Stop Losses

[chump]

Out of concern for new traders who might read this. Let me explain , using stops the way I have explained means you are either new and don't yet know what you are doing ,OR it means you have sufficient experience and confidence in what you a trading that you know from hard data (results) that using a hard stop adds nothing to your trading efficiency.Hopefully mechanical traders understand that there is nothing wrong with their use of hard stops based upon their trading rational.

 

[dbphoenix]

The question is when you take a setup do you know why you are taking it and what this means in terms of the underlying activity that should support it going forward.
The mechanical trader probably does not care much about this. He's backtested and happy with expectancy so leaving his stop is just part of plan. Hence, some of the quotes above. This is not a criticism, simply an observation.
The discretionary trader is the opposite. He's aware of the why in terms of the what. Therefore, if the what (price action) does not occur he's out regardless. This is also why he does not need to place a hard stop on entry. If you think about this, this 'expectancy' has nothing to do with prediction, it is in fact the ultimate trade what you see approach.
The trade either behaves right, or it does not and in a sense this is his first stop. A hard stop or even a mental technical stop are really only backups to what he sees as correct price behaviour.
I don't think I can add anything further by way of explaining this viewpoint.

This goes a long way toward explaining the difference between those who believe that entries are important (like me) and those who think they're immaterial. But that's another thread (though this particular bone has been chewed over and over again).

 

[Splitlink]

This goes a long way toward explaining the difference between those who believe that entries are important (like me) and those who think they're immaterial. But that's another thread (though this particular bone has been chewed over and over again).

I believe that the stop is more important because, then, the trader knows if he is going right or wrong. The entry will be important to me depending on its closeness to the stop. Too close and your trade is subject to the "noise" that makes the trade risky, inasmuch as it is likely to be over before it has begun. Too far, and the risk/reward factor becomes less acceptable.

This is a good thread. Thanks to everyone who is participating.

Split

 

[gamma]

The one subject that this thread has come to ascertain is that differnt traders have stop losses at different points for their own reasons,however the stop losses are governed by the entry point.
this has been a most interesting read and I hope as useful to all as it has been to me.The Photos of "dave" were a interesting and refershing diversion.

 

[new_trader]

The one subject that this thread has come to ascertain is that differnt traders have stop losses at different points for their own reasons,however the stop losses are governed by the entry point.
this has been a most interesting read and I hope as useful to all as it has been to me.The Photos of "dave" were a interesting and refershing diversion.

I think Chump made a very important point about discretionary Vs mechanical trading that you should not overlook. If you plan to be a discretionary trader then your entry point is governed by your ability and as a new trader you must use a hard stop at all times and keep them tight.

 

[Lightning McQueen]

I believe that the stop is more important because, then, the trader knows if he is going right or wrong. The entry will be important to me depending on its closeness to the stop. Too close and your trade is subject to the "noise" that makes the trade risky, inasmuch as it is likely to be over before it has begun. Too far, and the risk/reward factor becomes less acceptable.

This is a good thread. Thanks to everyone who is participating.

Split

Agreed this is a great thread, lots of points of view in the debate, me, well I'm going to disagree slightly with you Split by saying I'm in the entries are everything camp, employing a stratgy that picks a good entry means that soft stops can be tight (my ducks wouldn't sink ) leaving a hard stop for unforseen outages as has already been mentioned, lets face it, in SB a hard stop min distance from entry in my strategy is a country mile away, like way over on the horizon, a tiny spec in the distance :cheesy:

Bring on the beer babes

 

[rathcoole_exile]

Bring on the beer babes

not yer average girlie pop band

 

[tune]

If you plan to be a discretionary trader then your entry point is governed by your ability and as a new trader you must use a hard stop at all times and keep them tight.

On the other hand, the new trader could refrain from trading altogether until said ability was adequate.

 

[rathcoole_exile]

Bring on the beer babes

sorry i was trying to find pictures with beer content, but couln't find anything appropriate

(no, that's not me in the middle)

 

[Splitlink]

not yer average girlie pop band

Can this lot cook?

 

[laptop1]

This is what I mean by 2B:

t.

In this set up, the bar with the X showing, I would be looking to go short at this level. Well this what makes the market with so many views, sometimes I will be right sometimes you will be right. However, it's all about managing you trade once you take it on, that counts.

