How aggressive are people in trying to get to breakeven on a trade?

[Adecco]

I use daily cahrts - and i normally try to jump on an obvious existing trend.
Basically if there is any trechnical reason at all for me rasing my SL nearer to breakeven then i take it. (be it a S&R point, a trend line, MA etc)

Im only starting out - so im just wondering what do other people do to get to breakeven on a trade?
(I then use a different indicator to catch up to breakeven to trail for take profit - but this is currently subjective depending on the behaviour of the instrument)

I trade daily charts and psychologically i like to be at breakeven within 2-3 weeks max.

What are other peoples thoughst on this?

 

[jgtrade]

Be careful about trying to raise your stop loss to break even too quickly as you don't want it to be hit just by market noise.

Another useful way to break even when the trade is moving in your favour is to take profits on part of your position. For example, if you bought in at 100p, and initial stop was at 95p, then you could set a limit order to sell half your position at 110p.

Even if the market turns round and you get stopped out on the remaining part of your position you would've broken even.

Jarrod

 

[Adecco]

Be careful about trying to raise your stop loss to break even too quickly as you don't want it to be hit just by market noise.

Another useful way to break even when the trade is moving in your favour is to take profits on part of your position. For example, if you bought in at 100p, and initial stop was at 95p, then you could set a limit order to sell half your position at 110p.

Even if the market turns round and you get stopped out on the remaining part of your position you would've broken even.

Jarrod

Thats very interesting. Its an approach i never thought of before.

 

[tomorton]

Hi Adecco -I trade off the dailies also, strictly trend-following. My initial stop level is always technically based, e.g. just below the low of a swing low day in an uptrend. On such trades, I do sometimes move the stop to a higher technical level but more often find I am just trailing the stop higher so as not to enlarge my losses if the higher technical stop is hit.

Sometimes my initial stop is hit by noise, but if its that close to entry, then the r:r balance would be so far in my favour I can accept missing out on a minority of trades stopped through early exits when the majority going in my favour are so much better in proportion.

Incidentally, I don't ever have trades taking as long as you say to get to b/e - thay are always either at b/e or at target way before 2 weeks. So I wonder about the timings of your entries, and can these be optimised?

 

[Adecco]

Hi Adecco -I trade off the dailies also, strictly trend-following. My initial stop level is always technically based, e.g. just below the low of a swing low day in an uptrend. On such trades, I do sometimes move the stop to a higher technical level but more often find I am just trailing the stop higher so as not to enlarge my losses if the higher technical stop is hit.

Sometimes my initial stop is hit by noise, but if its that close to entry, then the r:r balance would be so far in my favour I can accept missing out on a minority of trades stopped through early exits when the majority going in my favour are so much better in proportion.

Incidentally, I don't ever have trades taking as long as you say to get to b/e - thay are always either at b/e or at target way before 2 weeks. So I wonder about the timings of your entries, and can these be optimised?

well thats it....im not sur ehopw comfoirtable i am waiting 2-3 weeks before breakeven either.

But i find if im looking for a new higher lolw (in an uptrend) - or trailing a MA of some sort...it seems to take that long.

SO what do you use out of curiosity to trail the price to get you to breakeven quicker?

 

[timsk]

Thats very interesting. Its an approach i never thought of before.

Hi Adecco,
Just to add to Jarrod and Tom's points about noise, one way of overcoming this is to measure it and then ensure that your stop is outside of the 'noise' zone. One way to do this is to use a tool like Average True Range that measures volatility. So, for example, if the daily ATR on the DOW is 100 points, you would set your stop a multiple of that below (assuming you're long) the current price. If you're aggressive, you can go less than 1 x ATR. Conservative traders will use 2 x ATR or more. Needless to say, the tighter the stop (i.e. the smaller the ATR multiple), the greater the probability of it being hit. The good news is that if you get stopped out and price continues to fall, you'll be very glad of it. The further away the stop is (i.e. the larger the ATR multiple), the probability of it being hit is greatly reduced, but it comes at the expense of giving more of your profit back to the market or, even, incurring a loss.

If you want to learn more about ATR, check out our own Articles :
The Average True Range Indicator by John Forman (aka Rhody Trader here on T2W).
Position Sizing as an Approach to Risk Management by Trader333.

Enjoy!
Tim.

 

[jgtrade]

I am also a big fan of an ATR multiple based stop timsk. I like it because it takes into account the volatility of each individual instrument you trade. It also gives you a consistent approach to setting the stop loss in the first place rather than looking for more random technical point.

