Stop Losses

[darktone]

I'm sorry but I have to disagree. Let's say I studied 1000 similar examples and in 800 of those cases price continued lower after breaching support by whatever % I have in mind, that I can conclude with a high degree of certainty that the odds are in my favour for continuing further down. I know this because I have studied it. I know these are the odds, I didn't say I knew what was going to happen, I said I knew what the chances are of something going to happen. A subtle but very important distinction.

Thats fine, all ive learnt is that there is NO knowing.

As for your second question, price can seemingly penetrate support to an untolerable level and still manage to recover and continue on it's merry way to the upside.

Indeed!

Each decision I make when trading is based on an equal amount of evidence to substantiate the entry. There isn't one single element that holds so much significance that it could influence my whole decision-making process.

Of course. But in this instance your view is long. We are at support and you have just into cost territory!

To me, the moment support was breeched, i view my entry and reading the short term ill. Im looking for the door!

Last question:

3) Where is the mean price?

 

[darktone]

Given that the entire trading plan appears to be solidly based on hope, I suggest that stops would most likely improve trading profits enormously.

Support / resistance / direction and hope! If you dont mind!:cheesy:

 

[firewalker99]

If you're suggesting that price was never rejected at 82 and the white bar never occurred nor did the following black bar, then I'd exit the trade. But what does any of this have to do with your lack of a trading plan?

No, I'm not suggesting that. I'm saying the initial rejection at 82 (your red arrow) did happen, as did the next couple of candles. The bars I have added start at 11:21 and are each 1-minute too. So basically you are already in and you are short. My question was, where would you exit and would you consider re-entry and more importantly, how does doing this manually differ from having a stop in place after taking the entry?

As for the chart I posted, it was a question related based on a hypothetical situation. So you're right, this does not have anything to do with me having or not having a trading plan.

 

[firewalker99]

Of course. But in this instance your view is long. We are at support and you have just into cost territory!

To me, the moment support was breeched, i view my entry and reading the short term ill. Im looking for the door!

Ok, so would I. And I'd be already out if I had a stop in, if all the parameters and studies etc (see my previous post) had me place a stop at that price level. So basically you're saying the same as I am. I'm still not clear on how using or not using stops would've made any difference in the net result of that trade. As for "mean price", I don't know what you mean by that.

 

[black bear]

Pinkpig Stops and other things that spring to mind

Wow! What a score! A new pair of boots for him, for sure, Moneybags!

I agree with you about "You takes your choice".

Do you enter a trade 2.5% from fair value, or do you close it? If you enter, then keep your stop close and watch the trend line. Personally, I think that 2.5% is where a lot of the stops are.

Split

Hi Split

ye great result, old foes to and their dads took it bad so added to the occasion

moneybags get out of it man, BSD was whinging on about 40k insurance on another thread and saying he might just manage to get started again I am in the absolute sh..t if that is the case Split.

Stop, well to be honest and remember I only trade the ftse

25 pts works for me and that is in fact 1% of my bank I would never consider an entry that required a larger stop even if I can see the reward BSD style, just me, I have done it in the past and never feel comfortable, it can be any amount of money just not more than 1% That allows good trades to be taken with my hard stop well over the hrs highs, but regardless thats the stop 25pts 1% of bank.

regards being close to where others put theirs, If I do not like what I see when I have entered I am gone pretty quick Split I usually consider a re-entry there sometimes thats my 1st considered entry point I just watch it all taking form on the day and trade what I see, some days better than others.

Exits I take them not the stop unless something strange happens BIG FAST BAR the wrong way for whatever reason :-0 thats what the hard Stops for IMO, nothing else I do not even think about its location I enter the trade and wrong for me is errrrr what did I say 8-14 pts ish usually, its anything from scratch to 14 pts just when I don"t see what I saw when I took the trade and it does not look probable I can close out at a better level in the timeframe I am holding in.

