How do you guys decide your stops/limits?

[sharesr4us]

Hi alexa,

No I don't mind. I chose GBP/AUD is because I seem to have got a better understanding of it's trends. Yes my stops are much further and yes it's high risk as well as expensive, but so far I'm doing well. The same applies to Germ30. I have tried other markets and played with EUR/USD, but have ended up getting burnt more often than DAX. However I have on some occasions made good money too.

I guess what I need to do is take a step back and learn how real traders do it, because at the moment I don't really follow any charts at all...simple instinct.

 

[mike.]

I guess what I need to do is take a step back and learn how real traders do it, because at the moment I don't really follow any charts at all...simple instinct.

Trading from just a " Hunch " and "simple instinct" then you are destined to fail, Seriously.

You need more screentime to watch how the markets work, You also need to develop a strategy that works for you, dont follow other traders strategies, this is something that has to be personal to you. After a while you will understand why, but at the moment you think everybody has a generic moneymaking strategy that your hoping they will tell you how it works, trading is not like that.

Learn how to read charts, for example: key and short term support and resistance levels, study how the markets react to fundamental's like employment news, after a while everything starts to fall into place, but dont expect it to happen within a few weeks, It wont.

 

[alexaherself]

I must admit that I instinctively agree with Mike, just above.

I can't help feeling that if you're doing short, intraday trades and need stops as wide as 100 pips, something is "mismatched", somewhere, and should be re-appraised. :|

 

[sharesr4us]

The word hunch was mentioned by VielGeld. To be very honest, I've actually been trying to understand trading and charts for a long time, but have been unsuccessful so far. I've tried many of the strategies that have been mentioned on here, but eventually they all seem to fail badly. Surely if charts were that accurate, then everyone would be millionaires, right? I honestly have tried a lot of the things mentioned, but I'm tearing my hair out as to why I fail whereas others say they are successful.

As said though so far only my instinct has worked and I do read the news to see just in case there is a fundamental reason the market has reacted in such a way. What I have found is that 80% of the time, the charts are within a certain range and don't tend to go out of this range too quickly.

If you were asked what in your opinion is the absolute and most simple method of trading (following charts etc)? What would you say? Could you give me an example such as a youtube video I can follow? Please bear in mind that I will take your advice, but I need a total baby step type of video to help me understand.

 

[mike.]

The word hunch was mentioned by VielGeld mate.

Apologies, I misread.

If you were asked what in your opinion is the absolute and most simple method of trading (following charts etc)? What would you say? Could you give me an example such as a youtube video I can follow? Please bear in mind that I will take your advice, but I need a total baby step type of video to help me understand.

Ok, I watched a video on youtube about being a dentist, I am fairly confident i would be able to carry out major surgery on you, fillings, removals etc... When would you like booking in ? Starting to see the picture now ?

Its a profession that takes time, unfortunately.

 

[sharesr4us]

Apologies, I misread.

Ok, I watched a video on youtube about being a dentist, I am fairly confident i would be able to carry out major surgery on you, fillings, removals etc... When would you like booking in ? Starting to see the picture now ?

Its a profession that takes time, unfortunately.

I totally understand and respect what your saying regarding the youtube videos don't mean much as it could be novice/rouge traders.

Let me explain how my method works. Think of it this way. You goto an auction selling properties. Normally you will see the starting bid and then two/three bidders outbidding each other. Now some people at this moment would join in, pushing the price up further. But my strategy is to wait it out and see how high it goes and once there is a resistance and the auctioneer is about to hit the hammer, I will suddenly jump in. This is very similar example of the strategy that I apply to my trades. When I see that the market is on the extreme side, I will wait it out and then jump in, ride the wave, make the money (not being too greedy) and pull out. It's not a strategy as such, but it works for me...having said that I still want to learn before actually going for the real thing.

 

[mike.]

I totally understand and respect what your saying regarding the youtube videos don't mean much as it could be novice/rouge traders.

Let me explain how my method works. Think of it this way. You goto an auction selling properties. Normally you will see the starting bid and then two/three bidders outbidding each other. Now some people at this moment would join in, pushing the price up further. But my strategy is to wait it out and see how high it goes and once there is a resistance and the auctioneer is about to hit the hammer, I will suddenly jump in. This is very similar example of the strategy that I apply to my trades. When I see that the market is on the extreme side, I will wait it out and then jump in, ride the wave, make the money (not being too greedy) and pull out. It's not a strategy as such, but it works for me...having said that I still want to learn before actually going for the real thing.

