Capital Requirements Question and Other Stuff

[black bear]

Your stop is where your reason for the trade is no longer valid, period.

Re: Stops

"Trade with tight stops" is potentially specious advice.

Your stop is where your reason for the trade is no longer valid, period.

A very simple example, I see a double bottom at 1400. My trade is to buy @ say 1403 (eg bar high +1 ) with a stop at 1398. The stop recognises that if price falls below 1398 then I assume support (at 1400) has definitely failed.

The size of your stop is also dependant on the timeframe you're trading. The longer the timeframe the potentially higher the stop unless you have the skill, as NT says, to buy at support or sell at resistance without the price revisiting your "tight stop".

Your stop distance needs to be compared to volatility in the TF you're trading and of the probability of fake outs occurring at the stop price.

Maybe. The STOP is also a distance = how much you are prepared to lose if you have misjudged your entry. The rest of what you wrote is mainstream "mechanical" mentality.

Hi fibonelli

Good post

"Your stop is where your reason for the trade is no longer valid, period."

Thats what new_trader is saying,

I agree

I disagree specious = apparently good or right though lacking real merit; superficially pleasing or plausible



Up to the individual trader to determine that one and it will take you probably 3 years of hard work to get to a point where a very tight Stop is in fact a very vaid option.

You will only get there if you except you have not even started learning when you are making consistant profits, or perhaps I should say up and down profits but not losing overhaul.

Have desire to learn how not to just make money but to trade better and improve.

Does not really matter fibonelli, if your own method works for you and your happy with the risk and how you define a trade etc and you no it all works out in the end. Quite valid to think there is nothing to be really gained getting any more accurate other than to just do it for the hell of it Two sides to a mountain

If you except that "anything can happen" I have done for far longer than I have owned the book or even realised I did.

Your own method over a large sample period

Entry goes in your favour from the gun 7 out of 10 times

The 3 out of 10 that do not work out straight from the gun ........

Why would you wait around running a loser :?: How do you no its a head fake :?: How much are you going to put on the line to find out :?: WHY !!!! does not make sense unless you like to run losers imho ( I do not do backtesting and think it as no merit or very little merit other than to thrash out bare bones idea)

You will almost certainly miss out on re-entry at a better level or even a trade in the opposite direction in my experience anyway.(live trading) I make more money for me and my broker by closing out a poor entry fast and re-entering when opportunity via my set up is seen again latter.

If not well trades are like the Bus service used to be when I was a lad

I would at one time just have sat through the drawdown thinking this and that might happen based on what I thought was growing experience, price is still within my Stop and very often more right than wrong I was proved correct and made money from the original entry.

I MAKE MORE BY BEING WRONG FASTER AND RIGHT LONGER & with no emotion involved or pointless thinking anymore

makes no sense to me and my method fibonelli, not saying your wrong in general or wrong for you etc

New_trader makes points regarding tight stops that are in line with my own findings and results over the last 1.5 years fibonelli. They work for me and my trading is getting stronger with each passing day and I could never imagine going back to wide Stops again.

I used to use much wider stops, and at one time had real trouble defining wrong and right regards placement both in the market and in my own mind.

Stops placement that I was happy with and would except without question.

I pulled my 2nd bank back from just over 50% drawdown with a sb firm, I achieved it on tight stops (In my head not placed in their market order system)

I lost the 1st bank and 1/2 the next one by following traditional advice on Stop placement.

Other errors were to blame to of course, but Stops were at the top of the list, followed by indicators and then coloured zig zag lines

The general advice posted around and information on so called information sites regarding Stop placement is in the most part just plain wrong and will end up costing you money and emotional pain imho unless you do your own research and spend time finding out what works for you and the method you are attempting to make your own.

A very good post on this site by Steve imho ..........

