Stoploss management

[shadowninja]

Might be the wrong section...

Today, the market was once more quite spikey. With a stoploss, do you try to keep it tight to the price or wait for the spiking to settle down? I'm always keen to maintain the right distance but get it to breakeven ASAP. Is this making things too tight for the movement?

 

[Glenn]

Might be the wrong section...

Today, the market was once more quite spikey. With a stoploss, do you try to keep it tight to the price or wait for the spiking to settle down? I'm always keen to maintain the right distance but get it to breakeven ASAP. Is this making things too tight for the movement?

Ideally your stop should represent the volatility of the instrument.
A simple way is to the the Average True Range of the last 14 periods.
e.g. if the ATR is 15 cents, then your stop should allow that much price movement + spread.

A more sophisticated way is to use the Implied Volatility of the options on the stock or index, which are an attempt to look forward.

Glenn

 

[Rhody Trader]

Might be the wrong section...

Today, the market was once more quite spikey. With a stoploss, do you try to keep it tight to the price or wait for the spiking to settle down? I'm always keen to maintain the right distance but get it to breakeven ASAP. Is this making things too tight for the movement?

Keep in mind the fact that as volatility expands the probability of your stop getting hit increases. That alters the real risk situation for your trade.

All of the above aside, if your stop is at a point where if it's reached it strongly implies that the move you were anticipating isn't going to happen, then you shouldn't be thinking about something further away.

 

[FXSCALPER2]

Might be the wrong section...

Today, the market was once more quite spikey. With a stoploss, do you try to keep it tight to the price or wait for the spiking to settle down? I'm always keen to maintain the right distance but get it to breakeven ASAP. Is this making things too tight for the movement?

This is one area that will mess with your head unless you get it right. For me, I adhere to my stops, come what may. The trick is to have a plan for all aspects of trading. With 'sipkes', how do you know that it is not the beginning of a big move? You don't. If you are uncomfortable with sipkes, you can avoid times when they are prevalent. One thing you do not want to do is change your trading to accomodate temporary phenomena.

I was trading the very fast moves up and down the dow after the news. I was selling it and going out with quick profits of about 20 pips. Eventually it got up to previous support and stopped me out and I lost 30 pips. That was almost the top tough and it came right back down. This stuff will happen a lot in your trading career. You gotta learn to live with it.

Right now, I am selling EURJPY below 166.40. I am making money doing that, but if it spikes up, I will be stopped out and lose. I will not say 'hey it is a spike'. How do I know? I don't. Selling GBPUSD is with a stop above 70 also makes sense, but you get out if it breaks even if it turns out that it is just a spike.

 

[shadowninja]

I guess what you're all saying is don't react because of them; ignore them to an extent. It's just that I was eager to keep my stops moving upwards in the direction of a trend as the price spiked upwards.

 

[FXSCALPER2]

I guess what you're all saying is don't react because of them; ignore them to an extent. It's just that I was eager to keep my stops moving upwards in the direction of a trend as the price spiked upwards.

I see! I am gonna lead ya by example. Short EURJPY AT 30 STOP 60

 

[FXSCALPER2]

I see! I am gonna lead ya by example. Short EURJPY AT 30 STOP 60

Leaving the stop where at 60

 

[FXSCALPER2]

Leaving the stop where at 60

going for a smoke. put a profit target at 10. It is getting late, you know. I will go for a smoke (just cigarettes )

 

[shadowninja]

If you hadn't put a target in and it jumped rapidly to 0, would you move the stop down to 30?

 

[FXSCALPER2]

short GBPUSD @ 55, STOP 85

 

[FXSCALPER2]

If you hadn't put a target in and it jumped rapidly to 0, would you move the stop down to 30?

That was what I was trying to show. lol I was up 15 pips on that one. I didn't move the stop to break even. I am now out of that.

 

[FXSCALPER2]

looking for 20 pips on the GBPUSD. I will not move the stop. My bahaviour to these situations is asymmetrical. If it spikes in my favour, I will look for more. If it sipkes against me, I am out.

 

[FXSCALPER2]

I am going to close shop for the week, but I am in good spirits so lemme tell you. I use a price stop as well as a time stop. I don't look at r:r on a trade by trade basis: I am interested in what happens over time. I look at the volatility and the speed of movement (which may sound the same thing). If the pair is hitting resistence and running down, then I expect to get my profits quickly. I give it a bit of time and close the position if nothing happens because it means the situation might have changed. For example, I expected the EURJP to give the 20 pips very quickly. It didn't, so I closed it instead of waiting for my stop of profit target to get hit.

I just closed the GBPUSD for 9 PIPS. Why? Because it looks sleepy.

I do move my stop to break even sometimes and trail the stop. I do this in a market that is edging in my direction in an orderly fashion. When I see 40 pip down, 10 pips up, 30 pips down 10 pips up, and so on. I take into account what has been happening immidiately before I took the trade.

This stuff is easier to do than to explain, believe me.

 

[shadowninja]

Ah, I see. What if you're position trading?

 

[FXSCALPER2]

Ah, I see. What if you're position trading?

In those cases I use trailing stops. But these thrades I posted were scalps and I treat them as such. It is quick in and out. I see myself as a pick pocket when I do this stuff.

 

[shadowninja]

I thought so after your more recent replies! Thanks for your help.