Is stop loss hunting avoidance worth it?

[kalott]

Many systems fail for many reasons but mainly 2 :

1- Gambler's ruin :

"One of the phenomenons of probability is Gambler’s Ruin. The most common meaning is that a gambler with finite wealth, playing a fair game (that is, each bet has expected zero value to both sides) will eventually go broke against an opponent with infinite wealth.

an edge would be to trade long only in something where the centralbanksters are liquidity providers :smart:

 

[CurrentBill]

There has been a lot of math and hypothetical ideas over the last few posts. The real thing you need is that trading is hard and requires a lot of work. At the end of the day you need a stratey that will tell you when price will rise /fall. If you can get that then you will make money

 

[itspossible]

regarding the last few posts.emotionally i didnt like holding onto losing positions even if they were small.i needed to get rid of them to free me up for the winners.i just felt better about myself when things were gong right.i then had the worry of when to take profits lol.each to their own but i couldnt hold em for long-didnt have the guts to do it-just needed to cut the position.i did hold on in the beginning but later it wasnt for me at all.

 

[Fugazsy]

regarding the last few posts.emotionally i didnt like holding onto losing positions even if they were small.i needed to get rid of them to free me up for the winners.i just felt better about myself when things were gong right.i then had the worry of when to take profits lol.each to their own but i couldnt hold em for long-didnt have the guts to do it-just needed to cut the position.i did hold on in the beginning but later it wasnt for me at all.

Those are emotions most will face, the difference will be made by those whom recognized them as you do and then work to change the negative behaviors into optimal one. Walk the talk.

Yes, there will be pain during it because you are going against your grain but when you succeed in doing so you will start to see that good traders make themselves.

 

[itspossible]

Those are emotions most will face, the difference will be made by those whom recognized them as you do and then work to change the negative behaviors into optimal one. Walk the talk.

Yes, there will be pain during it because you are going against your grain but when you succeed in doing so you will start to see that good traders make themselves.

My gut feeling and i may be wrong is that a lot of older traders who have been around the block will trade small to try and take the emotion out of their trades.

 

[sminicooper]

My gut feeling and i may be wrong is that a lot of older traders who have been around the block will trade small to try and take the emotion out of their trades.

That certainly does work in my experience and it's good training on the road to becoming emotionless. These days I work in percentages and I find that's the easiest way to remove the emotional effect of having a lot of money at stake (assuming of course, that you have good risk/money management in place also).

 

[Fugazsy]

My gut feeling and i may be wrong is that a lot of older traders who have been around the block will trade small to try and take the emotion out of their trades.

I would not worry about how others deal with their emotion, instead I would focus primary on myself how to deal with my own.

 

[Splitlink]

My gut feeling and i may be wrong is that a lot of older traders who have been around the block will trade small to try and take the emotion out of their trades.

Yes, age comes into it a lot. My risk/reward factor is based on the fact that I like peaceful overnight and weekend periods. therefore, I trade small and like day trading best.

20,000, based on weeks, or months, at a time., is out of my league, which is why I have not given any opinions, here. That kind of money goes into share purchases.

 

[dbphoenix]

It's not so much a matter of trading small as of trading smart.

 

[victorycountry]

Stop loss is essntial in day trading. But I have stopped day trading. I only trade off fundamental info now and don't set stop loss at all. But I do secondary research prior to trading as part of risk mgmt.

 

[selfoe]

So there are two types of traders in this world: retail traders & institutional traders. Retail traders are individuals who trade on their own, with their own capital, based on their own analysis. Institutional traders are often professionals, who trade hundreds of millions of dollars of a firm's capital, based on the analysis from the firm's research departments. Upwards of 90% of retail traders lose money trading Forex, which means upwards of 90% of institutional traders are making money.

Surely such institutional traders know how the retail traders think and where they might be entering into the market and putting their stop losses. In addition many of them have access to order books and can see entries and stop losses. So rather than trying to trade like the retail traders and getting your stop losses "hunted", why not try to trade like the institutions.

