price & stops

[Grey1]

Totally disagree with, well, all of that. No, sorry, the last line is okay.

The last line is vital to your trading and I feel you should start learning about volatilty and its sister risk managment before volatility wipe you

Grey1

 

[new_trader]

Anyway, the real issue about stops is that they are dependant on the skill of the trader. A trader who can detect the turning points and enter when the market is going to move in the anticipated direction. If you use a 5 point stop why not just wait until you are certain of direction and enter with a 3 point stop? The larger the stop, the more you are guessing.

 

[wasp]

The last line is vital to your trading and I feel you should start learning about volatilty and its sister risk managment before volatility wipe you

Grey1

Thank you for your concern. I, unlike you in your prior post, value risk equally if not more importantly than profit and as for 'high volatility', that's just a traders excuse for losses.

Let's agree to disagree here Grey1 as I stand by my viewpoint regards stops, as do you and neither of us will change*.









*I'm right btw!

 

[Grey1]

Anyway, the real issue about stops is that they are dependant on the skill of the trader. A trader who can detect the turning points and enter when the market is going to move in the anticipated direction. If you use a 5 point stop why not just wait until you are certain of direction and enter with a 3 point stop? The larger the stop, the more you are guessing.

This is a can of worm . This is why I expect traders go and read it themselves to get better understanding of stop loss,

Tight stoploss has a HIDDEN COST attached to it if is not volatility adjusted. This cost as I said is HIDDEN and traders seem to push it under the carpet. Wide stoploss is not any better either,, They are both as bad as each other,,

Correct levels of stoploss must be volatility adjusted and must not have a adverse impact on return distribution

Tight stoploss can be as ugly as a wide stop ( in terms of return distribution ) but sounds better

Grey1

 

[Grey1]

Thank you for your concern. I, unlike you in your prior post, value risk equally if not more importantly than profit and as for 'high volatility', that's just a traders excuse for losses.

Let's agree to disagree here Grey1 as I stand by my viewpoint regards stops, as do you and neither of us will change*.

My friend,

if you did value risk you would value understanding the volatility. These are unseperable. and the alphabet of financial engineering.

I have no idea why we should disagree on facts ? Am I talking fiction here mate?

Grey1









*I'm right btw!

My friend,

if you did value risk you would value understanding the volatility. These are unseperable. and the alphabet of financial engineering.

I have no idea why we should disagree on facts ? Am I talking fiction here mate?

Grey1

 

[wasp]

My friend,

if you did value risk you would value understanding the volatility. These are unseperable. and the alphabet of financial engineering.

I have no idea why we should disagree on facts ? Am I talking fiction here mate?

Grey1

No fiction, just a different perception of volatility and 'financial engineering'.

We disagree because, whilst others use wider stops to allow for 'insert reason here' I have the freedom to use tight stops because I have already ensured I buy/sell at the best price.

If I believed price 'may' go higher/lower than my entry, then I wouldn't be trading my style correctly and consequently, not entering until I am sure It is the best price.

Using smaller TF's to pinpoint the best entries I can keep my stops just as tight as I like without concern of the volatility because should price go against me, I just read the market wrong.

If a trader feels his stop should be wider due to volatile conditions, perhaps they should actually be reevaluating their entries.

____

Anyhow, markets closed and I am off........... have a good weekend!

 

[Grey1]

No fiction, just a different perception of volatility and 'financial engineering'.

We disagree because, whilst others use wider stops to allow for 'insert reason here' I have the freedom to use tight stops because I have already ensured I buy/sell at the best price.

If I believed price 'may' go higher/lower than my entry, then I wouldn't be trading my style correctly and consequently, not entering until I am sure It is the best price.

Using smaller TF's to pinpoint the best entries I can keep my stops just as tight as I like without concern of the volatility because should price go against me, I just read the market wrong.

If a trader feels is stop should be wider due to volatile conditions, perhaps they should actually be reevaluating their entries.

I leave you with this PDF to read,

The above post is based on your gut feeling and all that and I am not really into stuff like that ,,

http://www.ivolatility.com/news/Volatility_to_work.pdf

GOOD LUCK

grey1

 

[wasp]

I leave you with this PDF to read,

The above post is based on your gut feeling and all that and I am not really into stuff like that ,,

http://www.ivolatility.com/news/Volatility_to_work.pdf

GOOD LUCK

grey1

You assume too much, not a good trait for a trader. you want to be careful... oh, and GOOD LUCK to you too!

