price & stops

[firewalker99]

Human nature sees volatilty and thinks "...well, i'm not having that, i'll deal with you Mr volatility,...i'll just widen my stop..", that's a natural reaction and the paradox, it's fighting fire with fire and there's only one winner....it ain't the trader.

I think it was Livermore who said the public gets what the public wants.

My man, you are truly a wise person.

 

[wasp]

Tight stops do not, firstly, reduce your risk.

Correct POSITION SIZING reduces your risk.

But I will concede with you in part: Risk aside, trading successfully with tight stops, if anything, defines, at some level, a skill in ENTRY.

But "skill" in trading is a very broad term.

The real outcome of a trade is only defined by the EXIT.

Trading is a marathon, not a sprint and unless you arte shooting to make 10mil by Christmas then walking away, your overall P+L is what matters and that includes losses, thus, making stops vital. All these discussions seem relative to a singular trade and deciding who is right, its not just one.

Arguing over stop placement is just a chance for all these "elitists" to prove how clever they are:

"I called the move with a stop of just 3 ticks using the DOM and T&S and Market Profile and the Charts...and then I caught a nice 25 point swing, aren't I clever?

I got in a little later when I thought the probability was higher...and used a 50 tick stop to make 250 points off that swing."

P&L defines skill. Nothing more. Nothing less.

If we started with an equal amount and I make more money than you using 400 point stops whilst you use 5 point stops, I have traded more successfully. There is no room for argument on this.

Whether I blow up in the future does not come down to it. Current P&L is just a snapshot in time. But when that snapshot is made, current skill is assessed.

This is the crux of my point, other than the smaller losses equal, well, smaller losses....

I got in 50 points earlier than you, thus, I made 50 more points!!!

Why? Because I wanted to reduce my risk by getting in earlier and to make more points. Did I take more risk by not waiting for more confirmation? No, I analyzed more for a better entry and as you say, have a better P+L because of it.

Tight stops are to reduce risk and get better entries and make more profit.

 

[firewalker99]

New trader,

can I suggest next time you trade to reduce your pos size and have a wider stop loss and let your trade more breathing space. By reducing your pos size you reduce risk as i said before and then let your profit run MORE instead to cater for reduction in your position size.

Grey1

Let's take this example. Two traders, both with the exact same exit strategy, but a different stop strategy. They both trade the same %risk on their account, defined by stop size x position size. We assume their account size is the same.

Trader A takes on a trade with 12 lots and 5 point stop. He gets stopped out and re-enters again with 12 lots and 5 point stop. He scales out half of his position at +25 and the other half at +50.

Trader B takes on a trade with 6 lots and a 10 point stop. He doesn't get stopped out, and scales out half at +25 and the other half for +50.​

Who do you think ends up with most money at the EOD? I'm sure your complex formula's should be able to solve that simple question Both traders have the same risk, and the same exit strategy.

Trader A can re-enter the same trade 3 times (so he has 4 shots at it!), and still end up with more profit than trader B! All of that because he minimized risk by putting his stops close. I can't think of any better example than this.

==> Cutting down position size is what books and theory will tell you to do. Practice will tell you to study price and a chart, and analyze where and when the best entry takes place. Take your time and wait for that entry. If you can't use tight stops, skip the trade. Preservation of trading capital is the first, second, and third priority in trading.

Those who argue the other way are usually entering late, using a wider stop, and (see example) trading less size. All of which explains why most traders are losing more money in these markets, while there is another group of traders for who this volatility is a blessing.

Focus on that entry like a spider waits for it's prey. And only act when there is a convergence of most all of his signals before acting. Then pounce without hesitation and take home the prey. And if you can do so with staying comfortably in the middle of the web, why shouldn't you?

 

[wasp]

Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, preferably one that is sick or lame. Only then, when there is no chance it can lose it's prey, does it attack. That, to me, is the epitome of professional trading.

_______

From your page trade_dante.

I think it's spot on...

 

[Grey1]

Oh come one! If you put your stop at 10 points from your entry or 5, how much can you lose in both cases? Of course do tight stops reduce your risk exposure to the market! It's as simple as black and white. And yes, lowering your position size does the same thing. Which is what most people will do in volatile markets, denying themselves the opportunity to pick up more points when the market offers it.



There is on one hand the skill in placing the stop, and in the other hand the skill in exiting. Exiting a positing profitable and at the right time, is a completely different matter on it's own. And I'm sure some people are more proficient in planning their exits then others. But this is completely irrelevant to the stop issue. The first thing traders should be concerned about is managing their entry: i.e. the risk. Later down the road, the reward will take care of itself (to a certain extent). It goes without saying that a lot of work should be put into planning the exit!



