Fed up of being stopped out, but correct

[monkey180]

Hi,

I have been trading on paper and got consistent, swing trade equities, I basically flick the charts looking for very clean break out retests.

However I am sick of calling the correct direction only to stopped out, before the trade works.

So trying to come up with idea's....

Could buy a put option with 0.5 delta, so can then increase my stop loss, and the put option will go higher in value to compensate.

Perhaps write calls on the stock to the max loss of the trade.

Or just trade options, ratio backspreads ect...


Any other ideas?

Thanks

 

[monkey180]

Or how about scaling into the trade as it moves against me?

So risk 0.5% of the account, then if the trade moves down, increase to 1% risk, moves again then risk 1.5% of the account... to a max of 2% risk.

 

[monkey180]

Also generally its when the markets sells off hard, the support will not work.

Maybe best way is to short the sector ETF..?

 

[tomorton]

How do you identify the stop-loss level?

 

[Hoggums]

You could scale in the position with wider stops to avoid getting stopped out - effectively averaging down the position. Start small with a wide stop, As the position size grows move in the stop to keep the loss at your required risk percentage.

Can't promise it'll work but something for you to consider.

 

[timsk]

. . .However I am sick of calling the correct direction only to stopped out, before the trade works. . .

. . .Any other ideas?

Hi monkey180,
Sounds to me as if your stops are too tight?
I suggest you go through the trades one by one and work out where you would have needed to place your stop to avoid being stopped out, thereby providing enough 'wiggle room' for the trades to pan out. Then adjust your position size accordingly.
Tim.

 

[monkey180]

Thanks for the reply's guys!

The stop loss will be about a quarter of the range.

Imagine a perfect neat horizontal range break out, it would be one quarter the distance from the top of the breakout to the point of retest.

Then aim for a 4/1 risk reward at the retest goes back to the top of the range

 

[tomorton]

As Tim says, its position size that's more critical to risk, not the pips risked (though its always fun to hear people boasting about it). Range -based stops are you trying to impose order on the market. This has a low probability of winning.

Why not base your stop on TA? Use a price level which is given you by the chart at which the TA conclusion you reached is now more probably wrong than right.

 

[NVP]

Hi,

I have been trading on paper and got consistent, swing trade equities, I basically flick the charts looking for very clean break out retests.

However I am sick of calling the correct direction only to stopped out, before the trade works.

So trying to come up with idea's....

Could buy a put option with 0.5 delta, so can then increase my stop loss, and the put option will go higher in value to compensate.

Perhaps write calls on the stock to the max loss of the trade.

Or just trade options, ratio backspreads ect...


Any other ideas?

Thanks

but that means you are not calling the short term direction right .....

the other guys are offering good answers.......but its all about price action and reading the market correctly

trading is a bit like most fast moving sports ..you have to anticipate where the turns are back into the trend / direction you feel its going

you are taking the ball too early into the trend and then getting stopped out

N

 

[dbphoenix]

Thanks for the reply's guys!

The stop loss will be about a quarter of the range.

Imagine a perfect neat horizontal range break out, it would be one quarter the distance from the top of the breakout to the point of retest.

Then aim for a 4/1 risk reward at the retest goes back to the top of the range

The infamous "risk:reward" ratio is an illusion. Regardless of what one has been told by what guru, it is impossible to determine the "reward" that allegedly can be expected from any given trade unless one cuts his profits short in order to feel a winner. But there is also the matter of the advice to trade "only what one can afford to lose" and to determine the risk of any given trade in advance of taking that trade. None of this, however, addresses the question of how probable the realization of the risk will be. In other words, if one determines that the risk of a trade is X but fails to determine the probability that X will be reached, all of his calculations are meaningless. He may feel as though he's acted responsibly by trading only what he can afford to lose, but those feelings are not likely to compensate for the disappointment of actually losing the money. Traders can spend years in this revolving door, trading only what they "can afford to lose" and then losing it with frustrating regularity because they've never bothered to assess the probability that the loss will actually occur.

You've received sound advice in this thread, but none of it means much unless and until you post charts that show exactly what you're been doing. Theory is fine. Application's a bitch.

 

[tomorton]

Blimey N maybe I'm not calling the short term direction right. Do you want to say a bit more about anticipating the turns?

 

[counter_violent]

Here's some truth for you.

At any given point in time regardless of where price is/ has been/ might go, the instrument price will either go up or down from that point. So if you accept that anything can happen, then trying to pinpoint an entry, in the hope that One outcome is more favourable over another, is just a complete nonsense.

Traders would do far better spending more time managing both sides of the up/ down equation by adding in or subtracting positions with the aim of realising a profitable outcome over the series of trades.

 

[dbphoenix]

Here's some truth for you.

At any given point in time regardless of where price is/ has been/ might go, the instrument price will either go up or down from that point. So if you accept that anything can happen, then trying to pinpoint an entry, in the hope that One outcome is more favourable over another, is just a complete nonsense.

Traders would do far better spending more time managing both sides of the up/ down equation by adding in or subtracting positions with the aim of realising a profitable outcome over the series of trades.

Yes and no. The probability of profit over a series of trades is far more important than the probability of profit of a single trade. However, one can determine this probability by testing various entry protocols to determine which are more likely to be profitable than others. Entering at random then managing the trade can be a lucrative course to follow, but it's unnecessary. Even a casual acquaintance with auction market theory will prevent a great many losing trades.

 

[counter_violent]

Yes and no. The probability of profit over a series of trades is far more important than the probability of profit of a single trade. However, one can determine this probability by testing various entry protocols to determine which are more likely to be profitable than others. Entering at random then managing the trade can be a lucrative course to follow, but it's unnecessary. Even a casual acquaintance with auction market theory will prevent a great many losing trades.

To be fair DB, my post is not aimed at skilled practitioners. It is aimed at keeping all other levels of traders in the game long enough, that they might develop and hone the skills required to succeed.

 

[Trader333]

Using a measure of volatility may help you determine where to place a stop.

 

[dbphoenix]

To be fair DB, my post is not aimed at skilled practitioners. It is aimed at keeping all other levels of traders in the game long enough, that they might develop and hone the skills required to succeed.

OTOH, withstanding the temptation to trade long enough to observe whatever it is one thinks one wants to trade in order to to form some idea of how it moves, then studying and testing what appear to be profitable entries, then determining whether or not one's hypotheses stand up over a series of trades is to a large extent how one becomes a skilled practitioner in the first place.

This is of course the opposite of what most beginners do, believing as they do that they can trade intuitively from the very start.

“'Trading to learn' is no more rational nor profitable than playing roulette to learn."

 

[tomorton]

Using a measure of volatility may help you determine where to place a stop.

Yes, "help" is the right word for it. I did advise monkey180 to consider a TA-based stop rather than a range-based stop, which is a measure of volatility. This is for the initial stop. If the TA stop is used,it must also be far enough out not to be hit merely by volatility ("noise").

The occasion I do plump for a volatility-based stop is after price has reached break-even and gone well into profit, then a close back on the wrong side of the 9EMA would get me out (I think I owe this to Steven Primo).