rathcoole_exile
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that's trading off Weekly or Monthly charts ?
Have a look at This PDF
The Tips are useful A Trade should make a profit straight from the start in my view
The Tips are useful A Trade should make a profit straight from the start in my view
Are stop losses any good?
In my early days I would follow the norm which I believed was 30 points I would see my position turn against me hit my stop loss and go my way, After begining to think it was a personal issue the market wanted my money (yes this 1.3 trillion market was conspiring against little old me)
I raised my stop loss to 50 points and the market still cheated me
Raised it to 100 points and now all the banks, hedge funds and private investors got in on the action took my 100 points and then went the way I originally expected
Now I never trade before an economic-news event.
Do not set a stop loss
If I set my entry/exit parameters right it might go down 200 points but it will come back up and let me come out at B/E or a small loss.
I know people will say it depends on how deep your pockets are.
Not very deep really
I aim to make 25 to 30 points a day times my stake, I treat trading as a job
As I am sure a lot of us do
Expecting Realistic returns on your capital, dedication lot of hard work
And taking few knocks should make you more than the average u.k salary
But would like to hear others views and experiences with stop losses.
gamma
Experienced member
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I agree if you have prepared your attack you will not need a stop -loss I agree if you have prepared your attack you should not need a stop -loss
I am sure somewhere in the "Art of war" by Sun Tzu there is a whole chapter devoted to "Preparing your attack"
I wonder if Old Jesse read the book?
I agree if you have prepared your attack you will not need a stop -loss I agree if you have prepared your attack you should not need a stop -loss
I am sure somewhere in the "Art of war" by Sun Tzu there is a whole chapter devoted to "Preparing your attack"
I wonder if Old Jesse read the book?
I dread what our stop loss would have been on the Normandy beaches! Was there one?
Could we have got off if we had been beaten back? How long before we could have tried again?
I wonder if Sun TZu won the last battle? I never read his biography.
Split
theroguetrader
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Stops
" do not set a stop loss " ....... !!
is that a wise strategy...? :-0
Are stop losses any good?
In my early days I would follow the norm which I believed was 30 points I would see my position turn against me hit my stop loss and go my way, After begining to think it was a personal issue the market wanted my money (yes this 1.3 trillion market was conspiring against little old me
I raised my stop loss to 50 points and the market still cheated me
Raised it to 100 points and now all the banks, hedge funds and private investors got in on the action took my 100 points and then went the way I originally expected
Now I never trade before an economic-news event.
Do not set a stop loss
If I set my entry/exit parameters right it might go down 200 points but it will come back up and let me come out at B/E or a small loss.
I know people will say it depends on how deep your pockets are.
Not very deep really
I aim to make 25 to 30 points a day times my stake, I treat trading as a job
As I am sure a lot of us do
Expecting Realistic returns on your capital, dedication lot of hard work
And taking few knocks should make you more than the average u.k salary
But would like to hear others views and experiences with stop losses.
" do not set a stop loss " ....... !!
is that a wise strategy...? :-0
charttrainerdotcom
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Stop Loss? Always...
My trading system automatically ads a stop loss. I put the stop loss sign to approx 2% movement in the underlying. The automatic take profit is at 0.2%. This means I need more than 10 profitable trades per stop loss trade to be profitable over all. As the move in my direction is so small the probability of getting it home profitably seems to be more than 10x higher than getting stop lossed. Works out fine... as you can see.:whistling
My trading system automatically ads a stop loss. I put the stop loss sign to approx 2% movement in the underlying. The automatic take profit is at 0.2%. This means I need more than 10 profitable trades per stop loss trade to be profitable over all. As the move in my direction is so small the probability of getting it home profitably seems to be more than 10x higher than getting stop lossed. Works out fine... as you can see.:whistling
RogerTheTrader
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Events are a toss of the coin... good rule.
No stop loss... hmmmm... I am doing less and less directional trading, but flying without a net exposes you to a lot of risk.
I question your comment above "but it will come back up and let me come out at B/E or a small loss." How do you know it will come back up?
I have a stop at all times, either mechanical or mental, and I try to determine from the price action if I should even get out sooner.
I trade Options on US Equities and Indexes, primarily using spread trades. However, I designed a Probability Pyramid to determine how much I will risk per trade relative to the probability of the trade. Where the probability is low, I only risk a tiny percentage of my account on a trade. Where the probability is very high, I put the bulk of my funds.
I've also cut down the size of my trades considerably. Because I'm buying an option and selling an option, my entry cost is very low. Trades I place with lower probability, I assume the entire premium paid could be lost, then I work to only lose 20% of that amount or less. I'm in a lot of trades. But I'm highly diversified in both market sectors and risk.
In early January, I had a number of large trades blow up, when the US Markets rolled over. I did not cut my losses quickly and took a large drawdown. I completely reworked my strategy, cutting the risk per trade and adjusting the risk to the probability of the trade. Now, I take a lot of small losses, but no one trade can hurt me.
Now, I'm managing trades using a graphical P/L analyzer in conjunction with a price chart. I manage the trade for profit in a very mechanical fashion. I did all I could to get hope and fear out of my trading.