DOM? T&S? MP? never used any of it. Glad I'm not elitist then



Show me any trade and I'll show you there was a way to place your stop closer.



You will have had a better exit strategy. Which, like I said before, is a totally different matter and has nothing to do with how one approaches his entries. There is no reason you can't have both an optimum exit strategy ànd an optimum entry strategy.



For someone who (used to?) give out very decent advice and information to newbies, this is disappointing to read. "Whether I blow up in the future does not come down to it." ??? Please... that's exactly the mindset that will get many killed.

Firewalker,

I am not here to take sides but what TD is referring to is not his VIEW and is a fact depending on the school of though you belong to ,,
what he is saying and you fail to understand is
Entry has low importance and EXIT defines the final P/l , IN another word EXIT is more important than ENTRY
What you are saying is that ENTRY IS more important than EXIT but there is no reason NOT to have an optimised EXIT too,

I am in the second camp and last past 6 years been preaching it but what TD is saying is not wrong either,, Trend followers give LOW importance to entry and compensate their poor entry and risk associated with it in closing their pos much later ,, so exit is every thing to them ,, These people educate them selves on exit . I donot disagree with them as i totally understand where they coming from ,,
others go for Entry priority to reduce risk like myself.

In terms of trader's psycology and risk I think entry is by far most important than EXIT but as I said there is enough supporting evidence for both side

grey1

 

[Grey1]

They both trade the same %risk on their account, defined by stop size x position size. We assume their account size is the same.

This is where the problem lies,,,before you go further and explain I have to stop you in the first line as this is what is all about,,

stop +pos size is not a function of volatility .. % risk is not volatilty related and there fore not catering for volatilty risk . and if ya donot cater for volatilty then there is no point to talk about risk management. just stick to X dollar loss and bobs ur uncle lol

FIXED amount of loss or % risk is not good enough ,, it is not sophisticated enough ,, it is not volatilty based ,,

Hope this has cleared it,, if it has not I have no idea how else to explain it

Grey1

 

[firewalker99]

This is where the problem lies,,,before you go further and explain I have to stop you in the first line as this is what is all about,,

stop +pos size is not a function of volatility .. % risk is not volatilty related and there fore not catering for volatilty risk . and if ya donot cater for volatilty then there is no point to talk about risk management. just stick to X dollar loss and bobs ur uncle lol

FIXED amount of loss or % risk is not good enough ,, it is not sophisticated enough ,, it is not volatilty based ,,

Hope this has cleared it,, if it has not I have no idea how else to explain it

Grey1

I'm glad you understand my point. There is no reason to cater for volatility, because, if you are proficient in your entries, you can trade almost the same tight stops in low volatility as in extreme volatility.

Have you figured out which trader makes more money in my real-life (as opposed to "theoretical mathematical") example?

What you are saying is that ENTRY IS more important than EXIT but there is no reason NOT to have an optimised EXIT too,

In case you missed it, I said "There is no reason you can't have both an optimum exit strategy ànd an optimum entry strategy." So now you're parroting me...

 

[Grey1]

I'm glad you understand my point. There is no reason to cater for volatility, because, if you are proficient in your entries, you can trade almost the same tight stops in low volatility as in extreme volatility.

Have you figured out which trader makes more money in my real-life (as opposed to "theoretical mathematical") example?

I give up ,,, really have given up ,, the world is looking for risk analysis,, option price is based on volatility ,, danger is about volatility ,,, financial world is about volatility ,,,
ALL world universities teach about risk and volatility managment and you say there is no reason to cater for volatility . Institutions/pension funds employ risk assessors to asses the portfolio risk due to volatilty and you suddently feel you got it right and NO NEED TO CATER FOR VOLATILITY ,,
I honestly given up

grey1

 

[Paul71]

My man, you are truly a wise person.

Thankyou very much, kind Sir.

 

[firewalker99]

I give up ,,, really have given up ,, the world is looking for risk analysis,, option price is based on volatility ,, danger is about volatility ,,, financial world is about volatility ,,,
ALL world universities teach about risk and volatility managment and you say there is no reason to cater for volatility .

Like I said before, from an intraday trading point of view, volatility is managed by a tight stop. Anything else you bring into play, is totally irrelevant.

Institutions/pension funds employ risk assessors to asses the portfolio risk due to volatilty and you suddently feel you got it right and NO NEED TO CATER FOR VOLATILITY ,,

And we all know how good pension funds have been doing lately, don't we?