Incidentally, I don't ever have trades taking as long as you say to get to b/e - thay are always either at b/e or at target way before 2 weeks. So I wonder about the timings of your entries, and can these be optimised?

I completely agree with tomorton on the above too. If you are wanting to get into a big trend lasting more than a few weeks than perhaps you should be looking at using a breakout type entry like a breakout of a 40 day high just for example.

If you're buying into some good momentum in an uptrend then prices should rarely hang around at, or below your entry point. If they do, then maybe it's a sign to get out and look for trades elsewhere.

In addition to those ideas, with certain strategies I will also used a time based stop for similar reasons. 2 weeks is a long time to have money tied up in a position that isn't really going anywhere.

 

[Adecco]

I am also a big fan of an ATR multiple based stop timsk. I like it because it takes into account the volatility of each individual instrument you trade. It also gives you a consistent approach to setting the stop loss in the first place rather than looking for more random technical point.



I completely agree with tomorton on the above too. If you are wanting to get into a big trend lasting more than a few weeks than perhaps you should be looking at using a breakout type entry like a breakout of a 40 day high just for example.

If you're buying into some good momentum in an uptrend then prices should rarely hang around at, or below your entry point. If they do, then maybe it's a sign to get out and look for trades elsewhere.

In addition to those ideas, with certain strategies I will also used a time based stop for similar reasons. 2 weeks is a long time to have money tied up in a position that isn't really going anywhere.

SO you are saying if i choose a breakout as an entry, then if it doesnt poush past teh breakthorugh after a coupel of days or something like that, then i coudl exit if it comes back to area below breakout?

And if it does poush past then raise to breakeven?

Thats a good idea.

Althoug i dont enter on breakouts.

Anyone else have any ideas on how to get to breakeven on a trending stock?

 

[jgtrade]

SO you are saying if i choose a breakout as an entry, then if it doesnt poush past teh breakthorugh after a coupel of days or something like that, then i coudl exit if it comes back to area below breakout?

Yes that's exactly what I mean. The idea is you are getting in on a breakout of new highs into a decent uptrend. If the momentum stalls and prices fall back below the breakout then cut your losses quickly and look for opportunities elsewhere.

It reminds me a lot of a strategy called the 'box theory' used by a famous trader by the name of Nicholas Darvas.

 

[WklyOptions]

Example: Buying Orderly Pull-Back on Up Trends

Althoug i dont enter on breakouts.

Anyone else have any ideas on how to get to breakeven on a trending stock?

Hi, Adecco,

There is good validity to monitoring and measuring volatility of the price action. However, it is important to measure on the correct time frames that you will be trading - and this is primarily decided by the best trending time frame available.

For example, let's say XYZ is strongly trending on the Daily time frame. Our trading group labels this primary trend as the T1 time frame. Any of the indicators will clearly be shouting out "Up Trend here!" - example:

1. Daily MACD > 0.
2. Daily MACD Fast Line > Slow Line.
3. Daily MACD Fast Line slope is pointing to the upside.

However, there appears a 1-2 daily bar downside close(s). On an Hourly time frame, the price action of XYZ is decidedly in an Orderly Pull-Back. The Hourly time frame is one level below the Daily T1 time frame. We label the Hourly time frame as the T2 time frame. Here is an example:

4. Hourly MACD < 0.
5. Hourly MACD Fast Line < Slow Line.
6. Hourly MACD Fast Line slope is pointing to the downside.

At this point - as long as (1) thru (3) remains intact - I have isolated a low-risk Orderly Pull-Back on the Hourly time frame. Then I wait - yes, you read it right - WAIT :whistling (difficult for many retail traders) - until there is renewed BUYSIDE trend and momentum confirmation - example:

7. Hourly Price has Higher High, Higher Close, and Higher Low.
8. Hourly MACD Fast Line slope turns to the upside.
9. For added safety - WAIT (again, that tough rule!) - until Hourly MACD Fast Line > Slow Line.

Then a Low-Risk Entry on the Hourly T2 time frame can be considered - example:

10. Buy if Hourly High from (7) gets taken out to the upside. :idea:
11. Stop-Loss outside & below the most recent Hourly Swing Low pivot.

Measure: "1R" = ($ Entry) - (Stop Loss Price)

Example: Entry is at $50. Most recently Hourly Swing Low pivot is $49. So a "1R" size is ($1).