A simple experiment might help me make my point. Next time anyone gets the ‘urge’ to take a position in the market just stop for a moment. Bring up a chart or two of the relevant instrument. Now place yourself in two scenarios and answer the following two questions;
1 ) Imagine that you have recently gone long in this instrument – where would you place your stop?
And...
2 ) Imagine that you have recently gone short in this instrument – where would you place your stop?
Once you have identified the two stop areas you have identified an area where taking a trade is of much lower risk. It is of lower risk because you have found an area where temporary price deflection is likely to occur. In those areas the 95% are flushed out of their positions purely due to price – this is where you can step in. Obviously, if you have supporting volume as well then you are more than likely onto a good thing.

Right – I need some sleep!

Steve.

ye so do I



Latter all and good luck with your trading and life :clover:





Stops debate over, at least for me

 

[new_trader]

I don't understand why people would use a wide stop. If you think the market is going to move a few more points against you then simply exercise a few more points patience! It's the "mechanical" mentality that validates a wide stop...that is the problem.

As oscar says,

"It's better to be out of trade wishing you were in, then to be in a trade wishing you were out"

 

[Rhody Trader]

I don't understand why people would use a wide stop. If you think the market is going to move a few more points against you then simply exercise a few more points patience! It's the "mechanical" mentality that validates a wide stop...that is the problem.

It's not that you think the market is going to go against you. If you did, then you're right. It would be foolish to get in rather than just waiting. Instead, it's accepting that the market could go a bit against you before going strongly for you. It's a question of how far against puts the likelihood of trade success below acceptable levels.

If I'm thinking to go long and X is my buy point with Y as my stop (meaning the "This trade isn't going to do what I was looking for." point), then X is the point from which I believe the market will take off on a strong run. If the market goes lower than X, then it indicates a market seemingly less strong - more so as Y is approached.

Besides, "wide" is a completely subjective judgement. You may think of 10 points as wide for the way you trade, but I may think of it as tight for the way I do.

I can't help but laugh a bit when people talk about being scared at what they percieve as a "wide" stop. A 50 point stop in the S&P might seem like a huge one, but if you're 50/50 to make 300 on the trade, you set your position size to one that represents an appropriate risk and you take the trade.

On the flip side, if you have a 5 point stop that is 90% odds of getting hit because it's within the normal volatility of your trading timeframe, and you're looking at a 30 point gain, you don't take the trade. It's simple math - 90% x 5 pts = 4.5 pts vs 10% x 30 pts = 3pts. The expectancy of that trade is negative, and that's exactly where a great many new traders shoot themselves in the foot (and then scream that their broker or the market ran their stops).

 

[new_trader]

It's not that you think the market is going to go against you. If you did, then you're right. It would be foolish to get in rather than just waiting. Instead, it's accepting that the market could go a bit against you before going strongly for you. It's a question of how far against puts the likelihood of trade success below acceptable levels.

If I'm thinking to go long and X is my buy point with Y as my stop (meaning the "This trade isn't going to do what I was looking for." point), then X is the point from which I believe the market will take off on a strong run. If the market goes lower than X, then it indicates a market seemingly less strong - more so as Y is approached.

Besides, "wide" is a completely subjective judgement. You may think of 10 points as wide for the way you trade, but I may think of it as tight for the way I do.

I can't help but laugh a bit when people talk about being scared at what they percieve as a "wide" stop. A 50 point stop in the S&P might seem like a huge one, but if you're 50/50 to make 300 on the trade, you set your position size to one that represents an appropriate risk and you take the trade.

On the flip side, if you have a 5 point stop that is 90% odds of getting hit because it's within the normal volatility of your trading timeframe, and you're looking at a 30 point gain, you don't take the trade. It's simple math - 90% x 5 pts = 4.5 pts vs 10% x 30 pts = 3pts. The expectancy of that trade is negative, and that's exactly where a great many new traders shoot themselves in the foot (and then scream that their broker or the market ran their stops).

A trade with only a 50/50 chance isn't worth taking, you may as well choose your entries by the flip of a coin and trade with a 200 point stop. Why use a 50 point stop? If you trade with a 5 point stop you have approx 10 chances to get that 300 point advance. Makes too much sense doesn't it?

