Stop Losses

[dbphoenix]

The market can stay irrational longer than you can stay solvent.

-- John Maynard Keynes

 

[darktone]

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.

You exit be (or better) and observe! Thats what i would do.

Other options are:
Leave it alone cos your stop at 60 will get you out (if your proved wrong!)
potential cost= -25.

Have no stop cos u done your homework and it should come good at some point.
potential cost= lord knows!

 

[darktone]

The market can stay irrational longer than you can stay solvent.

-- John Maynard Keynes

Aint it the truth!

 

[dbphoenix]

Stages of a Trader:

Stage Two: The Hot Pot Stage

You scan the markets every day. After a while (sometimes a good long while), you notice a particular phenomenon which pops up regularly and seems to "work" pretty well. You focus on this pattern. You begin to find more and more instances of it and all of them work! Your confidence in the pattern grows and you decide to take it the very next time it appears. You take it, and almost immediately your stop is hit, and you're underwater for the total amount of your stoploss.

So you back off and study this pattern further. And the very next time it appears, it works. And again. And yet again. So you decide to try again. And you take the full hit on your stoploss.

Practically everyone goes through this, but few understand that this is all part of the win-lose cycle. They do not yet understand that loss is an inevitable part of any system/strategy/method/whathaveyou, that is, there is no such thing as a 100% win approach. When they gauge the success of a particular pattern or setup, they get caught up in the win cycle. They don't wait for the "lose" cycle to see how long it lasts or what the win/lose pattern is. Instead, they keep touching the pot and getting burned, never understanding that it's not the pot (pattern/setup) that's the problem, but a failure on their part to understand that it's the heat from the stove (the market) that they're paying no attention to whatsoever. So instead of trying to understand the nature of thermal transfer (the market), they avoid the pot (the pattern), moving on to another pattern/setup without bothering to find out whether or not the stove is on.

 

[black bear]

assuming we are trend down HTF and majority of bars are down before the counter rally (6)and TF 5-15 min

I would short the bar marked stop over on piccy on its low breach the next bar stop over previous bar as per piccy,

If they are days marked personally given the weak close and pinbar type bar printed. The next day I would sell the 1st sign of any weakness in the 10-15 min TF and manage it the same ie see if pdl gets breached

reason = cont of trend in TF, I am assuming that trend is down, if not and its up in HTF its a buy on breach of the high of the inside bar 2b cuts stop under the bar with wide range open and close close together.

down target is last low 1 off, run next one hope it gets through if not return to base with a few extra pts or leave him BE whatever your plan

The Breach area itself is a hot spot IMO= whippy entry would rather be in higher and take a smaller loss a couple of times if counter trend carries on up

Ftse did the same Friday almost exact 10 min time frame with gap under from pdc for good measure

db volume bars would be nice to cheers

whats next, for me I would be wait and seeing, it was a quick rejection of lower IMO so a HL and a buys on, if it went straight through 2d time I would sell pull back to the range as per 1st trade or wave by by to a missed one

 

[Splitlink]

assuming we are trend down HTF and majority of bars are down before the counter rally (6)and TF 5-15 min

I would short the bar marked stop over on piccy on its low breach the next bar stop over previous bar as per piccy,

If they are days marked personally given the weak close and pinbar type bar printed. The next day I would sell the 1st sign of any weakness in the 10-15 min TF and manage it the same ie see if pdl gets breached

reason = cont of trend in TF, I am assuming that trend is down, if not and its up in HTF its a buy on breach of the high of the inside bar 2b cuts stop under the bar with wide range open and close close together.

down target is last low 1 off, run next one hope it gets through if not return to base with a few extra pts or leave him BE whatever your plan

The Breach area itself is a hot spot IMO= whippy entry would rather be in higher and take a smaller loss a couple of times if counter trend carries on up

Ftse did the same Friday almost exact 10 min time frame with gap under from pdc for good measure

db volume bars would be nice to cheers

I'd like to say that I put my idea of where to short on that chart in answer to Laptop1's
post, in which he said that he would be thinking of shorting at the stop level. The post has to be taken in context of that.

