I certainly agree with what you said about the more you do something the better you get at doing it, whether it's playing the violin, golf, or in this case spreadbetting. I don't know how many trades I've made, but It's probably somewhere about 1000-1200. .................
What do you think is the optimal ratio of the stop/limit? Or do you think a better technique is just trailing the stops and going along with the price as far as you can? I used to always trail my stops, and most of the time I'd stop myself out too early only to watch the price rise (or fall) further, but I preferred trailing in order to lock in profit, because nearly always the price falls (or rises) back to your original stop. So have you a set limit target you stick to like 2-3 times the stop size, or do you trail which you think is better?
Well regards to what you said about it taking longer to get better only doing 5 trades a week as opposed to 20 a day, I'm not so sure. As long as you're active in the market watching the price, for example, I haven't traded for 8 weeks now, but my most recent trade, I didn't even risk any money, I just mentally placed a stop, and watched the price.
Hi CharlesD
Re - Stop sizes and fixed or trailing etc etc?
I personally believe you should always trade with a stop and it should be based upon whether the trade you are taking should happen - before price goes and hits you stop.
Many new traders think - OK - i can see a new direction and a target and its say 50 pips away. Therefore I need to allow price room to get there - I will not place my stop at just 20 pips away - its far too close - and the next real S or R is 45 pips away - so to be safe i will go for one further away - so a 80 pip stop should be OK
By doing this - they look that the market as more chance of going in their direction for only 50 pips - rather than going against them by 80 pips. In many cases they might be correct - but immediately by having a negative RR - they will need a win ratio of at least 65% to even make small gains in the future.
Stops for me should be as tight as possible - but still allow you to make positive pips.
Optimal stop size all depends on your trading knowledge and experience and of course bear a relationship to your actual target . A 5 or 10 pips stop after a 150 -200 pip target would be extremely difficult to pull off for any new or intermediate trader. Therefore many go down the RR route and think I need a minimum RR of 2 for this trade - so my stop should be somewhere up to 75 pips away from entry. 40 50 pips is a S or R away - so I will allow a bit and yes 65 pips is OK
But is it ??
My own view - but please remember I don't recommend this to any new trader - or trader who is not very experienced at reading PA - is I need a stop as tight as possible if I believe the direction is changing.
In my own case every trade I take as to be with a stop size of under 7 pips and can be as low as 3 pips on a pair with a spread of only 0 3- 0 5 of a pip.
That requires exact timing and patience etc etc - especially if I am going to take 10 -20 trades a day.
I will not except a win ratio of under 65% - and expect to always be around the 70 -80% every 100 trades taken.
My targets are totally dynamic. If I risk 5 pips - I don't just want a 3 pip result - BUT yes if I can only take 3 pips - I will accept it rather than end up minus 3 or stopped at minus 5.
Most trades do end up between 7 and 25 pips - normally in 10 -15 mins - and majority under 30 mins.
Many trader just think - well that's no good only say 16 pips as a result - hardly worth doing
What they dont realise is that trade as a RR of 3+ ( stop 5 pips) and monetary wise is exactly the same as me risking 50 pips to make 151 pip or even risking 100 pips to make 301 pips.
Yes the money I make off a 16 pip win in under 15 mins is the same as if I had waited 2 days for 300 pip with a 150 pip stop.
So that's why I want tight stops - to be able to make more money.
Even if I set my mental stop at 4 pips and I am stopped out - It still does not stop be risking another entry again - if I am still believing the move will go my way.
So I could actually have 2 losses of total 8 pips and then catch the trade and it goes on to make 25 pips - so end result - 3 trades - 2 losses - risked 12 pips in total and made 25 pips - still a very positive result.
I think to get to as low a stop as possible you need to work and trade a long time at the "coalface" - Ideally on 3 min or 1 min charts and then when they become slow - down to tick charts.
Initially try 8 or 9 pip stops - remember if you need a stop over 10 or 15 pips - it really a total different trade to a short term intraday trader.
Traders with stop over 20 or 25 pips are thinking they are being safe - but really just hoping and not understanding PA at the real coalface. The industry wants trader to think it cannot be done - IE - Trading in the noise is too risky - dangerous - near impossible.
Well its not - but it take years to get to the level that you can nearly follow every pip and wave move and then cherry pick the ones with the highest probabilities that might make you RR's of 3 or 5 + even in under 30 or 60 mins.
With regards to clues on how you do it. -
1. Watch small frame charts for many 1000's of hours.
2. Keep an eye on all levels - interim - dynamic - pivots etc
3. Keep an eye on the time of every move
4. Watch for false moves - ie a quick spike of 5 -10 pips to encourage traders to enter a trade in the wrong direction
5, When a move looks a certainty - be careful in may 7 out of 10 cases - its a set up - false sentiment - before a completely different move in the opposite direction
6. Learn to read patterns - even simple 123 or ABC as well as Head and Shoulders or other harmonics on the small frames as well as even candle stick clues.
7. Take 100's or even thousands of trades on a demo first to get the feel of quick entries etc etc
All these thing cannot be all achieved in 6 or 9 months - but after a few years of focus and determination etc etc - you will get there and then you will think - why did I ever need 20 or 30 pip stops?
Finally - its so important you do keep trading via demo or live account. As you know live account is a different world to demo - and even just mentally thinking out a trade is not the same as carrying it out.
No Pain - No Gain - and it certainly applies to trading - but then one day - the pains slowly go away - and the gains keep on coming in
Hope that helps
Regards
F