Ok, lets take the same auction scenario..But this time you have not 5 or 10 bidders but but millions around the world, then there is not just one house up for auction but millions of people selling them too, We have huge banks bidding for them, also huge banks trying to drive the price down, hedge funds doing the same, not at a £1 a point may i add, They have huge balance's so they are not going to let that house price rise to above what they want to pay, Then depending on their strategy other banks and hedge funds trying to push the price up, then come all the other trading institutions trying to do the same.

This is before we take into account all the trading robots trying to grab 1 or 2 pips by flooding the market with sometimes false orders Then at the bottom of this huge ladder is me and you trying to spreadbet the price with a few quid a point like we know where its going..

 

[VielGeld]

Can I ask what markets you trade in? Also forgive me for asking, but do you go by a "hunch" or do you actually use chart tools to figure out and decide what way the market is going to go?

....I wish there was a video tutorial to show beginners how experienced trader setup their live trades so that we can understand what is going on...most of the video tutorials are not as straight forward to be honest.

I'm currently doing the S&P500 and Brent Crude.

The only tools at my disposal are naked charts and my assessment of levels I find significant. The "hunch" comes in because trading is an inexact science as mentioned, so I let experience guide me on some things.

Tbh, my strategy is dead simple. Anyone could copy it. My edge comes from properly identifying levels and market reaction to them. This is the part that takes a lot of screen time and exp.

You really need to get your own understanding of the market. If there's one thing humans are good at, it's pattern recognition. You'll see stuff eventually. Whether that is tradeable is something else, but you'll see stuff.

Hint: look at support and resistance and try to find out why these are significant. Try to understand why price reacts like it does at certain levels and what is it that happens at the most fundamental level of the market. You'll notice price sometimes retraces the whole move (in any timeframe) and it sometimes stops halfway before continuing its trend.

Something that helped me form my idea of the market as it is today is http://www.cmegroup.com/education/interactive/marketprofile/handbook.pdf. I think this is more handy than squiggles overlaid on charts to get an idea of what's happening.

 

[sharesr4us]

Ok, lets take the same auction scenario..But this time you have not 5 or 10 bidders but but millions around the world, then there is not just one house up for auction but millions of people selling them too, We have huge banks bidding for them, also huge banks trying to drive the price down, hedge funds doing the same, not at a £1 a point may i add, They have huge balance's so they are not going to let that house price rise to above what they want to pay, Then depending on their strategy other banks and hedge funds trying to push the price up, then come all the other trading institutions trying to do the same.

This is before we take into account all the trading robots trying to grab 1 or 2 pips by flooding the market with sometimes false orders Then at the bottom of this huge ladder is me and you trying to spreadbet the price with a few quid a point like we know where its going..

Agreed that in the case of markets, there are millions trading, but the principle is still the same:-

1. wait till the market gets to an extreme (in terms of points),
2. check news that is causing that spike or drop,
3. look out for resistance to see if the market is still pushing up/down,
4. jump in when you feel market has got pretty high/low

Your right in thinking that I'm not using an exact science, but I feel that really no one knows which way it's going to go...not even banks/pro-traders. It amounts to psychology and knowing that what goes up must eventually come down & vice versa.

Even charts and tools don't really help...it all seems to be guess work.

I'm currently doing the S&P500 and Brent Crude.

The only tools at my disposal are naked charts and my assessment of levels I find significant. The "hunch" comes in because trading is an inexact science as mentioned, so I let experience guide me on some things.

Tbh, my strategy is dead simple. Anyone could copy it. My edge comes from properly identifying levels and market reaction to them. This is the part that takes a lot of screen time and exp.

You really need to get your own understanding of the market. If there's one thing humans are good at, it's pattern recognition. You'll see stuff eventually. Whether that is tradeable is something else, but you'll see stuff.

Hint: look at support and resistance and try to find out why these are significant. Try to understand why price reacts like it does at certain levels and what is it that happens at the most fundamental level of the market. You'll notice price sometimes retraces the whole move (in any timeframe) and it sometimes stops halfway before continuing its trend.

Something that helped me form my idea of the market as it is today is http://www.cmegroup.com/education/interactive/marketprofile/handbook.pdf. I think this is more handy than squiggles overlaid on charts to get an idea of what's happening.

