Locking In Pips Help

[dallir]

Hi,

still trying to devise the best plan for locking in pips and general money management. Can someone offer me their two pennies worth regarding whether it is better to have a risk to reward ratio and stick to that eg 1:2, 1:3. Perhaps it is better to let the profits run and then keep moving the stop loss or should you stick to the risk to reward ratio and then move the stop loss every 10, 20 pips etc. I intend to trade from daily charts and it is unlikely that I will be able to sit their keeping an eye on the charts throughot the day. Many thanks in advance

 

[TheBramble]

R:R as a profit target is only as good as the rationale used to assess it in the first place. My suggestion is to forget profit targets and R:R and just get out when it no longer makes sense to still be in.

You mention moving up your stoploss. A good idea. But even here you need to have a pretty solid basis for revising your stops.

With a stop unrelated to price action (random or arbitrary value stops or trailing stops) you'll find yourself getting out earlier than you would have wished to in retrospect on some trades (minor reversals), but it also get you out of the major reversals against your position too. Not sure if that's really swings & roundabout, but probably close.

You might want to look at not just S&R levels but also momentum of price, even use an indicator for momentum if you like, as that combination may serve you a little better.

 

[dallir]

My point is that if I am trading from a daily chart and I can not view the charts continually, should I not have a plan in advance that I adhere to? From what I can gather, not having a plan in place before entering trades can lead to a lack of discipline, possible greed and emotional trading. I would prefer to remove emotion from the equation and have a plan to stick to, which makes my trading plan more methodical and hopefully more profitable. I am hoping to be within the few % that makes a profit trading forex. Thanks for your input

 

[shadowninja]

I like to keep things simple... because I am.

So, I have a target area and a reasonable stop size for the market I am trading. If it achieves this area then I take half to 2/3s and move my stop to break even. I let the rest run for another target area further away from the entry. The targets comes from deciding where a market will have a problem passing ie support/resistance levels.

The key thing is this: you must be willing to take a loss.

Example: let's say you're trading trends on 4 hour charts, looking to buy dips into a bull trend on euro. A 50 pip stop would suffice (it may be 40, 45, 55, 60, it really isn't important because the market is organic so you can't be accurate). So you buy the dip. It moves 10 pips into profit. 10 pips is nothing on a 4 hour chart. 20 pips. Still nothing. You see 35 pips and the market is poking yesterday's low. Time to close half and move stop to b/e. Now look for next possible resistance area - round number, another low, the recent high. That's where you could take the rest. Sure it could fall 35 pips. Tough.

 

[TheBramble]

Erm...your last post is essentially different in what you were asking from the first one. The first was about stops and management the second about discipline and plans.

But in any event, if you're planning oin trading the Daily chart then you won't need to be checking the price intraday. So no problem. But the same basis for using stops I suggested in my initial response applies to any trading timeframe.

 

[dallir]

Cheers Bramble & Shadowninja for the replies.To respond Bramble IMO having a trading plan involves keeping disciplined and sticking to R:R ratio etc.. but I don`t want to make this a tit for tat thread.
Cheers Shadowninja this is the sort of thing I was looking for as I like simple. So you don`t necessarily always have a 1:2, 1:3 R:R ratio. You judge each trade and possible limit by what the chart is telling you i.e s/r levels?

 

[shadowninja]

The market doesn't give a toss about r/r ratios. Here's the problem: say you always have a 1:2 r/r. So you always close at twice the risk. In my example, you'd always close at 100 pips profits. What if you saw 80 pips profit then it fell back to hit your stop? Three times. You'd feel like a retard.

You need to get a feel for how the market moves. As I say, the market is organic. You could always have a rule like putting a stop 10 pips below yesterday's low but it could spike through for 15 pips. These numbers are all arbitrary. It's like in karate, you are taught to punch straight ahead, arm horizontal. What if the opponent is shorter than you? Or to the left a bit? So we have to adapt to the circumstances.

An important note to make: you need to figure out what works for the way you trade and how you identify areas to enter. It may be completely inappropriate for your way of trading.

 

[dallir]

Makes sense to try to let trades run, as I figured that some trades would continue gaining pips after the 1:2, 1:3 ratio and I would obviously feel that I should have let things run. I am just looking for some input on how more experienced traders do things and then to try to see what will suit me. Thanks for the input!

 

[shadowninja]

Well, there's nothing wrong with letting a trade run. You need to figure out what is a realistic move for the way you trade. I can't tell you this (because you need to experiment and watch the market).

Another example: wheat bounced off a low from January. The last couple of days you could have been buying, still, taking 60-70% each time. If you'd have let it run, you'd be staring at a loss now.

 

[Black Swan]

imho you could spend a lifetime trying to figure out a 'best exit' edge to your strat..

As for use of trailing stops (fixed or dynamic) they can be v.dangerous to your P&L.

 

[TheBramble]

Cheers Bramble & Shadowninja for the replies.To respond Bramble IMO having a trading plan involves keeping disciplined and sticking to R:R ratio etc.. but I don`t want to make this a tit for tat thread.

Uh? You asked if it was better to have a R:R and stick to it. I responded it probably wasn't. Then you give me your opinion that it is. Fine. Why ask in the first place.

SN and others, you're on your own.

As for tit for tat, it's not your call.

 

[dallir]

What do you suggest Black Swan as a way of trying to lock in some pips?