 

[Paul71]

I give up ,,, really have given up ,, the world is looking for risk analysis,, option price is based on volatility ,, danger is about volatility ,,, financial world is about volatility ,,,
ALL world universities teach about risk and volatility managment and you say there is no reason to cater for volatility . Institutions/pension funds employ risk assessors to asses the portfolio risk due to volatilty and you suddently feel you got it right and NO NEED TO CATER FOR VOLATILITY ,,
I honestly given up

grey1

Yeh, the same Ivy league tw*ts who thought they smart rebundling debt into financial instruments. W*NKERS!

Sorry, Grey, not really aimed at you as such.

 

[wasp]

...

 

[Grey1]

Like I said before, from an intraday trading point of view, volatility is managed by a tight stop. Anything else you bring into play, is totally irrelevant

is pos sizing irrelevant lol volatlity defines risk and hence pos size so according to you it is irrelavant

ANy way i think you have learnt enough but like to figth back in ur own way to save your face,,

I recommend traders not to take much notice of Firewalker's posts as his comments are flawed and has zero or little theoretical foundation ,,
I also feel Trader Dante last few post are worth thinking about,, There are other traders like FX scalper and GEKO who know what they are talking about .

grey1

 

[wasp]

ALL world universities teach about risk and volatility managment and you say there is no reason to cater for volatility . Institutions/pension funds employ risk assessors to asses the portfolio risk due to volatilty and you suddently feel you got it right and NO NEED TO CATER FOR VOLATILITY

..

 

[Grey1]

..

WASP ,, why donot we close all universities because you say so lol

Hmm thinking about it is not a bad idea rofl

Grey1

 

[wasp]

WASP ,, why donot we close all universities because you say so lol

Hmm thinking about it is not a bad idea rofl

Grey1

Grey1,

Why are we in a global recession?

Couldn't be because of all those university educated bankers?

 

[new_trader]

Tight stops do not, firstly, reduce your risk.

Correct POSITION SIZING reduces your risk.

But I will concede with you in part: Risk aside, trading successfully with tight stops, if anything, defines, at some level, a skill in ENTRY.

But "skill" in trading is a very broad term.

The real outcome of a trade is only defined by the EXIT.

Arguing over stop placement is just a chance for all these "elitists" to prove how clever they are:

"I called the move with a stop of just 3 ticks using the DOM and T&S and Market Profile and the Charts...and then I caught a nice 25 point swing, aren't I clever?

Yes, you are much better than me. I got in a little later when I thought the probability was higher...and used a 50 tick stop to make 250 points off that swing."

P&L defines skill. Nothing more. Nothing less.

If we started with an equal amount and I make more money than you using 400 point stops whilst you use 5 point stops, I have traded more successfully. There is no room for argument on this.

Whether I blow up in the future does not come down to it. Current P&L is just a snapshot in time. But when that snapshot is made, current skill is assessed.

I do not understand the constant reference to gloating or boasting. I am trying to explain what EVERY trader should be aiming for, not just the elitists. Let's say you did use a 400 point stop, are you honestly suggesting that if the market moved against you 399 points you would still accept your entry was good? Seriously?! 399 makes it a good entry and just 1 point, 1 freaking point, a move of 0.25% in the wrong direction makes it a misjudgement...or volatility!??? Are you for real???

 

[Grey1]

Grey1,

Why are we in a global recession?

Couldn't be because of all those university educated bankers?

Wasp lets close the universities and this way we both be happy rolf,, All we need to compete in world is not education it is a PINT of beer hey you happy now rofl

grey1

 

[barjon]

er, please don't let the disagreement degenerate into personal criticism guys. thanks.

So far as the topic is concerned I note that DOW recently has been gyrating 15 - 20 points within seconds whether or not it's been in a strong trend down or up, or at turning points. I'm not sure what "tight stops" means in these circumstances, but if anyone's been using 10 points or less successfully then I doff my cap to them.

good trading

jon

 

[firewalker99]

WASP ,, why donot we close all universities because you say so lol

Hmm thinking about it is not a bad idea rofl

Grey1

I suggest we all go back to university to learn about the efficient-market hypothesis (EMH) and listen about how financial markets are "informationally efficient", or that prices reflect all known information and making it thus impossible to consistently outperform the market, except through luck.

Or wait, I suggest we all study GARCH and other models to make predictions about future volatility and then tell everybody, after the event, that they saw it coming.

The same way all the "educated people" (including yourself) told us three months ago, oil would go up to $250 and we'd never see lower prices again.