To stop or not to stop?

[pb]

I aim to to limit my losses to 2%. In the past I used to put market stops. But then I noticed my stops are getting hit too frequently, even though the underlying market didn't reach anywhere near my stop. It was as if the SB firm was trying to set off as many stops as possible and earn some quick bucks.

Once I was convinced this was the case, I stopped putting market stops and started monitoring the market more closely. I.e., if a price is very close to my exit price, I'd get out manually.

This is fine except when a sudden movement upsets all your calculations. You obviously cannot protect yourself against violent movements. You are bound to get more than 2% loss.

what's the solution? Anyone?

 

[rossored]

Its well known that SB companies manipulate spreads in order to trigger stops. After all, you are playing their market, so they know where the stops are in order to trigger them.

So if you want to use stops (a good idea, imo), just put them a couple of ticks further away than you would do normally (and hence everyone else in the market) and there you go.

Bear in mind, of course, that the people who work at the SB companies and run the stops also no doubt frequent these boards....

RR

 

[FatCanary]

As you say, violent movements are difficult to defend against.
The best you can do is exit as soon as your stop is either hit or penetrated. Hopefully, the exit price is not too far away from your stop.

I personally never used market stops with SB co's for the reason that RR has stated. I don't trust them to not delibrately 'run the stop' whilst the underlying is trading away from the stop price.

FC

 

[GEM]

Being a bit of a novice, may i ask what the SB is?

 

[adrianallen99]

Spread Betting

 

[FatCanary]

GEM

SB = Spread Bet.

FC


Edit: Looks like I was beaten to it

 

[GEM]

I have to admitt that i do not understand why people use SBs, to trade, as far as i am concerned they are just for the person who just wants to put a bet on (not trade) on a serious note. It might be best to just set up a proper trading account with a broking house and use them instead. you will get the market prices (not spread, but you will have a fixed cost per lot you trade) in the long run it should be better.

 

[Volatile]

GEM,

spreadbetting has its place. You can spreadbet with a very small starting capital for example (even 1p a point if you are a big spender). Purchasing/Selling shares in general costs a considerably larger amount of capital to start developing returns.

In addition, all income from Spreadbetting is deemed to be "gambling" and so is tax free.

pratbh
I tend to just add 5 pips to my forex trades. I also have audio alerts when the real stops are breached on my charts. This does the trick for me. Before I did this I noticed the stops being hit prematurely all the time

 

[GEM]

Volite,

I am a futures trader, so i am not involved in the expencive game of buying and selling shares. but i agree for that purpose there is a good market out there for SBs. I still believe though if you a bit serious about trading for a profit, then there are other alternatives (ie brokers) that provide a fairly competive rate.

 

[pb]

I use SB because of the reasons Volatile has mentioned. SB firms give me access to (for very little money) a mechanism that would have cost me many thousands otherwise. Also, I wansted to make sure I can really trade and make money before splashing out a large amount. I started with exactly one grand and have traded my way to about 1300 in 6 months...which I am pretty happy with, I must say.
True, SB co's play it dirty at times, but what can you do other than being on your guard?

 

[FatCanary]

I found SB'ing a good and relatively cheap way of learning the ropes and to see what does and what doesn't work in various markets or instruments.

I would say if you can make a consistent profit from SB'ing then you should be able to make more if and when you eventually move onto, say, direct access.

FC

 

[TheBramble]

I would say if you can make a consistent profit from SB'ing then you should be able to make more if and when you eventually move onto, say, direct access.

Absolutely agree with that.

If you can hold on to your capital AND make a profit in the markets while handling all the fun & games some SBs (allegedly) throw at you - you've cut your teeth and can (with caution) move onto something a little more suitable to long-term trading as a primary activity.

 

[GEM]

A learning tool it is!!

 

[Buk]

yep, agree wholeheartedly with the above comments - I tend to use them for positional punts & they work very well as part of an overall strat. They have their 'place' & as Rosso commented....as long as you keep your stops away from the fire, you can amass a nice roll up to compliment your broker returns!....nowt wrong with SB's as long as they're used for the purposes to which they were intended!

 

[growltiger]

It is obvious that SB firms will be able to ensure that reasonable stops are hit; that is, as someone said earlier. because they are the counter-party (not a market, and not a broker). In direct access futures trading, your stops cannot be seen by the market. That being said, stops still seem to get hit by sudden raids outside the trading range, for which no obvious explanation is to be found (except sometimes there is not enough liquidity close the market, and that sends large orders outside the core of the order book). But at least you are not getting fleeced.