about stop-loss and limit

[lionfly]

Everyone and every book strongly command the must of setting stop-loss, but not set limit to "allow profit run".

However, I find too many times when I set stop-loss (FTSE 30 points, DJ 50 points), the stop-loss is triggered, then the index goes in favour of my direction again. If the stop-loss is not set, with enough margin left in account, I will be in profit instead, not taking the triggered set-loss.

When I do NOT set limit-profit, after in paper-profit, the index many times turn around direction to against my bet, to loss, threatening the stop-loss. If I set a profit limit (e.g. FTSE 40 points, DJ 60 points), I can guarantee the profit before it turns around to against me.

How do you balance this dilemma?

Do you always use stop-loss? not find annoying that the index is actually in your favour after it triggers your stop-loss? and change from profit to loss if you do NOT set profit limit?

 

[£10kLoser]

This is the beginner's dilema and why most people lose money! Already you think the market is consciously working against you and delivering 'bad luck'.

The answer is you are not entering trades correctly and it is probably random which way the market goes - so your stops and limits are meaningless.

First you have to be able to enter at a time when the odds are in your favour of the price going in your direction and second, you have to know where the best stop and limit should be put. Otherwise, you are matching your limited capital against the unlimited capital of the market which can always go higher and lower than you expected.

Yes, I always use a stop loss and a limit. I'm not that bothered about letting profits run because I make a profit anyway. Nobody can pick the tops and bottoms - just be content with taking a few pips from the move.

 

[trader3cnd]

How do you balance this dilemma?

The "dilemma" has a name and it's called volatility.

The answer is to have wide enough stops so that you are not stopped out for no good reason. One way to do that is to use at least 2 x ATR for your stop-loss.

There are of course many other ways to deal with high volatility including options.

 

[Black Swan]

Have you ever simply reversed your position? Rather than sitting there watching your stop get breached why not close it out manually early and reverse, for example, from buy to sell etc? Don't be passive or reactive be pro-active. Be warned this doesn't always prove effective but can if the market moves very quickly against your position meaning you quite simply got it wrong. This part of my strategy has actually partly caused me to break even this week by limiting losses (and it's been a dreadful week for me).

 

[Paul71]

Have you ever simply reversed your position? Rather than sitting there watching your stop get breached why not close it out manually early and reverse, for example, from buy to sell etc? Don't be passive or reactive be pro-active. Be warned this doesn't always prove effective but can if the market moves very quickly against your position meaning you quite simply got it wrong. This part of my strategy has actually partly caused me to break even this week by limiting losses (and it's been a dreadful week for me).

Good post.


A good trade can easily become a bad trade in the wrong hands, if that's the case, then it was just luck in the first place.....the trader would not know that they had made a good trade in the first place and so would be blinded and paralised when the trade goes against them, instead of taking advantage. As a retailer, you have to know how to take advantage, because this is the only real 'edge' a retailer has, knowing how to capitalise and take advantage of any move the broader market makes.


Changing your mind in an instant does not come naturally, for anybody, it's a real skull fcuk for most, so someone is lying, and the problem isn't the market itself, but how the individual applies thier account to it.....i blame the books.


Just my opinion.

 

[Black Swan]

Good post.


A good trade can easily become a bad trade in the wrong hands, if that's the case, then it was just luck in the first place.....the trader would not know that they had made a good trade in the first place and so would be blinded and paralised when the trade goes against them, instead of taking advantage. As a retailer, you have to know how to take advantage, because this is the only real 'edge' a retailer has, knowing how to capitalise and take advantage of any move the broader market makes.


Changing your mind in an instant does not come naturally, for anybody, it's a real skull fcuk for most, so someone is lying, and the problem isn't the market itself, but how the individual applies thier account to it.....i blame the books.


Just my opinion.

It's often hard to admit you're wrong and that "trade what you see, not what you think" is a compelling maxim.

 

[foredog]

THe idea is don't have fixed limit orders thereby limiting yourself to 50 pts for example but be flexible, if the market goes 40pts your way then reverses, take 40, if it goes 55pts your way then let it run a little and maybe you'll end up it going back a little and taking 50 pts but once in a while it'll run and run and you get 200pts.

 

[klastica]

Everyone and every book strongly command the must of setting stop-loss, but not set limit to "allow profit run".

However, I find too many times when I set stop-loss (FTSE 30 points, DJ 50 points), the stop-loss is triggered, then the index goes in favour of my direction again. If the stop-loss is not set, with enough margin left in account, I will be in profit instead, not taking the triggered set-loss.

When I do NOT set limit-profit, after in paper-profit, the index many times turn around direction to against my bet, to loss, threatening the stop-loss. If I set a profit limit (e.g. FTSE 40 points, DJ 60 points), I can guarantee the profit before it turns around to against me.

How do you balance this dilemma?

Do you always use stop-loss? not find annoying that the index is actually in your favour after it triggers your stop-loss? and change from profit to loss if you do NOT set profit limit?

A few years ago I tried my hand at spread betting. I traded the indices FSTE and WALL St. Mostly. I paper traded a few weeks with success and never even considered to use a stop loss (the thought of actually taking a lose just didn't appeal to me).
I started and within about 2 weeks I'd doubled my 6k stake. Impressive you might think.
Well it all went horribly wrong.
The markets kept going up and up and up. I had a £5 bet (point down) and as it moved up I added in a couple of other £5,s. The markets rose for about 30 days and seemed to make a new record everyday.
I ended up losing about £8k from this simple £5 bet that I was looking to get a couple of hundred for.
Did I learn my lesson? Not atall.
After 7 weeks of gains playing the oil market turning my £4k into £10k (just trading the inventory figures - again without stop loss).
I then turned to Wall St again after the news about sub prime broke. Wall St had fallen about 800pts and I listened to the nervous traders who where just suggesting it was a blip. I figured it would rise again.
But it fell
And fell And fell some more.
I was caught pointing up and the more it fell the more I put in.
I ended up losing another 8k and that was it for me.

I have started again. AND I have now learnt my lesson.

DON'T EVEN CONSIDER DOING A TRADE WITHOUT A STOP!!

If you bet and it immediately goes the wrong way you've made a bad trade.