So would you say that you use similar strategy/method to myself?? i.e. no real tools other than plain charts? BTW, thanks very much for the link to the handbook. I shall certainly have a good read of it.

 

[alexaherself]

no one knows which way it's going to go

That's true in one sense: it's true of individual, specific instances (and probably all individual, specific instances).

It isn't true collectively of specific scenarios.

For example, nobody can look at a chart at any given moment and truthfully say "I know that this is going to go up/down now".

But a trader with a proven edge (and you won't ever make steady profits without one) can look at a chart at some given moments - for which they've typically waited patiently - and legitimately say something like "I know that if I trade this set-up 100 times, risking £x on each occasion, I'm going to show an overall profit of £y, give or take a variance of £z, after those hundred trades.

Until you can confidently say that, having researched and proven it meticulously and methodically and done it a few times, reliably, with "play money" on a demo account, you shouldn't be trading with real money.

it all seems to be guess work.

Please appreciate that I say this with absolutely no sense of impoliteness or criticism intended at all, but my own guess-work is that your real trading education isn't actually going to begin until after you've abandoned that belief. I do actually know (a very few) people who trade regularly and still believe that, but none of them is profitable over the long term.

In my opinion there are reasons for that, and they're good and valid and reliable reasons.

And they'll apply to you just like they do to everyone else.

 

[sharesr4us]

No worries alexa, I don't find you impolite at all and appreciate your honest. I'd rather have someone being honest than to give me false hope of succeeding.

I've read countless books, tutorials and watch videos to help me, but what I always struggled on is understanding and reading charts. Usually using the resistance/support tool.

For example I've seen in beginners videos many traders drawing resistance/support - i.e. floor ceiling etc, but it seems to me that the chart still hardly ever follow this. The expert describes "here is the resistance and here is the support" etc, but I can't figure out how they have come to that conclusion as I can't see the pattern they are referring to. I have tried to use this technique, but almost always failed. Also what is the difference between drawing resistance/support and using Fibonacci?

If someone could show me this on ig index then that would be great.

 

[mike.]

It seems as though were getting slightly off topic as regards to your original question about stops and limit orders, But if your happy to carry on with the discussion then no problem.

You mentioned :


Agreed that in the case of markets, there are millions trading, but the principle is still the same:-

1. wait till the market gets to an extreme (in terms of points) So in terms of points a market can only drop a certain amount, But it can rise infinitely, So there is no real extreme, just resistance levels

2. check news that is causing that spike or drop, quite often the market can spike without any news.

3. look out for resistance to see if the market is still pushing up/down,Resistance is just that, resistance, Not a hard floor, the market can and often does plough straight through it

4. jump in when you feel market has got pretty high/low, when you feel? Are we trading a defined strategy or off gut instinct here ?

If you posted a chart of say gbp/aud, and 10 of us here gave our opinions as to where/how we would trade it, you would get 10 different trade set up's, not one would be the same, that doesn't mean one is right and the rest are wrong, All of them may be winning trades.

 

[alexaherself]

The expert describes "here is the resistance and here is the support" etc, but I can't figure out how they have come to that conclusion as I can't see the pattern they are referring to. I have tried to use this technique, but almost always failed.

Ok, here's the thing: many people are very lazy about how they refer to resistance and support, and that can mislead people who are trying to learn about it.

What they should do is refer to things like "historical resistance/support" and "recent resistance/support". That's how resistance and support are really determined. It doesn't mean they're necessarily going to be future resistance/support. If they turn out to be, then ok, it means that with hindsight they turned out to be good indicators of forthcoming resistance/support. But until that actually happens, they're not resistance and support, they're only "potential resistance/support". (Still very valuable, though.)

It is true that recent (and sometimes historical) resistance and support can become future resistance and support, just as they were before. It's also true that recent (and sometimes historical) resistance can turn out to be future support, and vice-versa. And there are reasons for that (they're particularly well-explained in Dr. Alexander Elder's book Trading For A Living, if you want a recommendation). But they're no "cert".

It's exactly like what I explained in my post just above, about the difference between specific instances and collective instances: there's no certainty about individual cases. These things are all a probability-function.

Also what is the difference between drawing resistance/support and using Fibonacci?

The difference is that potential resistance/support comprises largely areas/levels which have been proven to be resistance/support before, and Fibonacci levels are only putative, often as-yet-undemonstrated resistance/support to people who believe in Fibonacci levels.