 

[Paul71]

My friend,

if you did value risk you would value understanding the volatility. These are unseperable. and the alphabet of financial engineering.

I have no idea why we should disagree on facts ? Am I talking fiction here mate?

Grey1

Grey, volatility works, volatility is good, but you've got to know how to use it properly. Widening stops, dropping contracts and basically sh*tting yourself is just not the done thing. Use it to your advantage.

Thanks for the posts.

Paul.

 

[firewalker99]

The last line is vital to your trading and I feel you should start learning about volatilty and its sister risk managment before volatility wipe you

Grey1

No mathematical formula for risk management is going to help you trade what you see. If you rely on calculated values to determine your stop size, you are very likely risking more than is necessary. I'm all ears if you can show me how to trade using whatever theoretical model you have at hand that could provide a way of putting less money at risk.

You can keep telling people about calculating their stop sizes using complex formula and how they can gauge future volatility using GARCH, QGARCH, EGARCH, etc, etc. However, in practice in the markets (meaning: in real life, not in theory), the assumptions made in standard GARCH models don't hold up. The intrinsically symmetric model is unable to cope with the skewness presented in a market's volatility, and as you are probably aware there are certain 'effects' which render the GARCH model not as useful as one would think at first.

Forecasting volatility isn't going to learn people anything about how to trade the market that's in front of them. No matter how many fancy acronyms one throws up in the air.

 

[Grey1]

Why can't you catch a big move with a tight stop?

Are you saying I can't do what I do?...that's news to me...

24th of OCT I am giving my 7th LIVE trading seminar on pal talk with 100s of people from this BB. Are you going to come and show our traders how to catch a big move LIVE with tight stop or you washing your hair ? If you do come I can arrange so we both trade along side each other and our friends make money from our calls .


I appreciate if you say YES or NO ,,,

Grey1

 

[firewalker99]

It sounds nice to say HAVE A TIGHT STOP but this is actually irrelevant in risk managment and people keep parroting TIGHT STOP LOSS to make them sound pro,,
Grey1

We don't talk about 'tight stops' because we like to sound 'professional', we talk about 'tight stops' because we think of risk first, and only later we think about the reward. Which is what everybody should do, if they plan on staying in this game for a long time.

stops are function of stochastic volatilty and can be wide or small depending on pos size for a given capiital
Grey1

Now thàt is parroting. Probably from 'investing for dummies'.

Volatilty will define your pos size ,,, your pos size defines your stop level ,,
Tight stoploss is not any better than a wide stoploss if volatilty and hence POS sizing is calculated incorrectly,, Tight stop loss only sounds better lol
Grey1

Sounds like more of that 'investing for dummies' to me.

Tell me... why some of the best traders I know still manage the same stop size today as they did three months or a year ago?

Grey, volatility works, volatility is good, but you've got to know how to use it properly. Widening stops, dropping contracts and basically sh*tting yourself is just not the done thing. Use it to your advantage.

Exactly.

 

[Grey1]

No mathematical formula for risk management is going to help you trade what you see. If you rely on calculated values to determine your stop size, you are very likely risking more than is necessary. I'm all ears if you can show me how to trade using whatever theoretical model you have at hand that could provide a way of putting less money at risk.

You can keep telling people about calculating their stop sizes using complex formula and how they can gauge future volatility using GARCH, QGARCH, EGARCH, etc, etc. However, in practice in the markets (meaning: in real life, not in theory), the assumptions made in standard GARCH models don't hold up. The intrinsically symmetric model is unable to cope with the skewness presented in a market's volatility, and as you are probably aware there are certain 'effects' which render the GARCH model not as useful as one would think at first.

Forecasting volatility isn't going to learn people anything about how to trade the market that's in front of them. No matter how many fancy acronyms one throws up in the air.

Firewalker, No complex formula,, TT group only use ATR and I have given them a code so it is done all automatically ,, so they even donot bother about calculating and dealing with complex formula..



You said
I'm all ears if you can show me how to trade using whatever theoretical model you have at hand that could provide a way of putting less money at risk.

Just speak to any of my group who use the simple code to adjust their pos size,, 100 s of traders from TT are using it NOW and been using it for at least 2 years.