Taking small losses is part of the game. The key is keeping them SMALL. Letting a trade run away from you and assuming it will come back can blow a crater in your account in no time at all.
I'd recommend setting a fixed loss amount.
You may need to adjust your strategy depending on the personality of the instrument you trade. I've day-traded stocks and options and found each to have unique characteristics that required adjustment of the stop rules.
Always... keep your risk low and your profits high!
RogerTheTrader
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Great attachment. Excellent comments regarding balance, too.
Chorlton
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Events are a toss of the coin... good rule.
No stop loss... hmmmm... I am doing less and less directional trading, but flying without a net exposes you to a lot of risk.
I question your comment above "but it will come back up and let me come out at B/E or a small loss." How do you know it will come back up?
I have a stop at all times, either mechanical or mental, and I try to determine from the price action if I should even get out sooner.
I trade Options on US Equities and Indexes, primarily using spread trades. However, I designed a Probability Pyramid to determine how much I will risk per trade relative to the probability of the trade. Where the probability is low, I only risk a tiny percentage of my account on a trade. Where the probability is very high, I put the bulk of my funds.
I've also cut down the size of my trades considerably. Because I'm buying an option and selling an option, my entry cost is very low. Trades I place with lower probability, I assume the entire premium paid could be lost, then I work to only lose 20% of that amount or less. I'm in a lot of trades. But I'm highly diversified in both market sectors and risk.
In early January, I had a number of large trades blow up, when the US Markets rolled over. I did not cut my losses quickly and took a large drawdown. I completely reworked my strategy, cutting the risk per trade and adjusting the risk to the probability of the trade. Now, I take a lot of small losses, but no one trade can hurt me.
Now, I'm managing trades using a graphical P/L analyzer in conjunction with a price chart. I manage the trade for profit in a very mechanical fashion. I did all I could to get hope and fear out of my trading.
Taking small losses is part of the game. The key is keeping them SMALL. Letting a trade run away from you and assuming it will come back can blow a crater in your account in no time at all.
I'd recommend setting a fixed loss amount.
You may need to adjust your strategy depending on the personality of the instrument you trade. I've day-traded stocks and options and found each to have unique characteristics that required adjustment of the stop rules.
Always... keep your risk low and your profits high!
Hiya Roger,
Can you go into any detail regarding the comment in BOLD? ie. What exactly constitutes a high probability trade for you? Some form of additional confluence on a chart??
Just interested...
Chorlton
RogerTheTrader
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Chorlton,
A high probability trade is a spread trade that is set very wide from the current price. I don't know if you can trade a type of spread trade in UK markets - selling an option or derivative and buying one of a different strike or price - or what instrument you could trade that is similar. The strategy revolves around the only guarantee in the stock market - options lose value EVERY DAY. I'm selling the time value, and letting it decay in some other bloke's portfolio.
On the Thinkorswim (TOS) trading platform that I use, you can run a risk profile on a trade. It will show an area of 1 standard deviation (68%), 2 standard deviations (95%), or 3 standard deviations (98%). I'll leg into the trades on top and bottom reversals. When the index rises near resistance and turns, I'll put on a bearish spread with about 75% probability. When the index nears support and turns, I'll put on a bullish spread with similar probability. Because I'm placing the trades at extremes within a range, the overall trade tends to have a higher probability. Under these circumstances, I'm willing to risk more of my portfolio.
Straight directional trades tend to be low probability. Yet, you can stack the cards in your favor with strong technical analysis. Buy or short on bounces from support or resistance, respectively. Look for technical indicators like the MACD, Stochastic, RSI to be rolling in support of the trade. Volume. Changes in direction or breakouts with 150% spikes in volume can increase your odds.
A big one is to move with the sectors and industry groups that are moving. Chase the big money because you and a few hundred of your best friends can't move the markets; but an institution can. Lately, not many sectors are bullish in the US. Coal, however, has been on fire. A sector play rolls over into supporting industries. I've got a coal trade, a trade on a coal driller manufacturer, a railway trade (has to be transported), and a trade on a manufacturer of rail cars.
Same goes for agriculture. Corn goes in long cycles. Right now, corn is in the middle of a 15 year bull market cycle. Due to the misguided push to utilize ethanol as a bio-fuel, corn is not being grown for food. Demand for corn will not abate for years to come - the agricultural companies have been running - fertilizer, seed, farm machinery.
In choppy markets, the technician will survive. Fundamental traders will be twisted into the ground. Which reminds me of one of my favorite quotes: Markets can remain illogical longer than you can remain solvent.
Chorlton
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Chorlton,
A high probability trade is a spread trade that is set very wide from the current price. I don't know if you can trade a type of spread trade in UK markets - selling an option or derivative and buying one of a different strike or price - or what instrument you could trade that is similar. The strategy revolves around the only guarantee in the stock market - options lose value EVERY DAY. I'm selling the time value, and letting it decay in some other bloke's portfolio.