 

[black bear]

Re-post of post content

Good thread and very good posts

thought I would cut and paste this from earlier post before thread went on a stops run

I think Strike rate is overlooked by many looking for the dream large trade/trades, and they do not fully understand just how long that wait can be between winners if lady luck deserts them, or the law of probability re-enforces itself


Some info from my horse racing days, sorry only goes from 25%-80% SR, others available upon request, its a bit of a table to typo up

25% SR =10% chance of losing run of 9 5% chance of losing run of 11 and a 1% chance of losing run of 17

to be on the safe side, life being what it is ~ you should allow 2 of the above such runs to come close together after all you only have one real bank dont you, if its any proper size that is or your just starting out.

I guess you can see where I am comeing from ~

Drawdown is rather large IMO or could be very easy IMO at the low SR end of the range even if you get some big wins to compensate you, if your down 30% of capital thats some confidence in your method IMO, I sure would be questioning myself with real money I can tell you (not 30% of a grand, a bit bigger)

Do I have experience of what I am talking about ~

unfortunately yes at 24 I aspired to be a big shot backing horses, I was on at 5-8/1 range animals and did well for a couple of years

Then the losing run came

och ! I got out alive and only gave back previous win money, that was the good luck

the bad was un believable at that SR end of the spectra it went on and on and on and on and on, :-0

80% SR = 10% chance of 2 losers in a row 5% chance of 2 losers in a row and a 1% chance of 3 in a row

Just make sure you now and have considered the downside to your method and you are sure you will cope with an adverse trading spell, errrrrrrrrrrrr A BAD ONE

off again

 

[new_trader]

On the other hand, the new trader could refrain from trading altogether until said ability was adequate.

I will repeat what I wrote earlier: Proficiency is when you can predict the turning point and direction of the market with near certainty and this is done through study and practice. You must also develop the confidence to back up your opinion with money and this can only be accomplished through live trading. The issue about stops and where to place them will make more and more sense throughout the whole process.

 

[Splitlink]

In this set up, the bar with the X showing, I would be looking to go short at this level. Well this what makes the market with so many views, sometimes I will be right sometimes you will be right. However, it's all about managing you trade once you take it on, that counts.

You would be looking at a pullback, perhaps? But it would have to complete the pattern, though, wouldn't it? Even at the latest bar, it is still going up, besides. This chart is incomplete. I'd want to know a bit more about RS levels

Split

 

[searchlight]

How about the theory that says; if your stop is not in the place that you could take opposite
trade to the one stopped, it was in the wrong place to start with.Only thing should change is the size of your position not the where the stop is placed.

Searchlight

 

[Splitlink]

How about the theory that says; if your stop is not in the place that you could take opposite
trade to the one stopped, it was in the wrong place to start with.Only thing should change is the size of your position not the where the stop is placed.

Searchlight

I don't think that closing a trade is to say that it should be a reversal.

Split

 

[laptop1]

You would be looking at a pullback, perhaps? But it would have to complete the pattern, though, wouldn't it? Even at the latest bar, it is still going up, besides. This chart is incomplete. I'd want to know a bit more about RS levels

Split

Yes, that would be a nice place to short, where you posted your entry, However,one could wait for that break at your entry, then wait for a pull back up near the high to weed out the weak shorts, before it moves lower.so many ways to play it, the ones who went long at the red X would also have made money.:whistling

 

[tune]

I will repeat what I wrote earlier: Proficiency is when you can predict the turning point and direction of the market with near certainty and this is done through study and practice. You must also develop the confidence to back up your opinion with money and this can only be accomplished through live trading. The issue about stops and where to place them will make more and more sense throughout the whole process.

If study and practice can enhance proficiency with turning points and direction, why can it not enhance proficiency with stops?

 

[searchlight]

I don't think that closing a trade is to say that it should be a reversal.

Split

OK. Let me play the devil's advocate here.
why close a trade, if you think general direction of the movement of the price is still what you anticipated what it should be.Other than of course wrong MM.

PS: remember I am just playing the devil's advocate.

 

[darktone]

OK. Let me play the devil's advocate here.
why close a trade, if you think general direction of the movement of the price is still what you anticipated what it should be.Other than of course wrong MM.

PS: remember I am just playing the devil's advocate.

eg:
expectation = down
Resistance at 50 (but u missed it due to romantic interlude with Dave!)
You enter short at 35 on a pull back in favorable price action, u time it to perfection!
Price carries on for another 30 pips before a hard charge back to your entry!

What do you do!?

To me there is only one sensible answer.