As far as risk is concerned then you welcome to my next seminar where I be covering the risk managment part of trading again ,,, As my seminar usually takes around 8 hours There is plenty of time to explain it again .
The point is risk management is not only about stoploss,, It is about diversification of trade. relative strength of instrument to the market ,,

I totally understand you have not ever been shown how things works in real time as far as risk managment is concerned but this is your opportunity .

grey1

 

[Grey1]

We don't talk about 'tight stops' because we like to sound 'professional', we talk about 'tight stops' because we think of risk first, and only later we think about the reward. Which is what everybody should do, if they plan on staying in this game for a long time.



Now thàt is parroting. Probably from 'investing for dummies'.



Sounds like more of that 'investing for dummies' to me.

Tell me... why some of the best traders I know still manage the same stop size today as they did three months or a year ago?



Exactly.

Firewalker

You are not getting any where in life with that kind of attitude,, I am trying to help you so you can improve,, if you wish to show attitude then you close doors to yourself that I am trying to open to you ,,

Who else would teach you risk managment in real time with real trade from this BB?

Verbal abuse does not make you technically correct..

Grey1

 

[firewalker99]

If you do come I can arrange so we both trade along side each other and our friends make money from our calls .
I appreciate if you say YES or NO ,,,

Grey1

I still lie awake at night, wondering how your friends made money from your famous 'the dow will never break the March low's' call... hmm... that was like... 4000 points higher than were we are now?

Firewalker, No complex formula,, TT group only use ATR and I have given them a code so it is done all automatically ,, so they even donot bother about calculating and dealing with complex formula..

ATR is perfectly fine if you have no other way of determining the probabilities of your trade. If the odds of your trade succeeding are nothing more than a result of extensive backtesting, instead of an evaluation of the market after you enter the trade, than ATR might be just what you need. If you are however looking to understand the market and learn to act on what you see - instead of letting yourself get stopped out for no reason other than because your automatically calculated formula tells you to place the stop there - then, and only then, will you truly 'manage' risk.

Managing risk is something which is done NOT ONLY before the trade is entered. It is a dynamic process, which need continuous evaluation as long as the market is in a state of flux.

I'm pretty sure I know the answer to this question, but I'll ask anyway: do the TT people trade less size and have wider stops (in terms of absolute points) then 6 months ago? If the answer is yes, I invite them all to think for themselves for a minute :idea: and reflect whether it is really necessary to put more money at risk, just because the market moves a greater range in the same period of time.

Verbal abuse does not make you technically correct..
Grey1

Verbal abuse? Fact is what you are telling is what every book for beginners says. That you should change your stop size and adopt accordingly position size to volatility blah blah. Unfortunately that's not the right path to teach a person about risk. By all means, use that approach if you have nothing better at hand. It definitely beats guessing. But it's far from optimal.

I ask again, if you could win $200 with buying a lottery ticket and you had the choice between one of $5 and one of $10 (odds of winning the same on each ticket), which one would you buy? Until you get that, there's no point in trying to explain risk "management".

 

[Grey1]

We don't talk about 'tight stops' because we like to sound 'professional', we talk about 'tight stops' because we think of risk first, and only later we think about the reward. Which is what everybody should do, if they plan on staying in this game

so keeping tight stoploss keeps you in this business and a wide stop loss bankrupts you . you think it is as simple as this then ?

In this case from 2morrow I am going to keep the stop loss to 1cents for all stocks. Thanks for the tip ,, why on earth did I not think of it earlier ?

grey1

 

[firewalker99]

so keeping tight stoploss keeps you in this business and a wide stop loss bankrupts you . you think it is as simple as this then ?

In this case from 2morrow I am going to keep the stop loss to 1cents for all stocks. Thanks for the tip ,, why on earth did I not think of it earlier ?

grey1

Where did I say that having a tight stoploss ALONE will keep you in this business? If you take 100 trades per day with 1 point stop you will still lose money. I am sure you know there is more to it: discipline, having a profitable plan, having carefully laid out rules, having an exit strategy, a trade management strategy, etc, etc.

However, you are deviating from the point I was making. Which is, again, stops don't need to be wider just because the volatility is. I am talking about your reply to new_trader and your reply to wasp:

"This is a can of worm"
"Tight stoploss has a HIDDEN COST attached to it if is not volatility adjusted. "

I totally disagree on both accounts. Your approach seems highly mechnical, and although there is nothing wrong with that, it is unable to compensate for extreme or unexpected gyrations in the market. No matter what formula you choose.

