High R Trading - Setups For Tight Stops

[no other one]

I am curious to figure out how certain traders can trade with such tight stops. Having read many threads here and elsewhere on this topic, these traders seem to be able to fine tune their entries to allow for such tight stops. I remember reading about an ES trader that trades with a 3 tic stop and he has a very high win percentage.

His advice was to work backwards from your risk allowance - another words, find your stop first and then place your entry 3 tics from the stop. Obviously, he knows where to hunt for areas that allow such brilliant entries. I, however, cannot find those areas. Anyone have some ideas?

Are there any setups that allow such tight stops?

 

[DeadMoney]

I have seen the technique used where you watch the orders and look for a price that has a lot of big orders, then if the price drops down to 3 ticks from them you buy,
as long as the large number of orders hold you stay in your position, if they start going away then you sell for a loss before they are all gone.

 

[marty]

- how about looking at;

1. a reasonable setup for entry 9say price drops onto old support etc etc)
2.A small "inside" bar , follows the above setup. Stop on one side of the inside bar , entry , the other

Reagrds

Marty

 

[no other one]

DeadMoney: I have not been able to make this type of trading work off of the DOM/T&S. Using big order levels as the area to lean against does not seem to work for me. It seems to come down to being a 50/50 shot (and then if you incorporate a market stop the odds really go to hell).

marty: I have studied/tried the 'setup' route to trading with small stops as well (with even worse success). Even on the smallest of timeframes, I've tried looking for 'reasonable' setups (ie. pullbacks to s/r AND/OR small inside bars, engulfing bars, hammers, hangmen etc.). My results were always poor. It is only when I widen out my stops that I have a fighting chance.

Both of your ideas are good/intuitive starting points. The fact is that I know there are traders that trade the ES with extremely small stops (3 tics or so) who manage to have a good percentage win rate WITH a high r (4 to 12 tics). I just can't seem to figure out how they do it.

Maybe someone that has this aptitude will stumble on this thread and give us a peek into this style.

 

[nine]

I use what others would consider small stops.

I don't use the dom at all (the leaning issue is tough for many to read in part because there may be a lot of faking in your market) but now chart trade only. Interestingly, since I started entering orders directly on the chart (Sierra Chart + IB) I have found my information stress is lower and my trading better ... I think that unless you really understand the dom it is a confuser and also entrains you to money losing reactive trading. This is true for me (but not for some others).

How do you get a tight stop trade? Well here is one way. First you decide on some setups that would work with larger stops. Then you try to figure out if you could use smaller stops. Or do the "big boys" push price back a certain amount after signals so that they can get filled before continuation ... which would give you a new filling point with stop (and if you find such a setup within a setup you then need to evaluate its expectancy).

If you haven't found it yet then you may just need to keep looking. Perhaps you are using the wrong timeframe to see the signal when the bigboys agree that it should go forward but before they push it back a final time for a last chance to get filled.

Take advantage of your small size to piggy back a behaviour that big guys need so that they can get filled at all.