I don't know whether I would have shorted there, in real life, because I'd need to look at a much wider picture. But, if that latest top was piercing a resistance line, or an average that I was following, it could well be a good place to short.

 

[black bear]

I'd like to say that I put my idea of where to short on that chart in answer to Laptop1's
post, in which he said that he would be thinking of shorting at the stop level. The post has to be taken in context of that.

I don't know whether I would have shorted there, in real life, because I'd need to look at a much wider picture. But, if that latest top was piercing a resistance line, or an average that I was following, it could well be a good place to short.

sorry split it was a knee jerk post

saw the trade posted it execution execution execution, fully auto

Im off, was just luking around

 

[laptop1]

Where would you place your stops based on these two trades, one Long and one short trade ? Or maybe you would have not taken the trades at these levels?

Once I get some response I will add further to it.

http://quote.prophet.net//applets/j...duration=5d&frequency=1m&forceOrient=portrait

 

[darktone]

Where would you place your stops based on these two trades, one Long and one short trade ? Or maybe you would have not taken the trades at these levels?

Once I get some response I will add further to it.

http://quote.prophet.net//applets/j...duration=5d&frequency=1m&forceOrient=portrait

Just for fun as id have taken neither of these, theres nothing here that i like.

Re the long. Id have been looking for a be exit (and found it) once the previous SL had been breeched.

Re the short. Id still have this one with a stop in be as soon as i felt appropriate (dont have enough info).

On both occasions ive have a "get me the fook out stop" placed at a manditory distance. (dont have enough info to say where). Probably well outside the swing points of this chart.

 

[laptop1]

RE: post put in a wrong price on the long trade, same chart though

Where would you place your stops based on these two trades, one Long and one short trade ? Or maybe you would have not taken the trades at these levels?

Once I get some response I will add further to it.

http://quote.prophet.net//applets/j...duration=5d&frequency=1m&forceOrient=portrait

 

[dbphoenix]

Where would you place your stops based on these two trades, one Long and one short trade ? Or maybe you would have not taken the trades at these levels?

Once I get some response I will add further to it.

http://quote.prophet.net//applets/j...duration=5d&frequency=1m&forceOrient=portrait

I wouldn't take either one.

Since R is at or around 42-43, I wouldn't go long here. I'd wait to see what happens at R. As it is, there is a surge of buying pressure up to R which then vanishes. So, I'd short at the dot. No stop.

 

[firewalker99]

Since R is at or around 42-43, I wouldn't go long here. I'd wait to see what happens at R. As it is, there is a surge of buying pressure up to R which then vanishes. So, I'd short at the dot. No stop.

If you say 'no stop' does that imply you will use market orders to change your position in case the market shows you otherwise? For example close out and go long when price goes up to say 1344-45? Or -for example- stop yourself out manually and wait for a re-entry to fade a potential failed breakout, etc.

What is this then with limit orders and why are they - apparently - considered as a disadvantage? Is it because of the fact you might be missing out on an entry by a single tick? I remember you saying a while ago you wait patiently to see price travel to your entry point. Obviously there needs to be a signal to confirm the entry. Market orders tend to have more slippage then limit orders though.

Didn't you mean to say that a "no stop" strategy implies you will close out your position at a predetermined price level or based on a predetermined price (and volume) action pattern? That's still a stop imo. Saying you don't use stops at all, is like saying you will do nothing, except for close the trade out with a profit, regardless if the trade goes against me by hundreds of points. I'm just thinking of all the people who might be reading this and drawing the wrong conclusions...

 

[dbphoenix]

If you say 'no stop' does that imply you will use market orders to change your position in case the market shows you otherwise?

Yes.

For example close out and go long when price goes up to say 1344-45? Or -for example- stop yourself out manually and wait for a re-entry to fade a potential failed breakout, etc.

Not necessarily. That would depend on what price and volume are doing at the time.