On the Thinkorswim (TOS) trading platform that I use, you can run a risk profile on a trade. It will show an area of 1 standard deviation (68%), 2 standard deviations (95%), or 3 standard deviations (98%). I'll leg into the trades on top and bottom reversals. When the index rises near resistance and turns, I'll put on a bearish spread with about 75% probability. When the index nears support and turns, I'll put on a bullish spread with similar probability. Because I'm placing the trades at extremes within a range, the overall trade tends to have a higher probability. Under these circumstances, I'm willing to risk more of my portfolio.
Straight directional trades tend to be low probability. Yet, you can stack the cards in your favor with strong technical analysis. Buy or short on bounces from support or resistance, respectively. Look for technical indicators like the MACD, Stochastic, RSI to be rolling in support of the trade. Volume. Changes in direction or breakouts with 150% spikes in volume can increase your odds.
A big one is to move with the sectors and industry groups that are moving. Chase the big money because you and a few hundred of your best friends can't move the markets; but an institution can. Lately, not many sectors are bullish in the US. Coal, however, has been on fire. A sector play rolls over into supporting industries. I've got a coal trade, a trade on a coal driller manufacturer, a railway trade (has to be transported), and a trade on a manufacturer of rail cars.
Same goes for agriculture. Corn goes in long cycles. Right now, corn is in the middle of a 15 year bull market cycle. Due to the misguided push to utilize ethanol as a bio-fuel, corn is not being grown for food. Demand for corn will not abate for years to come - the agricultural companies have been running - fertilizer, seed, farm machinery.
In choppy markets, the technician will survive. Fundamental traders will be twisted into the ground. Which reminds me of one of my favorite quotes: Markets can remain illogical longer than you can remain solvent.
Roger,
Thanks for such a detailed and lengthy response. One of the many things I liked in your reply was the fact that you "tailor" how much to risk on a trade based on its probability of succeeding.
I have in the past looked at different Position Sizing Models in my own trading but in each case I have always given "equal weight" to each trade. Not sure how I can include some form of "weighting" system within my own Mech Systems but you have definately given me "food for thought"
Many Thanks for taking the time to reply....
All the best,
Chorlton
Roger,
Thanks for such a detailed and lengthy response. One of the many things I liked in your reply was the fact that you "tailor" how much to risk on a trade based on its probability of succeeding.
I have in the past looked at different Position Sizing Models in my own trading but in each case I have always given "equal weight" to each trade. Not sure how I can include some form of "weighting" system within my own Mech Systems but you have definately given me "food for thought"
Many Thanks for taking the time to reply....
All the best,
Chorlton
I find it very difficult to assess the probability of one trade against another. It seems rather a mystery to me and I enter with the expectation of staying with a winner as long as possible. That is one of the reasons that I keep my stops close. As soon as I can get into profit I lock it in with a stop loss. Basically, I increase/decrease my trade size according to what I am trading. For instance, I like SP in the am, before it opens but, because of its slowness I start increasing my size when I get confidence in the direction it is going to take.
Split
Chorlton
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Hello Split,
I remember discussing a few topics with you a couple of years ago. Hope the trading is going well
I agree with your comments as I trade in a similar manner. Not knowing where my next profit will come from I try to maintain my winning positions for as long as possible while cutting my losing ones asap.
However, Roger makes some interesting comments. Even though I agree to a point that assessing the probability of a future trade would be difficult, maybe there could be opportunities when a particular trade offers a higher likelihood of becoming profitable.... such as when additional confluence appears on the chart.
Hi guys,
I've only been trading a few weeks now. And I've been consistently breaking even or losing money on the hourly timeframe. I've watched trade after trade stop me out and then turn round and obey my initial analysis. So afew days ago I decided to increase my margin for loss. I took my first trade yesterday with a 150 stop loss and lo and behold success! I've got 90 pips for the first time in my career. I've trailed my stop and I'm now looking forward to taking a long ride on the gravy train baby!
I've only been trading a few weeks now. And I've been consistently breaking even or losing money on the hourly timeframe. I've watched trade after trade stop me out and then turn round and obey my initial analysis. So afew days ago I decided to increase my margin for loss. I took my first trade yesterday with a 150 stop loss and lo and behold success! I've got 90 pips for the first time in my career. I've trailed my stop and I'm now looking forward to taking a long ride on the gravy train baby!
darktone
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Thats cool and glad to hear you on ya way. Only thing id say is its your entry that probably needs the work. Not your stop.
Gl
I wish that I had your attitude, it would save me a lot of work and I would move into swing trading. Please keep us informed of your experiences with these far away stops.
As Darktone says, a lot depends on your certainty that your entry is good. I suggest that you use deep stops because you are unsure of the accuracy of those entries.
Good trading
Split
Yeah I decided to go for a longer timeframe for trades just as an experiment and so far it's going alright. That trade yielded 240 pips by late Friday. I heard a story about this guy who made $2 mil by accident! He basically changed his broker, left a trade open with his previous broker and forgot about it for two years. When he remembered what he'd done he went back to close up and voila! Maybe there's something to be said for leaving one or two open and forgetting about them for a while
