price & stops

trader_dante

trader_dante

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One more point I quickly wanted to make is contrary to what new_trader recently wrote about proficient traders having tight stops.

All the time the market is giving you more information. Sometimes you need to pay a premium for more reliable information.

The premium is paid by getting in later and using a larger stop.

Both techniques work fine.

I really don't understand the mentality of people being scared of using big stops.

A scalper here does 200 round trips per day paying 0.5 of a tick on the FTSE. This means they are paying a premium of 100 full points risk in the course of a day.

I can do two trades with 50 point stops or 1 trade with a 100 point stop, taking the exact same risk.

There is advantages and disadvantages to both strategies. A scalper has more opportunities to be right but then a scalper has more opportunities to be caught in market blips when bids and offers get pulled or computers get switched off etc which are unlikely to affect me.

I've also found that whilst scalpers have the theoretical advantage - tight stops with huge rewards...I have never met a scalper that captures anywhere near the move I do (note I talk about the move not the monetary gain)

This is something that always baffled me because scalpers should be able to max out as their stops are tight and just try to run things. So I spoke to one of our best scalpers here and he told me that trying to run a trade would kep his concentration on that and not on new opportunities. I can't get my head round this since we all know that it is the big swing that makes the money...but there you go.
 
trader_dante said:
One more point I quickly wanted to make is contrary to what new_trader recently wrote about proficient traders having tight stops.

All the time the market is giving you more information. Sometimes you need to pay a premium for more reliable information.

The premium is paid by getting in later and using a larger stop.

Both techniques work fine.

I really don't understand the mentality of people being scared of using big stops.

A scalper here does 200 round trips per day paying 0.5 of a tick on the FTSE. This means they are paying a premium of 100 full points risk in the course of a day.

I can do two trades with 50 point stops or 1 trade with a 100 point stop, taking the exact same risk.

There is advantages and disadvantages to both strategies. A scalper has more opportunities to be right but then a scalper has more opportunities to be caught in market blips when bids and offers get pulled or computers get switched off etc which are unlikely to affect me.

I've also found that whilst scalpers have the theoretical advantage - tight stops with huge rewards...I have never met a scalper that captures anywhere near the move I do (note I talk about the move not the monetary gain)

This is something that always baffled me because scalpers should be able to max out as their stops are tight and just try to run things. So I spoke to one of our best scalpers here and he told me that trying to run a trade would kep his concentration on that and not on new opportunities. I can't get my head round this since we all know that it is the big swing that makes the money...but there you go.
Click to expand...


I think it's just personal mentality/perception. There is probably no right or wrong, just as long as the individual is profiting and there are no gaping holes in thier risk control.

Good post.
 
trader_dante said:
All the time the market is giving you more information. Sometimes you need to pay a premium for more reliable information. The premium is paid by getting in later and using a larger stop.
Click to expand...

So not only are you getting in later (one disadvantage), you are also using a larger stop (twice disadvantage)? Doesn't seem like a premium I'm willing to pay...

trader_dante said:
Both techniques work fine.
Click to expand...
Sure they can, but you are comparing scalping with longer term trading meanwhile equating scalping with tight stops and longer term trading with wider stops. There is no reason why you cannot enter with a 1 point stop and come out with a 25 point profit.

trader_dante said:
I really don't understand the mentality of people being scared of using big stops.
Click to expand...
"Being scared" has nothing do with it... trading 1 lot with 50 points stops is the same "risk" as trading 10 lots with a 5 point stop, so you can always scale down if you feel like you're risking too much. However, that's not the point new_trader was trying to make.

Let me put it this way. Suppose you could buy two lottery tickets. One costs $5, the other $10. Now if I told you there is, with both tickets, exactly a 15% chance you could win $200, which one would you buy (if you had to choose)?

trader_dante said:
I have never met a scalper that captures anywhere near the move I do (note I talk about the move not the monetary gain)
Click to expand...

Since scalpers are by definition not interested in catching a big swing, that's obvious. But again, just because you enter with a very tight stop, says nothing about the way you will manage the trade after you're in.
 
I have requested the stops related posts be moved to a different thread as this is not pertinent to the analysis of PA nor TA and participant actions, and it covers a whole different factor and one that can, and has, gone on for many, many pages.......
 
firewalker99 said:
So not only are you getting in later (one disadvantage), you are also using a larger stop (twice disadvantage)? Doesn't seem like a premium I'm willing to pay...
Click to expand...

OK, I didn't make myself clear. I believe that the real money is made catching the big swing in the market. And I believe this is very hard to do from a scalping perspective since you have to find the exact market turning point since your stops are so tight. The DOM which most traders use is little or no use for moves other than the next few seconds to minutes at most. Obviously, a bigger move starts on a smaller TF but I think by getting in LATER where you have more information means you have a higher probability of catching the swing without needing multiple attempts and the possibility of missing it. Paying a larger stop is by no means a disadvantage at all.
 
trader_dante said:
OK, I didn't make myself clear. I believe that the real money is made catching the big swing in the market.
Click to expand...

On that we definitely agree :)

trader_dante said:
And I believe this is very hard to do from a scalping perspective since you have to find the exact market turning point since your stops are so tight.
Click to expand...
Afaik scalping is defined as entering and exiting the market within minutes or even seconds and making dozens or even hundred trades/day. Because a scalper needs to right much more than wrong, he 'needs' per definition tight stops. However, it's not because you use tight stops that you are by definition a scalper. I use tight stops, but I rarely make more than 3 trades per day.

trader_dante said:
The DOM which most traders use is little or no use for moves other than the next few seconds to minutes at most. Obviously, a bigger move starts on a smaller TF but I think by getting in LATER where you have more information means you have a higher probability of catching the swing without needing multiple attempts and the possibility of missing it.
Click to expand...

There's nothing wrong with multiple attempts to get the entry right... suppose you took one shot at a trade with a 50 point stop, but I took (for the sake of the example) as many as 5 with a 10 point stop. It's not wrong to stop yourself our at breakeven and re-enter seconds later, something most traders seem afraid of.

trader_dante said:
Paying a larger stop is by no means a disadvantage at all.
Click to expand...

It is if you have no idea of what the probabilities are that the market will move in your favourable direction. The wider the stop, the more money at risk. The more money at risk, the less money available to take other positions. And even if you could argue that it's not a disadvantage, I would say it's never a necessity, even in volatile market conditions.
 
I think from new_traders POV, and mine too, there is no reason why one cannot get into a position for a 500 point swing on say GBPJPY with just a 20/25 pip stop (which is pretty damn tight for GBPJPY). By utilizing smaller timeframes and a top down approach, you can pinpoint the entry with scalper precision then zoom out to manage the larger movement. It makes financial sense but just requires a little more work.
 
Plus, imo, those who look for a tighter stop are looking for the better entry and thus making extra points as they, theoretically, bought as close to the bottom (or top) as feasible.
 
wasp said:
Plus, imo, those who look for a tighter stop are looking for the better entry and thus making extra points as they, theoretically, bought as close to the bottom (or top) as feasible.
Click to expand...

Indeed, make that three disadvantages ;)

Fwiw, I'm not out to get any point proven nor influence someone else's trading approach. I'm positive t_d does perfectly fine. I'm just saying try to remain open, try not to think in stereotypes like most people. Because it seems that a lot of what's been said is just been accepted without giving it second thought. I made the same mistakes to. Clichés like 'the public is always wrong' and 'you can't make a big profit if you risk little' just aren't true.

Once you start to dig deeper, it's surprising how new you can get a new perspective on things.
 
it doesnt matter how big your stop is, its all about what % of your equity our risking. weather its a 500 point stop or a 5 point stop you should always still be risking the same %. just comes down to what trading style suits you best..
 
Genics said:
it doesnt matter how big your stop is, its all about what % of your equity our risking. weather its a 500 point stop or a 5 point stop you should always still be risking the same %. just comes down to what trading style suits you best..
Click to expand...

If you are using bigger stops and want to keep risking the same %, you need a bigger account. Most people don't want to start with a big account, and here's me telling them they don't need to. Even in the volatile conditions we are in right now :)
 
It's all about perception..

For those of us swing traders that keep a trade open for days/weeks a 50-100 point stop IS a tight stop. Compared to a short-term trader I do get in later. But I also get out later as I'm not concerned with intraday ups n downs. So risk/reward I think it's pretty much the same.
 
Hoggums said:
It's all about perception..

For those of us swing traders that keep a trade open for days/weeks a 50-100 point stop IS a tight stop. Compared to a short-term trader I do get in later. But I also get out later as I'm not concerned with intraday ups n downs. So risk/reward I think it's pretty much the same.
Click to expand...

Labels. Terrible things. I am a _____ trader. I swing in the sense that I try my best to ride swings high to low and I am a day trader as I may take 3 trades in one day yet then again, maybe a position will last 3 days. I am not interested in time and this is partly why I prefer FX over anything else as its open 5 days and always moving allowing for this... I digress.

For all my positions, my goal is to be in as close to the bottom and as near to the tops as possible. I'm not greedy, I'm not trying to pick tops and bottoms nor be clever.

This is my business and my living and from that POV, I want to get the best trades I can with minimal risk and maximum potential. Why only take the middle section? Seems very strange and pointless to me. I'm in the business of making money and I endevour to do this to the best that the market offers.
 
Genics said:
it doesnt matter how big your stop is, its all about what % of your equity our risking. weather its a 500 point stop or a 5 point stop you should always still be risking the same %. just comes down to what trading style suits you best..
Click to expand...

Why?
 
good post TD and .............everybody

trader_dante said:
One more point I quickly wanted to make is contrary to what new_trader recently wrote about proficient traders having tight stops.

All the time the market is giving you more information. Sometimes you need to pay a premium for more reliable information.

The premium is paid by getting in later and using a larger stop.

Both techniques work fine.

I really don't understand the mentality of people being scared of using big stops.

A scalper here does 200 round trips per day paying 0.5 of a tick on the FTSE. This means they are paying a premium of 100 full points risk in the course of a day.

I can do two trades with 50 point stops or 1 trade with a 100 point stop, taking the exact same risk.

There is advantages and disadvantages to both strategies. A scalper has more opportunities to be right but then a scalper has more opportunities to be caught in market blips when bids and offers get pulled or computers get switched off etc which are unlikely to affect me.

I've also found that whilst scalpers have the theoretical advantage - tight stops with huge rewards...I have never met a scalper that captures anywhere near the move I do (note I talk about the move not the monetary gain)

This is something that always baffled me because scalpers should be able to max out as their stops are tight and just try to run things. So I spoke to one of our best scalpers here and he told me that trying to run a trade would kep his concentration on that and not on new opportunities. I can't get my head round this since we all know that it is the big swing that makes the money...but there you go.
Click to expand...

trader_dante said:
OK, I didn't make myself clear. I believe that the real money is made catching the big swing in the market. And I believe this is very hard to do from a scalping perspective since you have to find the exact market turning point since your stops are so tight. The DOM which most traders use is little or no use for moves other than the next few seconds to minutes at most. Obviously, a bigger move starts on a smaller TF but I think by getting in LATER where you have more information means you have a higher probability of catching the swing without needing multiple attempts and the possibility of missing it. Paying a larger stop is by no means a disadvantage at all.
Click to expand...

firewalker99 said:
On that we definitely agree :)


Afaik scalping is defined as entering and exiting the market within minutes or even seconds and making dozens or even hundred trades/day. Because a scalper needs to right much more than wrong, he 'needs' per definition tight stops. However, it's not because you use tight stops that you are by definition a scalper. I use tight stops, but I rarely make more than 3 trades per day.



There's nothing wrong with multiple attempts to get the entry right... suppose you took one shot at a trade with a 50 point stop, but I took (for the sake of the example) as many as 5 with a 10 point stop. It's not wrong to stop yourself our at breakeven and re-enter seconds later, something most traders seem afraid of.



It is if you have no idea of what the probabilities are that the market will move in your favourable direction. The wider the stop, the more money at risk. The more money at risk, the less money available to take other positions. And even if you could argue that it's not a disadvantage, I would say it's never a necessity, even in volatile market conditions.
Click to expand...

wasp said:
Plus, imo, those who look for a tighter stop are looking for the better entry and thus making extra points as they, theoretically, bought as close to the bottom (or top) as feasible.
Click to expand...

firewalker99 said:
Indeed, make that three disadvantages ;)

Fwiw, I'm not out to get any point proven nor influence someone else's trading approach. I'm positive t_d does perfectly fine. I'm just saying try to remain open, try not to think in stereotypes like most people. Because it seems that a lot of what's been said is just been accepted without giving it second thought. I made the same mistakes to. Clichés like 'the public is always wrong' and 'you can't make a big profit if you risk little' just aren't true.

Once you start to dig deeper, it's surprising how new you can get a new perspective on things.
Click to expand...

Hoggums said:
It's all about perception..

For those of us swing traders that keep a trade open for days/weeks a 50-100 point stop IS a tight stop. Compared to a short-term trader I do get in later. But I also get out later as I'm not concerned with intraday ups n downs. So risk/reward I think it's pretty much the same.
Click to expand...



Stops debate :)


Tom you are right, no question in my mind at all

I spent ages in the tight stop camp intra day and the not so tight a stop camp intra day (3timeframes) and traded with consistancy over short moves for a long enough period to no, well recent head box department troubles have very little to do with ....method good or bad ....just a F..cking nervous wreck which is not related ..... = open PL syndrome :LOL:

I always have a very good idea of the larger timeframes (1/4 month week day always looked at them regardless of what I trade intra day)

I have NEVER (well ok once or twice) seen an intra day entry that would slide in to the kind of moves td posts about without being stopped out some time later, then price moveing and confirming the original trade direction later

Hoggums, good post imho ...........that is a tight stop in those timeframes ~ month week day

td enters on day tf = theShort term trend

much the same as me entering on the 3 min tf intra day = the short term trend

I can see the reasoning behind the scalper should be able to enter at huge advantage to anybody else but

I don"t think scalpers and short run traders minds work the same, what goes on at key support and resistence levels (price movement) makes holding for longer than whats right in front of them an alian exercise imho, I would not give up a 20 pt run playing from behind a 7pt stop for .........................mmmmmmmmm"m anything, my stops moved up tight till the market takes me out under those circumstances. Then I am stood down and looking for the next one.

many of my trades = price ends up behind me later in the session, might even take 2-3 of the same level or there abouts even if my trade direction is later proved by the market to be correct and maybe even correct for days on end.

I have looked at this possibility and .................. :) aaaaaaa hhhhhhhhh :mad:

td I make you poster of the week, real good uns on the other thread imo (y)

have a go if you want, I just think your one or the other timeframe or your personality is very robust and can take a lot of pain :)

have a good weekend all

real good read on both threads and plenty to think about

latter all

Andy
 
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