Perfect example... the "head and shoulders" pattern. It is a very retail minded trade. Many retail traders use this pattern to enter into the market, but essentially it is just a break out trade. The point at which price breaks out of the head and shoulders pattern is where many traders enter into the trade. If the trade goes in their favor many put their stop to break even.... or the point at which price broke out of the pattern. It is not a coincidence that you often see price very quickly come back to that point and "retest it". It is retesting the level for a reason... to stop out those short sellers with their stops at break even (essentially triggering buy positions) that the institutions will sell to for an optimal entry.

Think like an institution, not like a retail trader, and you will see a massive improvement in your trading.

NOT TRUE
Most of institutional traders lose money in the long term, as like retails

 

[victorycountry]

NOT TRUE
Most of institutional traders lose money in the long term, as like retails

Exactly . I have seen a lot of financial instituions go out of business especially during financial crisis.

 

[bootsyjam]

[QUOTE So rather than trying to trade like the retail traders and getting your stop losses "hunted", why not try to trade like the institutions.

Thank you, Unique Forex. I'd like to learn more about trading like the institutions. Any more you can tell me about that would be greatly appreciated - and/or any leads to good web articles or other literature on it. I'll do my own research on it, but if you've got something right off the top of your head, I will definitely follow up on it.

Thanks again,
Norm[/QUOTE]

Think of the head and shoulders pattern. In some cases it is essentially a failed 1-2-3 breakout. This pattern works on a statistical basis because those traders who went long on the retrace, (the bounce off previous resistance), then went on to fail as sellers came in. The retrace up the the shoulder/or that failed bounce area is the place to go short. Why? Those beaten longs have to sell. Trading against trapped traders is always a good idea.

 

[bootsyjam]

The answer is simple: Don't think about that. Stop Hunting doesn't exist in its simple meaning but if it exists only in DYNAMIC version - I mean it depends on current market sentiments (which depends on N other factors) and can be at any level. Putting it in a strategy simply brings more confusion because you start to consider one more unnecessary factor. And anything what complicates your system - works against you.
Use plain principle of of putting SL somewhere away from round numbers and .500 levels. Unless you want to analyze your every trade using this principle will save you a lot of time.

Stop hunting does exist, but in terms of understanding market structure, and what the big boys are doing, it is unhelpful and inaccurate to call it that.

Instead, look at it as large traders hunting pools of liquidity. The large traders tend to be the ones who stop trends and get in at low prices. They will continue to load up within a swing. And now they have a huge amount of contracts to dispose of but they don't want to exit at any area as there will not be enough liquidity for them to close their positions, and maybe open new ones in the opposite direction at a great price with low risk and high reward.

Guess where all that liquidity is? Where stops are. It is not stop hunting, it is liquidity hunting.

 

[TraderNorm]

Thank you guys for your input.

Thanks to you, especially, Bootsyjam.

"Liquidity hunting" does seem to be more accurate. Good concept. As for thinking through the broken 1-2-3 pattern, at this point my brain is broken after a long day, and I'll need to wait on thinking that through, but thanks again.

Norm

 

[bootsyjam]

Thank you guys for your input.

Thanks to you, especially, Bootsyjam.

"Liquidity hunting" does seem to be more accurate. Good concept. As for thinking through the broken 1-2-3 pattern, at this point my brain is broken after a long day, and I'll need to wait on thinking that through, but thanks again.

Norm

Here is a live example on the bund today. Chart is 7000 vol (each candle is 7000 contracts).
You can see price breakout of the channel to move higher. Then it retraces down and bounces higher again. This does not result in a new high. So the first trade is the red arrow area (well, earlier as well but in this specific potential failed 1-2-3 then it is the red arrow!).

Now where the rebound long is taken at the red arrow, that means there are people who are long. If this area fails, and retraces down to the lower blue line, then you can see that this is a similar formation to the head and shoulders. But because of that rebound higher, there is an extra layer of trapped traders long (at the higher of the two blue lines) that should act as resistance if price goes back up there.

Understand who is trapped, and where, and you will have an edge. Understand why Head and shoulders patterns work (sometimes!) from this perspective, rather than just recognising a pattern with no idea why it works. Apologies if you know this already!