 

[grantx]

NT,

"If you trade with a 5 point stop you have approx 10 chances to get that 300 point advance. Makes too much sense doesn't it?"

And if you're still convinced of your move, you'll probably get in at a better price.

Grant.

 

[MrGecko]

I think it's absolutely crazy to be talking about tight stops or wide stops without any context in particluar.

I belong to the school of thought that believes "stops are there to protect you if you're wrong". My trades are discretionary, made with a basket of supporting evidence that i believe indicates that price will move in a particular direction (e.g. level XXXX is resistance); It only makes sense for me to put my stop where either the evidence, or my interpretation of it, has shown to me that what i thought to be true, is infact false (e.g. level XXXX isnt resistance - I can only know this once price has proven me wrong). Thus my stops are determined by the environment of the trade, not some arbitrary figure I feel comfortable with losing. Stops determine position size, not vice versa - and it is not for the trader to decide where to put his stop, it is the trade that shows him where it belongs.

I don't agree with the idea of using a tight stop and having multiple attempts at getting an ideal entry either; To start with, it makes position sizing pretty tricky IMO, as you'll have to have a good idea about how many times you are likely to be stopped out before the trade goes your way in order to determine the Net R:R (especially once comms' are brought into the equation). My entries have a time element involved, and I hold out until all the ducks are lined up before I pull the trigger; if i am shooting fish (or ducks) in a barrel, i would choose one shot with a 12 guage (i.e. one trade with a large stop) rather than 12 shots with a BB gun (multiple tight stop entries) to hit the bugger. This might happen only once per barrel (trade), but there is always tomorrow.

Addendum: I am happy to sacrifice a better entry for the added due diligence the "timing" condition of my entry permits; For example, a setup may only be legitimate if certain price criteria are met within a time limit (e.g. the next bar, before NY open, and so on). The Price or Time that I enter my position is highly unlikely to affect the direction price moves; I am either wrong or right, and price will break my stop or it won't - but I am willing to sit on my hands while price retraces against me a little if it allows me more time to go through the R:R and position size stuff - rather this than be perched on the edge of my chair taking multiple stabs at the same trade. The outcome will be the same, either way.

 

[new_trader]

I think it's absolutely crazy to be talking about tight stops or wide stops without any context in particluar.

Without any context? It has been put into context but the context keeps being distorted, misunderstood, rewritten and redefined. Stops have nothing to do with market gyrations, support levels, resistance levels, double tops, double bottoms, previous bars and other such nonsense. STOPS are a function of proficiency, it's that simple....for me anyway...and anyone else who wants to progress in this profession.

 

[Mathemagician]

new_trader, the world is not black and white. There are many ways to succeed at trading. Some of the most wildly successful traders have managed to proceed quite nicely in this profession (guys with 20+ year track records and 10 figure trading capital) using stops that you would call wide. The fact that risk can be managed through a combination of size and stop placement (i.e. a wider stop can be made less risky than a tight stop by varying the size of the position) is not a matter of opinion but a demonstrable fact. Of course, it requires trading more than one contract and this may be where the disconnect occurs...

jj

 

[grantx]

Mr Gecko,

We'll have no addendums on this thread, thank you. Coming on here with your fancy London ways.

Grant.

 

[Rhody Trader]

A trade with only a 50/50 chance isn't worth taking, you may as well choose your entries by the flip of a coin and trade with a 200 point stop. Why use a 50 point stop? If you trade with a 5 point stop you have approx 10 chances to get that 300 point advance. Makes too much sense doesn't it?

If they have the same trade frequency, which would you rather have, a system with a 50/50 win rate and a 6:1 win/loss ratio, or a system with a 90% win rate and a 2:1 win/loss ratio? The answer is the 50/50 system because on average you will make 2.5 per trade, while the 90% system will only make 1.7 per trade. In the long run, the 50/50 system would leave the 90% system done and dusted by a long, long, long way.

