EUR/USD, which is the world's most widely-traded instrument and typically, unsurprisingly, the one with the lowest and most competitive dealing costs), and put some of your problems behind you?