I can't help you at all with Fibonacci. Personal opinion only (and there will be many people here who disagree with it, and some of them quite strongly), but in my opinion anything to do with Fibonacci, in trading, is 100% bullsh!t, and the only "evidence" for it is anecdotal, cherry-picked, subjective nonsense; certainly the few genuine, objective, academic studies that have been done on it have very consistently shown that Fibonacci levels have no more significance than any other randomly selected levels around the same places. Speaking for myself, whenever I've encountered anything Fibonacci-based or Fibonacci-influenced, I've not only ignored it but looked pretty much askance at anything else presented as "information" by the same source, as well. But there you are: admittedly I'm a notorious skepchick, and some people do believe in it.

Some people believe that analysing the phases of the moon helps their trading, too. Which is fine for them, if they like that sort of thing.

As long as they don't ask me to be interested, too, or to respect their claims about it.

 

[darktone]

Agreed that in the case of markets, there are millions trading, but the principle is still the same:-

1. wait till the market gets to an extreme (in terms of points)
Yep, and in counter to where your betting.
2. check news that is causing that spike or drop,
3. look out for resistance to see if the market is still pushing up/down,
4. jump in when you feel market has got pretty high/low
I wouldnt bother your hole with 2,3 or 4

I feel that really no one knows which way it's going to go...not even banks/pro-traders (you got that right!). It amounts to psychology and knowing (knowing? wash your mouth out with soap!) that what goes up must eventually come down & vice versa (for the most part).

sounds like youre starting to wake up.

 

[sharesr4us]

It seems as though were getting slightly off topic as regards to your original question about stops and limit orders, But if your happy to carry on with the discussion then no problem.

I'm happy to continue as I feel it's a very interesting discussion with positive contribution from us all :cheesy:

You mentioned :

Agreed that in the case of markets, there are millions trading, but the principle is still the same:-

1. wait till the market gets to an extreme (in terms of points) So in terms of points a market can only drop a certain amount, But it can rise infinitely, So there is no real extreme, just resistance levels

I NEVER leave my trades overnight and most of the time, I've found that there is almost a maximum no. of points the markets tend to rise/fall within one trading day...even with good/bad news (Unless it's extremely bad, such as BREXIT/GREXIT or TERRORIST ATTACK.


2. check news that is causing that spike or drop, quite often the market can spike without any news.

True, but what I meant is that I will double-check and find out some news has caused a spike/drop and then judge it on these factors if it's worth taking the plunge or wait it out. For example, if suddenly there is a GREXIT or BREXIT, I know that this will most likely cause a sudden spike/fall in markets and even smash through the maximum daily range, so I would avoid this until I know it's the right time.

3. look out for resistance to see if the market is still pushing up/down,Resistance is just that, resistance, Not a hard floor, the market can and often does plough straight through it

Agreed, but then the same can be said when using charts and tools. You set up a resistance/support level thinking it's going to stick within these ranges, but then it goes through it.

4. jump in when you feel market has got pretty high/low, when you feel? Are we trading a defined strategy or off gut instinct here ?

If you posted a chart of say gbp/aud, and 10 of us here gave our opinions as to where/how we would trade it, you would get 10 different trade set up's, not one would be the same, that doesn't mean one is right and the rest are wrong, All of them may be winning trades.

Yes and there is really nothing to say that those traders will get it right...it's simply a trend they are looking for but it can go either way. Regarding gut-instinct or strategy.....I'd say it's a bit of both. To me it's a gut-instinct based on the above strategy...ONLY if all these pointers are there will I then decide to jump in or not. I sometimes will wait for days before going for it.

Ok, here's the thing: many people are very lazy about how they refer to resistance and support, and that can mislead people who are trying to learn about it.

What they should do is refer to things like "historical resistance/support" and "recent resistance/support". That's how resistance and support are really determined. It doesn't mean they're necessarily going to be future resistance/support. If they turn out to be, then ok, it means that with hindsight they turned out to be good indicators of forthcoming resistance/support. But until that actually happens, they're not resistance and support, they're only "potential resistance/support". (Still very valuable, though.)

It is true that recent (and sometimes historical) resistance and support can become future resistance and support, just as they were before. It's also true that recent (and sometimes historical) resistance can turn out to be future support, and vice-versa. And there are reasons for that (they're particularly well-explained in Dr. Alexander Elder's book Trading For A Living, if you want a recommendation). But they're no "cert".