You don't need to even win on more trades than you lose on to profit extremely nicely in the markets. Though not everyone is prepared for the types of drawdowns a lower win rate implies.

 

[new_trader]

If they have the same trade frequency, which would you rather have, a system with a 50/50 win rate and a 6:1 win/loss ratio, or a system with a 90% win rate and a 2:1 win/loss ratio? The answer is the 50/50 system because on average you will make 2.5 per trade, while the 90% system will only make 1.7 per trade. In the long run, the 50/50 system would leave the 90% system done and dusted by a long, long, long way.

You don't need to even win on more trades than you lose on to profit extremely nicely in the markets. Though not everyone is prepared for the types of drawdowns a lower win rate implies.

It's all very well speaking of nebulous "systems" but when it comes to trading the only thing that ultimately governs your success is how you think, which ultimately affects how you act. What you have written exemplifies mechanical mentality. I strive for 100% success rate and take as much profit as I can get out of a trade. I have fewer and fewer losses as I become more proficient. You say that not everyone is prepared for the types of drawdowns a lower win rate implies whereas I say not everyone is prepared to put in the extra effort, study and practice a higher win rate demands. Most people are either far too lazy or just not fit for this profession, and that is black and white.

 

[Rhody Trader]

You say that not everyone is prepared for the types of drawdowns a lower win rate implies whereas I say not everyone is prepared to put in the extra effort, study and practice a higher win rate demands. Most people are either far too lazy or just not fit for this profession, and that is black and white.

True enough. Everyone wants the money machine.

It doesn't nullify the fact, though, that one can do quite well with a trading approach (or whatever term you like) that doesn't have a high win rate. That has nothing to do with "mechanical thinking". It's just reality.

 

[mp6140]

It's all very well speaking of nebulous "systems" but when it comes to trading the only thing that ultimately governs your success is how you think, which ultimately affects how you act. What you have written exemplifies mechanical mentality. I strive for 100% success rate and take as much profit as I can get out of a trade. I have fewer and fewer losses as I become more proficient. You say that not everyone is prepared for the types of drawdowns a lower win rate implies whereas I say not everyone is prepared to put in the extra effort, study and practice a higher win rate demands. Most people are either far too lazy or just not fit for this profession, and that is black and white.

=================================================================

WELL DOG MY CATS !!! another on this site who believes in actually LEARNING how to trade !!!!

WHAT A PROPOSTEROUS IDEA !!!

you all know my feelings about stops, and now you know i agree with new trader a bunch more --- I DONT GIVE MONEY BACK -- its mine, i worked for it and no stop loss, set because the "trader" didnt know where support or resistance was or how price moves over a period of time, is going to change how i trade, which is 100% correct trades WITH NO GIVEBACKS EVER !!

why on earth anyone would give back can only be because of fear --- fear invariably comes from not knowing and not knowing comes from lack of experience !

If youre moving with the trend, and dealing with a normal amount of lots, then the "trend is your bosum buddy, friend and lover and keeper of the keys to the grand whazoo" --- if you miss for whatever reason, it comes back again tomorrow --- drawdowns are just a part of trading and not to be feared, but letting a loss develop and then selling at that loss is a shameful act of insecurity and lack of trading knowledge !

now that wont work for bear, cause hes an in and out kind a guy (in NOT going near that one !) --- finding and taking his honey in the shortest amount of time, but to him im not addressing this post --- its for the ones who play the 30 minute, H1, H4 and DAILY charts and to get out of a trade, before its played itself out to conclusion, is only an act of fear, and only shows that "someone" ought to learn a bit more about trading and a whole lot less about discussing the relative advantages of wide vs tight stops (after all -- whats gonna really happen is youre either gonna lose a LOT of money or youre going to lose a WHOLE LOT of money if youre using stops in a correctly trending situation !)

Now, ive seen people here and all over talk about letting the stop take them out, then getting back in when the price comes around to where it was taken out --- its a wonderful idea, but HOW OFTEN does it actually happen in practice --- sure, you set a buy stop which gets triggered on some "unusual" downtrend with a "strange" spike, and youre right back in the same headache again !

