Move to Break-even.

[daveylibra]

Hi, I have started to dabble in spread-betting major shares on daily charts, and am happy with where I enter a bet.
My problem comes with how to manage the bet. Very often, at the end of day, I may be a small number of points to the good, say 1 or 2. My stop-loss will be much further away from entry on the other side of the trade.
I have read that a trader should "move his stop-loss to break-even as soon as possible." This is from Dr Elder, (by the way, from a book I rate highly, Come Into My Trading Room.) But when is "as soon as possible?
I could take my small profit. My risk:reward ratio is then going to be high.
I could move my stop-loss to break-even. My stop is then going to be only 1 or 2 points away, and I will likely be hit.
I could move the stop-loss to a point where I guarantee half my profit. Then it will be even closer to current price.

Has anyone else considered this dilemma? I'm sure there must be thousands of people. Maybe we could come to some consensus of opinion.

Cheers,
Dave

 

[mb325]

This is definitely an area I'd like to see more discussion of.

My number 1 rule is to protect my capital, so I always have a point at which I move to breakeven. Normally this is an area on a chart where I expect some sort of reaction against the way I'm positioned. I'm also aggressive in moving my stop towards breakeven as and when price allows, trailing behind short term high/lows etc. My style is such that if a trade hasn't hit my breakeven point within a couple of minutes then it's probably a bad trade. Once at b/e I Iet it do its thing and its either a scratch trade or it starts hitting targets.

I find the time when price is hovering around your entry is the time when you're most prone to psychological duress and errors - so I'm willing to give up a few trades which might work out but instead get scratched in order to limit my time under this 'stress'. I think the most important thing is to find something which fits in with your psyche, as long as you are consistent, allowing you to build experience and some stats to work with, then you are probably on the right track.

There are other possibilities, depending on confidence in your system you could just set and forget the trade, i.e. get in, set your stop-loss, set your targets, let it do its thing. Or you could look to exit a portion of the trade for a small profit to cover the risk on your remaining portion, e.g. take half off at 1R (so if a 20 pip stoploss take off half when you are +20pips).

 

[Splitlink]

Try to assess the range of what you are trading. I place my SL well away from the action when I open and move it closer as I get into profit. I believe, strongly, that the market (not the broker, necessarily) moves towards the area where the most stops are likely to be with the intention of triggering them. They could be stop losses, or places where traders think that trades should be opened. Therefore, I prefer to close manually, if possible.

A lot of the older pundits have written sound trading advice but, remember, that most of those books were written decades ago. This is the age of computers and programation and a lot can happen in a second, these days. Most of us are competing with highly automated trading houses.

If you are unhappy with breakeven ,don't put it there until it is well beyond the range of where the price is then you may be able to close, manually, and take a profit before it triggers. If you want to leave the computer then you may want to move it closer, moving away again when you come back.

This is just an opinion of mine, to be taken for what it is, ie. a comment based on what I do. The last thing I like is to be jumpy because my stops are too close. Well, not the last thing but one of them!

 

[OLdNoob]

A good way to satisfy yourself is to close half your position when you move your stop to break even, if the trade goes back to entry and you get stopped out on the rest you still have some profit from the trade, if it goes on a run you have not missed out.

 

[dunitatlsatrodney]

"Don't strangle your trades"

 

[daveylibra]

Cheers guys, sorry to be slow OldNoob, but when you say "close half your position", does that entail opening 2 identical positions at entry, and then closing one of them when you want to?
I like this idea and just want to make sure I would be doing it right.

 

[barjon]

Dave

When you say "...,,,,,,,,at the end of the day......" are you talking about holding overnight?

If so, there are two aspects to consider:

1. In "normal" circumstances the opening spread often widens quite considerably until things settle down and a close stop will often be hit because of that even though the mid-point chart is showing no change in price.

2. In "abnormal" circumstances - eg: significant overnight news - a substantial gap opening may occur which will leapfrog your close stop and get you out at the best available price miles away from it.

For equities I tend to take stops off overnight and put them back on when things have settled down after the open.

From a trade management point of view you might say that a share that is only a point or two to the good by the end of the day is not really performing as you anticipated and should therefore be closed off.

 

[OLdNoob]

Cheers guys, sorry to be slow OldNoob, but when you say "close half your position", does that entail opening 2 identical positions at entry, and then closing one of them when you want to?
I like this idea and just want to make sure I would be doing it right.