 

[tomorton]

If you can't watch the positions on-screen and you don't have a profit target crystallised in a limit order, I don't see how you can hope to make any profit.

However, you have at least 3 valid approaches -
use a trailing stop loss so that your position always closes if price backs more than X pips away from its furthest point of travel
apply TA to identify the places where a price move will probably travel to and where the move will probably peter out: set a stop just this side of that level
back-test to develop statistics on what price normally achieves after an entry signal or TA pattern of a particular type: if price gains 30pips after 90% of signals of type X, setting a limit order at X-1 should be consistently profitable.

 

[dallir]

OK tomorton, I will have to have a sit down and try to figure out what may be best for my style-thanks for the response.

 

[tomorton]

Sorry, in the last example I meant setting the exit order at 29 pips from entry. (but don't forget about spreads)

 

[nunrgguy]

Sorry, in the last example I meant setting the exit order at 29 pips from entry. (but don't forget about spreads)

Consider, stay long until you would enter short. Stay short until you would enter long.
When you enter in one direction consider what traders looking to enter in the other direction are looking for.
And the perrenial spike-out. You can be right on all accounts, location, direction, target but if you use a stop loss at entry (which I don't recommend not doing unless you play multiple lots and know what you're doing with increasing/lightening(sp), you can still lose because unless you run a huge stop loss and only close out if price CLOSES past a certain point, the market movers will know exactly where you've put it. Yes, they are b@stards but it's all part of trading.

 

[dallir]

Cheers all for the replies. I am really trying to keep things simple and disciplined. Ultimately no one can tell me how to do it, i will have to figure a way for myself and that`s what the demo account is for!

 

[nunrgguy]

Consider, stay long until you would enter short. Stay short until you would enter long.
When you enter in one direction consider what traders looking to enter in the other direction are looking for.
And the perrenial spike-out. You can be right on all accounts, location, direction, target but if you use a stop loss at entry (which I don't recommend not doing unless you play multiple lots and know what you're doing with increasing/lightening(sp), you can still lose because unless you run a huge stop loss and only close out if price CLOSES past a certain point, the market movers will know exactly where you've put it. Yes, they are b@stards but it's all part of trading.

One thing that's just sprung into my mind this morning also is this: the more you see this on charts, if that's how you trade, the harder it actually gets to hold onto a trade for any significant period of time unless you just walk away and leave it to lady luck. What you may start to see is that, depending on your time perspective, price is always moving between supply and demand areas and you never know which ones will hold and which ones will break. For instance for that big momentum move at the end of the last 'trend', for sure, before the last push there was a period of ranging on some small timescale, this range is an area of supply/demand imbalance before the break out and price will tend to target some area apparent on a higher time frame perspective, price moves to where the money is.

Now price will tend to range in this area between zones, one which is maybe only apparent on a low timeframe chart, and the other which is only apparent on the higher timeframe chart, if you only look at one chart you may think 'why is it doing this here?' But price will not move out of this area until all supply or demand in one of the zones is 'sucked up'. So the low risk plays are trading between the zones until price breaks out, but the breakout will possibly be a losing trade for you, or you will be closing your trade out when price breaks out and you MAYBE miss out on the trend which may follow up to the next possible target, unless you have a strategy for getting in on stops.

If you start to think about price moving from stops to entries, and from entries to stops you'll see why (usually) which and where price will pull back in a trend, but you don't know if this will be a pull-back or a reversal (book profits and re-enter??), why it will range etc etc. Of course, no-one has a crystal ball but you'll see it time and time again why price turned there (or your idea of why price turned there anyway).

If you are long you are ALWAYS fading a short move, if you are short you are always fading a long move, don't let the trend you see on a larger chart fool you. If price is gravitating upwards on a monthly chart for example there are plenty large short moves in there - get your chart to only display down bars or only display up bars and you will see more clearly. Uptrend? Yeah what about the 1500 pip down moves??

The larger the move you want to attempt to capture the more money you could have 'won' you have to be prepared to give back. I've fallen 'foul' of this this very week with the ranging on cable. I could/should have been up circa 120-150 pips, money there, in the bag if I had traded in and out but in waiting for a larger move short I've given all of that back and come out of it with about 5! Only last night I gave another 40 pips back which I could have booked because again price bounced of the clear as day demand zone on the 4hr and weekly chart (but we have supply on others), it had hit it at least three times I think, surely it was going to bust through this time. NO

So it's swings and roundabouts - capturing the big pips makes you feel all nice inside - 'hey wow I just got 300 pips on that trade, fantastic' BUT you WILL sacrifice a lot getting that big win. Then of course there are the 'what ifs' what if you miss the trade that would have got you into the final big push? This is why imo back testing, while it has its uses, in terms of finding out your actual expectancy is of limited use because what it never shows you is all the trades you miss, and it's sod's law it will be the big ones you do miss.

TLDR I know.

It's a topsy turvy world. I use you when I mean me, entries are exits, exits are entries, wins are losses, losses are wins, down is up, up is down, charts show the truth, charts are illusions, TA is the law, TA is hogwash, T&S shows the way, T&S shows the way to the poorhouse, time perspectives give us useful information, time perspectives cloud our judgement, certainty is uncertainty, trading is easy, trading is impossible, the more you know the more, the more confused you get. Trade2Win? Trade2Mashyourbrains more like.

Life was so much simpler when there was just a moving average and a pullback to think about. Trading used to be easy, now it's feckin impossible