Then I use a money management Exit and Trail Stop procedure. Since my numerous back tests have shown that most Hourly Entries do NOT run past +5R before turning back down - I use the following Exit and Trail Stop criteria:

12. At (+1R) = I look to Exit 50% of the position. Closed Profit = (0.50R). 50% Left.
13. At (+2R) = Move Stop Loss to Break-Even.
14. At (+3R) = Exit another 50% of leftover. Closed Profit = (0.75R). 25% Left.
15. At (+3R) = Move Stop Loss to (1R) price level.
16. At (+4R) = Move Stop Loss to (2R) price level.
17. At (+5R) = Exit all leftover. Closed Profit = (1.25R). Campaign closed. :clap:

Net Profit = (+2.5R). On the rare occasion when the Initial 100% position is stopped out right away - then the Max Loss is (-1R). This happens < 10% of campaigns.

Once XYZ hits (+5R) - I start over again from Item (1). As long as the Daily up trend remains intact, I WAIT (ughhh...that again!) - for another Hourly Orderly Pull-Back setup. It may not happen for days yet.

Normally I have automated scans that follow 400 stocks/etfs with weekly options. I trade and manage campaigns using weekly options primarily - sometimes with monthly options if necessary. :idea: :!:

In summary - the Stop Loss trail is a (-2R) size.

Adecco - OBVIOUSLY - you will need to have a statistically robust and back-tested trend following system. For this example, the back-tests have shown that (+5R) gets hit often enough - but is often also the trigger - for price to pull back to the downside. Again - your own research and back-test stats will measure and determine how many (+Rs) to go up the ladder - BEFORE trend exhaustion. :smart:

The data MUST be trustworthy - enough you are willing to risk your hard-earned $$$ on a daily and weekly basis. And then to risk the $$$ repeatedly over and over again! This is what being a professional risk-taker is all about. :smart:

I hope my details are easily and clearly enough to be followed. Feel free to PM if you have questions on trends, pull-backs, bet sizing, targeting, etc.

Good luck - and great topic you posted here - very useful for the many retail T2W traders! Thanks.

Best regards,

WklyOptions

 

[jgtrade]

Great explanation by WklyOptions of another way to trade a trend Using multiple timeframes is great way to "fine tune" your entry into the bigger trend. And it works with longer and shorter time frames too. I like using pullbacks on the daily charts to get me in on the longer weekly trend.

It's nice to see someone else using R multiples when considering position sizing WklyOptions. It's something I learnt from Van Tharp years ago and have used ever since.

 

[Adecco]

Thats a great post WklyOptions.
Always interesting to see how another man trades.

So out of curiosity - (and you may now want to reveal this here) - but what kind of ballpark % monthly returns does your system return?

 

[Fugazsy]

not sure trailing the SL to BE without taken technicality in account is the right things to do, you might experience many times your SL trailed to be hit and then the trade continuing in the original direction, best is to trail above/below the latest swing in my view, if you think is too far, scale it down to the 4h tf and see if there is a decent swing closer to the price to trail....

 

[everyTHING]

Be careful about trying to raise your stop loss to break even too quickly as you don't want it to be hit just by market noise.

Another useful way to break even when the trade is moving in your favour is to take profits on part of your position. For example, if you bought in at 100p, and initial stop was at 95p, then you could set a limit order to sell half your position at 110p.

Even if the market turns round and you get stopped out on the remaining part of your position you would've broken even.

Jarrod[/Q

Thanks! Great method. I ll try and text about results.

 

[ffsear]

People should take more pride in their break even trades and treat them as winners. You've risked and protected your capital. You shouldn't look upon that as a bad thing. Its good risk management.

I move to break even when profit = half of total max risk per trade. In my case 1%

 

[NVP]

I use daily cahrts - and i normally try to jump on an obvious existing trend.
Basically if there is any trechnical reason at all for me rasing my SL nearer to breakeven then i take it. (be it a S&R point, a trend line, MA etc)

Im only starting out - so im just wondering what do other people do to get to breakeven on a trade?
(I then use a different indicator to catch up to breakeven to trail for take profit - but this is currently subjective depending on the behaviour of the instrument)

I trade daily charts and psychologically i like to be at breakeven within 2-3 weeks max.

What are other peoples thoughst on this?

Just remember all markets cycle.......so when you go in be aware of how much the market has moved to tempt you in.....the more the market has moved when you enter the greater the probability it will retrace and challenge your stop

So keep the stop wide enough to ride the retrace and then hopefully ster to move into profit......then keep the stop far enough away for any future retrace

Also look at pyramiding and taking partial profits as people are already mentioning to you

N

 

[bredin]

Breakeven is not a goal.

G.

edit: its a consequence of being aggressive at the wrong point of the chart.