Anyone who works with me knows one thing --- YOU DO NOT GIVE BACK !

mp

 

[Forex in Tokyo]

Trading in Tokyo

Newbie here. Please welcome me with open arms, encouragement and advice.

Been part time day trader (two days a week while I work from home) for a couple months with good overall success. Made the blunders that's been mentioned here but have been able to limit the losses. A voracious reader and have enjoyed studying the materials.

Thinking about giving myself six months of cont'd part time day trading and if my success continues, I may take the leap to full time trading. I have a mindset that I wanted to throw out there to be dissected. Looking for feedback. I've always been one to throw my opinions out there but very willing to be corrected.

I like simplicity. The sophisticated systems that I've seen here are intimidating and mind boggling. If I can develop a good trading pattern by spotting good positions based on stock volatility, macro-economic conditions and the pattern of the stock using generally accepted indicators, I should expect to ID the correct trend seven times out of ten. I'm thinking to key to success is to not accept a losing position. Giving myself little (say .5%) margin to maintain a losing position limits the losses. I'll be getting out of many positions that would turn out to win but I'm willing to give that up. My motto so far has been to let the market give me what its going to give me. I'm resolute that I won't force a position. Afternoon trading tends to challenge my "system" as I'm thinking I can take the one last profit to cap off the day. So for me, the challenge has been the psychology more than the technical. Fortunately, I consider myself mentally disciplined and tend to be very decisive and deliberate.

Big question I have is capital. If I decide to go full time, I want to make certain I have the right capital in order to give me the best chance to succeed. The more I have, the fewer ticks I need in order to meet my daily profit goal. Is it generally accepted that $300-500k in buying power is enough to insure a six figure income if I'm moderately successful and can get a .5 to 1% average daily return? And how difficult will it be to obtain that type of average daily return?

I know the general answer is "maybe' or "expect to lose your shirt". What I'm looking for is whether these dynamics cause you to shudder or if your first thought is...ok, sounds like he may be on the right track but here's what I suggest.

Not that it matters necessarily but I'll share...a big reason for this possible change in occupation is to spend more time w my three small boys. No, I don't see this as part time, but would enjoy being able to pick them up from school at 4pm instead of rolling in a 7pm, tired and exhausted.

Appreciate all replies.

Hi ,
My name is Jasmin Porlier I am networking and spreading the word on Tokiwa, the forex trading company I trade/advise for here in Tokyo. Tokiwa is an international company with branches all over the world, of which the biggest, and most profitable market is here in Tokyo trading the JPY principaly against the EUR, GPD, and of course USD. The company was incorporated in 2005, and has a capital of JPY119,000,000.
We offer a leverage of 200:1, and our teams of analysts, and trading consultants are top of the line, and in general providing you listen to our advice and recommendations with proper risk control the probability of making a profit increases to 75%, and of course set realistic targets and goals. We are available for consultation 24/7, and your account is strictly under your control, and governed by Japanese regulations.
To open an account with Tokiwa, you are required to invest a minimum of USD$10,000. The only cost that will be incured will be the initial cost of the bank transfer to the Mizuo Bank which handles all our investments. There is no time limit on which you must invest, and at any time you can withdraw all or portions of your investment or profits at no cost. We do however recommend that you invest at least USD$20,000 to minimize your risk, as this will lower the percentage of capital that is used, allowing a greater range of market fluctuation without causing a loss. And to recap, you can take money out of your account or close it at any time. It is always your choice.
If you are interested in making some serious profit, with what I consider a small risk when dealing with Tokiwa and our team of experienced, goal driven traders and analysts, please contact me. I look forward to hearing from you.
Best Regards,
Jasmin Porlier

Tokiwa Investment Inc.
Poisson Bleu Building. 4F 12-13 Tsukiji 1-chome Chuo-ku Tokyo
Japan 104-0045
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