No not 2 positions, you open your normal position as per your risk management rules, lets say for example that is £2 per point. lets say the market moves 40 points in your favour and you are about to move your stop to break even, first you close half the trade (£40 profit) move the stop for the rest of the position and let it run, if the stop gets hit you still have your £40 rather then nothing whilst still not letting a winner turn into a loser.

I hope thats clear.

 

[daveylibra]

Hi, yes the method is clear, but I trade with IG and cannot see how to close half the trade.
On the ticket I have options to close or edit, but cannot see how to partially close. Sorry!

 

[mb325]

Hi, yes the method is clear, but I trade with IG and cannot see how to close half the trade.
On the ticket I have options to close or edit, but cannot see how to partially close. Sorry!

can you not change the amount that you close?

e.g. you are long at £20/point, on the order ticket can't you amend the 20 to 10 to close half the position?

 

[darktone]

10ppp or 10x1ppp, same deal. If your platform doesn't allow partial closes you can always use multiple tardes for an overall position. this will give you some flexibility.

Stops to BE.................no!

 

[remme001]

Hi, yes the method is clear, but I trade with IG and cannot see how to close half the trade.
On the ticket I have options to close or edit, but cannot see how to partially close. Sorry!

You can partial close just by opening a ticket on the same instrument but trading in the oposite direction and editing the size based on the amount you want to partially close. As long as you don't have 'force open' checked it will partial close your existing position.

 

[Splitlink]

After reading this thread I decided to give this BE business a try. I made six trades on the 1m chart, determined to try my level best to close before running a loss.

I give fair warning, to do this, one must park his backside on a chair and watch the screen the whole time. Between 1533 and 1704 all those trades made a profit which were, in points 3.2, 0.7, 2.2, 1, 5.5, 0.5.

It is not easy to do this, especially at my age, but it can be done and I think that I can do better. I'm going to try. One must do this at turning points, while trying to get into the bigger run that you think is there.

I was in the family business and an old customer came in. He wanted to chat. It was the trade that made the 5.5. and I closed it, at once. One must focus and not get distracted by anything. Most of the trades were closed out after having made a better profit. ie. thery were running back and would have gone into loss.

Anyone, who tries this---remember---go to the w.c. and have that coffee before you start! Shut the door, as well, and don't stop until you get started on the run that you are aiming for.

I must admit that I am looking forward to Monday, to give it another try.

Oh, yes. I am a spreadbetter.

 

[dbphoenix]

I have read that a trader should "move his stop-loss to break-even as soon as possible." This is from Dr Elder, (by the way, from a book I rate highly, Come Into My Trading Room.) But when is "as soon as possible?

Characterize your market and your instrument. For example, how deep can a countermove be before it becomes a reversal? 3t? 5pts? 10? 20? This is easy to determine though it takes time. And it will vary with each interval and each instrument (if you trade futures, you only have to do it once). However, the time is well-spent. Once you have that, you know when and where and how to move your stop.

 

[piphoe]

Characterize your market and your instrument. For example, how deep can a countermove be before it becomes a reversal? 3t? 5pts? 10? 20? This is easy to determine though it takes time. And it will vary with each interval and each instrument (if you trade futures, you only have to do it once). However, the time is well-spent. Once you have that, you know when and where and how to move your stop.

a countermove AKA pullback can be of any depth...there is no avg "countermove" in any instument in any given timeframe.

buying/selling is random and way i deal with this is to move toward the macro

 

[piphoe]

10ppp or 10x1ppp, same deal. If your platform doesn't allow partial closes you can always use multiple tardes for an overall position. this will give you some flexibility.

Stops to BE.................no!

taking all those "skittle" trades, bite sized pieces up & down just adds to your commiss load...

adding to a position is one thing. but that's another:whistling

 

[piphoe]

10ppp or 10x1ppp, same deal. If your platform doesn't allow partial closes you can always use multiple tardes for an overall position. this will give you some flexibility.

Stops to BE.................no!

why am i banned YET AGAIN from your traders are TARDER thread?:|

 

[Sonicscooter]

why am i banned YET AGAIN from your traders are TARDER thread?:|

I have great difficulty in understanding what you are saying, it's as though you are using slang, but whatever it is, i struggle to understand most of your posts.......:|

 

[dunitatlsatrodney]

I have great difficulty in understanding what you are saying, it's as though you are using slang, but whatever it is, i struggle to understand most of your posts.......:|

Homeskooled

 

[darktone]

taking all those "skittle" trades, bite sized pieces up & down just adds to your commiss load...

i think spending 1point or less to save yourself 5 10 50 100+ points is a good idea. Buuuuut we all different man, no rules in this tarding game.:smart: