Direction is everything.

Splitlink said:
2) If your stop is outside the noise your direction is wrong. You might as well cut it ASAP.
Click to expand...

Excuse me for the dumb question but what do you do then when you get direction wrong? If you don't have a stop, cool, no problem, but you still get out at more or less the same place where I would have my stop. So practically speaking you might as well have a stop. Or am I barking up the wrong tree?
 
forker said:
You being serious. The market hunting stops. 5hit If I knew that I wouldn't have gotten into this business in the first place. What's the point of placing a trade if the market is just going to stop hunt it..
Click to expand...

Did you need the irony emoticon there? Or at least the wink? Very dry..nice one ;)
 
I think this whole stop hunting stuff needs to be put in perspective.

Let's say the ES has hit the overnight high, people jump in short and a fair amount of contracts are traded and price moves down 4 or 5 ticks. Now we have a situation where, in all probability, there are a bunch of stops just above that high. Someone with deep pockets - i.e. the ability to trade 40-50,000 contracts can very easily control the selling - not let it drop too much and then push it back through the high - where all the stops are. In this case, there is a compelling reason for a run at the stops and it is within the abilities of some people to do that.

breakout.png


This is what happened in the above scenario. We had 12,000 more market sell orders than market buy orders but price couldn't break down. Then it ran up and we got back to to just above the amount of net longs we had before the attempted sell off.

Now - on the other hand, if you have a 1 lot trade and the price is now 6 ticks away from your stop, there is no possible scenario where someone will start trading size to take out your 1 lot. This is common sense.

So - if you are getting your stops hit often - consider the following possibilities.
1) your entries are crap - try pullbacks instead of breakouts.
2) your stops are where everyone else's are
3) your stops are just too tight
 
Adamus said:
Excuse me for the dumb question but what do you do then when you get direction wrong? If you don't have a stop, cool, no problem, but you still get out at more or less the same place where I would have my stop. So practically speaking you might as well have a stop. Or am I barking up the wrong tree?
Click to expand...

I have a stop, because lots of unpleasant, unexpected things happen. Sites, computers crash, I might get called away. One should be prepared for those things. Otherwise, my stop is manual and I am clear about direction. If the trade goes the other way, then I was wrong about being clear, wasn't I? Any real point in hanging on, hoping for a recovery?
 
FX Bandit said:
I do the same whenever possible - a full loss is very rare for me.
Click to expand...

I guess it could depend on a number of factors. For me, I typically have a 40 tick stop which I leave as is until I start to lock in profit. There is reasoning behind this. I have found a fair chunk of my successful trades get within 5 pips of my stop. If I were to close those trades as you do I would ultimately have a decaying account.
 
forker said:
I guess it could depend on a number of factors. For me, I typically have a 40 tick stop which I leave as is until I start to lock in profit. There is reasoning behind this. I have found a fair chunk of my successful trades get within 5 pips of my stop. If I were to close those trades as you do I would ultimately have a decaying account.
Click to expand...


it's very difficult to analyse each person's methods or trades. Generally, I trade the way I said but there are other factors, as well. I do not like to act before a bar is complete and I use 15M and 30M TF--unlike DT. It, really, is a can of worms to try to follow each one's reasoning.
 
Splitlink said:
I have a stop, because lots of unpleasant, unexpected things happen. Sites, computers crash, I might get called away. One should be prepared for those things. Otherwise, my stop is manual and I am clear about direction. If the trade goes the other way, then I was wrong about being clear, wasn't I? Any real point in hanging on, hoping for a recovery?
Click to expand...

Agree. Very insightful, and a lesson I learned the hard way over a period of time.
 
forker said:
I guess it could depend on a number of factors. For me, I typically have a 40 tick stop which I leave as is until I start to lock in profit. There is reasoning behind this. I have found a fair chunk of my successful trades get within 5 pips of my stop. If I were to close those trades as you do I would ultimately have a decaying account.
Click to expand...


it's very difficult to analyse each person's methods or trades. Generally, I trade the way I said but there are other factors, as well. I do not like to act before a bar is complete and I use 15M and 30M TF--unlike DT. It, really, is a can of worms to try to follow each one's reasoning.
 
I am very junior from you that's why don't think that i am arguing but don't you think markets of different things are usually very unpredictable their are always some sudden ups and downs in the market so don't you think that it is really difficult to read the direction of market specially for someone who is just newbie?
 
William King said:
I am very junior from you that's why don't think that i am arguing but don't you think markets of different things are usually very unpredictable their are always some sudden ups and downs in the market so don't you think that it is really difficult to read the direction of market specially for someone who is just newbie?
Click to expand...

Great post.Some of these experienced traders can learn from this post.:cheesy:
 
William King said:
I am very junior from you that's why don't think that i am arguing but don't you think markets of different things are usually very unpredictable their are always some sudden ups and downs in the market so don't you think that it is really difficult to read the direction of market specially for someone who is just newbie?
Click to expand...

When I, with years of trading behind me, get fooled by direction more often than I care to admit, how can I answer you?

You are, absolutely, right.

Nevertheless, knowing that you can get it wrong frequently does not take away the importance of directing your attention on getting it right.

It is the only thing that you need to get right.

Money management and stops become of importance when the direction was not correct.

Think about that. What else is there? What do you do if you get handed a hot potato? You drop it. Traders tend not do that, though, until they have learned. Some never learn, they hang on and hang on until they are forced to quit.

BTW, the unpredictability is reduced if you stay away from low time frames. Currently, I am doing well with 15M and 30M.
 
Perhaps you can give more info as to what we should make of this? If direction is all important, what does that mean about the approach you take?

Otherwise, to play the role of devil's advocate here, I am going to say that entries are more important. Because if you don't make an entry, it doesn't matter what direction you thought was correct. You won't profit from it.
 
Splitlink said:
Money management and stops become of importance when the direction was not correct.
Click to expand...

Actually stops or if you wish to sugar coat it as money management holds significant importance throughout a trade's lifecycle, not just to protect against direction change.

Furthermore, as important as direction is, it isn't nearly as important as risk. For example: the direction is bullish, you enter a trade long, price retraces 100 points before continuing the bullish trend. In theory your direction analysis was correct. Your stop was likely hit unless your a moron or a newby trading micro lots.

Using this example what key factors springs to mind? Direction or risk.
 
In theory, with 100 points reversal, my directional analysis was wrong but that is all a matter of opinion and trading technique, with everyone having different views.

If my direction had been right, I would have been giving scant attention to stops, unless they were trailing ones.
 
Forker,

It's just occurred to me. I trade Footsie, you probably are on Forex. You would be using wider stops, probably.
 
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