 

[Grey1]

I still lie awake at night, wondering how your friends made money from your famous 'the dow will never break the March low's' call... hmm... that was like... 4000 points higher than were we are now?



ATR is perfectly fine if you have no other way of determining the probabilities of your trade. If the odds of your trade succeeding are nothing more than a result of extensive backtesting, instead of an evaluation of the market after you enter the trade, than ATR might be just what you need. If you are however looking to understand the market and learn to act on what you see - instead of letting yourself get stopped out for no reason other than because your automatically calculated formula tells you to place the stop there - then, and only then, will you truly 'manage' risk.

Managing risk is something which is done NOT ONLY before the trade is entered. It is a dynamic process, which need continuous evaluation as long as the market is in a state of flux.

I'm pretty sure I know the answer to this question, but I'll ask anyway: do the TT people trade less size and have wider stops (in terms of absolute points) then 6 months ago? If the answer is yes, I invite them all to think for themselves for a minute :idea: and reflect whether it is really necessary to put more money at risk, just because the market moves a greater range in the same period of time.



Verbal abuse? Fact is what you are telling is what every book for beginners says. That you should change your stop size and adopt accordingly position size to volatility blah blah. Unfortunately that's not the right path to teach a person about risk. By all means, use that approach if you have nothing better at hand. It definitely beats guessing. But it's far from optimal.

I ask again, if you could win $200 with buying a lottery ticket and you had the choice between one of $5 and one of $10 (odds of winning the same on each ticket), which one would you buy? Until you get that, there's no point in trying to explain risk "management".

Fiewalker,

You came to Technical Trader and called the market 2 times and you was wrong both times and as you said it urself YOU LOST YOUR HONNER. Your stoploss was very tight and i told you that and as a result in both trades you HIT the stop and you said you would not post if you was wrong and you was wrong and all members of TT watched the trade,,

I know this upset you and caused discomfort to you but as I said to you at the time ,, IT WAS DUE to lack of understanding of market volatilty.

I think it is nearly 4 month from that episode and you still have not improved your understanding of risk and risk control. your money your bin

PS:- It was due to decision of many Techncial Trader traders to BAN you from the Board for your fighting attitude with weak technical back up .

grey1

 

[firewalker99]

Fiewalker,

You came to Technical Trader and called the market 2 times and you was wrong both times and as you said it urself YOU LOST YOUR HONNER. Your stoploss was very tight and i told you that and as a result in both trades you HIT the stop and you said you would not post if you was wrong and you was wrong and all members of TT watched the trade,,

I know this upset you and caused discomfort to you but as I said to you at the time ,, IT WAS DUE to lack of understanding of market volatilty.

I think it is nearly 4 month from that episode and you still have not improved your understanding of risk and risk control. your money your bin

PS:- It was due to decision of many Techncial Trader traders to BAN you from the Board for your fighting attitude with weak technical back up .

grey1

Nice going at deviating from the subject. However, as memory doesn't fail me, you asked me to put on a swing trade where I clearly said I don't make calls, AND I only traded intraday. I joined in your party nonetheless and although that particular trade got stopped out, my technical analysis was spot on since it predicted the market would fall much further.

Let's not kid ourselves... the reason I got banned was because you couldn't believe what was happening when the market broke the March lows. Someone who is supposed to be such a proficient trader, seems to forget one cardinal rule: the market is always right, no matter how brazenly one might declare otherwise.

Now, I think it would be best to stay on topic and answer the question:
How much wider are the stops of you (or anyone else from TT) today compared to 6 months ago? And would you be able to trade with a 1 point stop on the ES?

Who else would teach you risk managment in real time with real trade from this BB?

I've yet to see a single trade live from you. But markets are open Monday, and this thread is fine for me! I'll be especially interested in the stop size.

 

[firewalker99]

This was your answer to Paul71's question about where to place stops:

Historical and future volatility..
Grey1

History repeats itself... but only to a certain extent. Unless you can point them out, I never saw any of your posts predict the extreme volatility in the markets over the course of the last couple of weeks?

And scientific journals admit that the existing methods are not useful in an asymmetric environment as the stock market. Besides, even in their trials they filtered out extremes such as the 1987 crash. If you read the journals, I'm sure you know this.

So what it basically comes down to is measuring the ATR of your timeframe and putting it into a simple formula and placing the stop, am I right? Let me ask you, are the targets a measure of the ATR/volatility too? And if not, why not?