Stoplosses on overnight trading


Active member
After not being massively successful daytrading the indices I thought I'd finally take the point that everybody makes about daytrading with SB's (i.e the spread & bias making it extra difficult) and take the longer term approach.

The problem is I just don't get the best way to use stoplosses.

On daytrades, it's simple:

1) place a trade
2) if it doesn't do what you expect very quickly then close it

But the intraday movements for trades that you intend holding for a few days are obviously less important ... so what would be a typical stoploss if, for example, you were trading the Dow for a few days ?? We all know that can move 150+ pts in an afternoon.

This has been the reason I've preferred to daytrade, so I help someone can illustrate how position trading is "easier" than daytrading ... for having massive stoplosses (which doesn't appeal to me) is the only way I can imagine it right now.
If you are uncomfortable with 'massive stoplosses' (your words) then, with respect, you are trading with too high a stake. Cut it right down to pennies, and learn to give the market time and space to breathe and move without hitting your stop loss. Look at a chart and work out the amount of 'wiggle' you need to give - each stock/index will be different.

On position trading stops are often placed using previous major support and resistance. For short term this can be the high / low of the previous day, and for further out using small pullbacks.

Entry is important because you need to know within the shortest amount of movement/time whether you are in the correct trade or the wrong trade. Patterns are easier to use for this than indicators - so, for instance you would short the second attempt at an isolated high, with the knowledge that if it goes against you (ie it carries on going up), you will know very soon and can exit for a small loss.

If you are changing your strategies, you need to spend a considerable amount of time deciding how you are going to trade, what your entries will be, and your exits. If you are used to daytrading it will be quite a culture shock to trade EOD, so don't rush in.