It's exactly like what I explained in my post just above, about the difference between specific instances and collective instances: there's no certainty about individual cases. These things are all a probability-function.



The difference is that potential resistance/support comprises largely areas/levels which have been proven to be resistance/support before, and Fibonacci levels are only putative, often as-yet-undemonstrated resistance/support to people who believe in Fibonacci levels.

I can't help you at all with Fibonacci. Personal opinion only (and there will be many people here who disagree with it, and some of them quite strongly), but in my opinion anything to do with Fibonacci, in trading, is 100% bullsh!t, and the only "evidence" for it is anecdotal, cherry-picked, subjective nonsense; certainly the few genuine, objective, academic studies that have been done on it have very consistently shown that Fibonacci levels have no more significance than any other randomly selected levels around the same places. Speaking for myself, whenever I've encountered anything Fibonacci-based or Fibonacci-influenced, I've not only ignored it but looked pretty much askance at anything else presented as "information" by the same source, as well. But there you are: admittedly I'm a notorious skepchick, and some people do believe in it.

Some people believe that analysing the phases of the moon helps their trading, too. Which is fine for them, if they like that sort of thing.

As long as they don't ask me to be interested, too, or to respect their claims about it.

(Or to discuss it with them at any length or in any detail, because long and sometimes frustrating experience has taught me that I won't manage to change their minds, and - a little arrogant though it may sound, I'm afraid - I've gradually, increasingly come to realise that my time is actually too valuable to be wasted in trying!).

I thought this too I know a friend who believes fibonacci helps him trade, but I think it's a load of tosh. He has spent weeks and months reading through countless books/tutorials and videos, but still fails on many occasions. My honest thought is that no matter what resistance/support level you use, the market will go the way it wants and not the way you want it to go or think it will go. But one thing I have found (and this is in my own honest opinion ) is that what goes up MUST eventually come down in the short-term. Lets take an example of GBP/USD. It's trading at 9650 and due to good news on uk economy, the GBP currency shoots to 10000 in a single day. Within the trend of 350 points of market going up, there will obviously be many large profit takers, scalpers and losers in between. However, the market has now reached a point where it's been stuck on the 10000 mark and not moving much higher, this (for me) is resistance and the perfect time to place a SELL trade and wait it out. Eventually sells will kick in as people will lock-in their profits.

 

[sharesr4us]

sounds like youre starting to wake up.

Sorry darktone, but what did you mean by "I wouldnt bother your hole with 2,3 or 4"

Also did you get me PM? :cheesy:

 

[alexaherself]

My honest thought is that no matter what resistance/support level you use, the market will go the way it wants and not the way you want it to go or think it will go.

I can only repeat, in response to that, what I've already said in posts #50 and #53, above - but that isn't going to help you; nor is it going to interest anyone else; sorry. :|

 

[sharesr4us]

I can only repeat, in response to that, what I've already said in posts #50 and #53, above - but that isn't going to help you; nor is it going to interest anyone else; sorry. :|

Alexa, I'm simply trying to say that no matter what support/resistance method you use, you can't predict which way the market would go. It might give you a better idea, but not guaranteed knowledge of market direction. My apologies if I've said or done anything wrong. I want to have an honest, but detailed debate, so that it can help me and others understand, but so far I'm struggling.

 

[darktone]

Heres a little screenie of a friday campaign.
The orange tags mark the time and place of the scratched trades. (focus on their execution, all at limit.)
The red tags are the shorts held through the turn. (Ma cross)
The aqua tags are the profits on those shorts. (all taken at limit, at the best prices in that moment)

Looking at the screenie youl notice I could have taken an averaged -10 on those scratched trades. I took -3. Ask yourself where a 10 point stop would have got you out? Getting it yet?

If you closer youll notice the positive slippage on some exits, on the entries but not shown, just something else in my favour. Another glance shows the wall of stacked sell limits that I cancelled after the show.

The main point im trying to convey is that I was seeking value in every execution. Going in, scratching, coming out. A stop player does the exact opposite.

 

[darktone]

Sorry darktone, but what did you mean by "I wouldnt bother your hole with 2,3 or 4"

Also did you get me PM? :cheesy:

I just mean dont bother.
with the news
with resistance or any of that other bs
with how you feel.

I got your pm