What is this then with limit orders and why are they - apparently - considered as a disadvantage? Is it because of the fact you might be missing out on an entry by a single tick? I remember you saying a while ago you wait patiently to see price travel to your entry point. Obviously there needs to be a signal to confirm the entry. Market orders tend to have more slippage then limit orders though.

I use stop-limit orders for entry ahead of the market.

Didn't you mean to say that a "no stop" strategy implies you will close out your position at a predetermined price level or based on a predetermined price (and volume) action pattern? That's still a stop imo.

No, I didn't.

Saying you don't use stops at all, is like saying you will do nothing, except for close the trade out with a profit, regardless if the trade goes against me by hundreds of points. I'm just thinking of all the people who might be reading this and drawing the wrong conclusions...

No. It's saying that I will act according to what the market's doing at the time rather than to what I thought the market might do or would do or could do or should do at the time I contemplated entering the trade.

 

[tune]

As it is, there is a surge of buying pressure up to R which then vanishes.

Would it be fair to say that there was a similar occurrence later in the day at S?

 

[dbphoenix]

Would it be fair to say that there was a similar occurrence later in the day at S?

Yes. There's a lot of buying going on in that long bar.

Incidentally, the same setup occurred in the NQ:

 

[new_trader]

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

They sort of go hand in hand, but think of stop as a safeguard. An analogy would be someone using a safety net when learning to walk a tightrope. The aim is to become skilled at walking the tightrope without ever falling off, the aim isn't to figure out how far from the rope you should place the safety net. The safety net doesn't improve or contribute to your ability to perfect balance and poise. It is there to protect you whilst you are learning these qualities. Imagine you start with the safety net 1 meter below the rope and you keep falling off. You wouldn't blame the safety net would you? An aspirant should always use a hard stop and keep it in place. As Oscar says,
STOPS ARE IN, EMOTIONS ARE OUT!:!:

 

[darktone]

I wouldn't take either one.

Since R is at or around 42-43, I wouldn't go long here. I'd wait to see what happens at R. As it is, there is a surge of buying pressure up to R which then vanishes. So, I'd short at the dot. No stop.

Looking at a longer term chart there is indeed previous resistance there which to me validates the entry, i just took laptops chart as is with no other view. With this in mind do you really need volume to aid the decision? Ive never been a believer in volume, just as well i trade FX! .

Agree with way you handle position, ie no hard 'tight' stop and manual control. With no stop at all tho i see it that you are at some event / hardware failure etc etc risk.

 

[firewalker99]

Agree with way you handle position, ie no hard 'tight' stop and manual control. With no stop at all tho i see it that you are at some event / hardware failure etc etc risk.

I remember once - it was still early days then - when I was short and price started to move in my direction. I was about to move my stop to breakeven because there was some news figure coming out in about 30 minutes or so and price had already traveled a reasonable distance to substantiate that decision. Unfortunately, for some reason, the news came out at a different time, 30 minutes earlier. Price spiked way through my short position, and never came back there for the rest of the day. There I was, sitting like the proverbial deer in the headlights... To me, the opportunity cost of placing a stop warrants the protection I get from it.

 

[Splitlink]

Hi db,

Let me get this straight, because this thread is getting long and to go hunting can be a bind.....

Did you say, in so many words, that you put greater importance on the entry than the stop?

I ask this because I understand that you advocated very close stops when you debated with BSD , a few pages back. If that is the case, does that mean that you will not accept an entry unless the stop, mental or otherwise, is close.

Doesn't that mean that you will not enter a trade which has a possibility of getting stopped or, just as relevant, "hanging around" for an indeterminate number of bars.

What I'm getting at, when I say that I consider stops to be more important than entries, is that we are not very different from each other's points of view, surely? You reckon that your shares are going to move positively for you. I'm not so sure of mine, but get close to my stop out, just in case.

So, which is the more important? You've been around a long time but I am still here, too! I guess it's that volume thing that makes us different.

Regards Split

 

[black bear]

Volume thing

Well I for one would like to thank db for making Pinkpig aware of that Live volume thing, its fell in very well with my usual method and up till reading his posted charts etc, it made no sense whats so ever


so.............

thanks db

Glenn
FW
VSA