I have been scalping just recently, well thats the name given to it, in fact I see no difference between all trading methods, all I am in fact doing is taking what I hope to be the 1st part of the trade off at 1st target which is close and based on my smallest time frame and paper trading the other parts at the moment.

markets are volatile, I am new to this kind of constant volatile price action as well as a new interface, I see no point in running before I can walk and taking what in my opinion are undue risks in the 1st few months. New platform and DA make it possible for me to exit and enter fast and when I want so may as well pay my way while I learn more and get more confident etc.

The 25 pt stop is tighter than I am used to if you allow for the volatility, might be wrong on that one Split, could be just that healthy FEAR you were ribbing me about

I just never ever saw the point in holding to a hard stop location, I did use them in the early days, just became aware I was right more often than wrong regards when trade was going wrong so exited trade on my own, the hard stop just stopped getting hit after a bit and I never ever bothered to move it closer. Trailing stops errrrrrr dont bother with that just close out at target, not even stuck on target if the price is not looking like its going to make it I am gone, if it runs on without me = uppppppps! another boob dont really care to be honest, in all the time I have been trading the market always gives you a better entry exit later, we have stops and limits just in case

Somebody else posted on another thread that made me laugh, they were talking pts, this guy said he traded 10 times in a session approx, he was asked why he just did not take a long ride for 1500 pts with a major move

and the other guy/poster retorted back windowsil I think

Because I am trading for money not points

I see it like that Split, if I trade 10 times and just about cover costs lose a bit or win a bit using what I now or think I now by taking a few entries to get it right then the next one pays the bills :clap: no problem imo, I am happy my brokers happy to.

Hindsight oh yes but if you had done such and such and this and that it woulda coulda maybe have improved your bottom line, sure some things do and always checking and I for one am aware if I am over 2 entry attempts in a morning session but if they are there I take them, end of, no debate.

80-20 rule BSD or am I pushing it :?: 20% of my action produces 80% of my profit

gone for T, could not find any boots with wings on

 

[dbphoenix]

No, I'm not suggesting that. I'm saying the initial rejection at 82 (your red arrow) did happen, as did the next couple of candles. The bars I have added start at 11:21 and are each 1-minute too. So basically you are already in and you are short. My question was, where would you exit and would you consider re-entry and more importantly, how does doing this manually differ from having a stop in place after taking the entry?

As for the chart I posted, it was a question related based on a hypothetical situation. So you're right, this does not have anything to do with me having or not having a trading plan.

If 79 were decisively rejected, I'd probably exit, depending on how it was rejected. I have no idea whether I'd re-enter or not. If you want to manufacture a series of price bars extending to the right side of the chart along with accompanying volume bars, I might be able to address a few principles. Otherwise, I don't see the point in this.

As to the chart you posted, your focus on stops and whether or not to have them and where has everything to do with your lack of a trading plan. Apparently, your plan was to short a break through what you saw as support, reach some sort of profit position ASAP, then hope for the best. You "contemplated" exiting when you got what might have been a reversal signal, but after more than 30 minutes, you continued to do nothing about it. Under these circumstances, then, yes, stops would be a good idea since you are not in charge of the trade.

 

[darktone]

Ok, so would I. And I'd be already out if I had a stop in

Did you!? If i remember it was me giving a tight hard stop example!:whistling

So basically you're saying the same as I am.

sorry, nope!


Mean price, maybe im mathmatically wrong, or i spelt i rong!
What i means is the center price / average price / the price in the middle of the swings!
In this case it should come in around 12,380ishat that point in time.
Ok. Is it likely that prices will return to these sorts of levels in the st? From what ive seen the answer is yes! This begs the question is it correct that we take our exit in the form of a close hard stop which is located away from the mean price(indeed at an extreme from the mean price) against the direction of our expectation!? To me the answer is no!!

So to be completely clear!. The way i would have played it would be to have a hard 'get me the f**k out!!' stop placed! (for me it would be 40). I would have placed a limit to exit at BE! if i didnt get filled i would aim near the succeeding swing high, and so until conclusion!

This is to my view the point steve was trying to make!

Ive made my point and yawl make of it what you will because i dont think i can be any clearer than i have been!

 

[firewalker99]

If 79 were decisively rejected, I'd probably exit, depending on how it was rejected. I have no idea whether I'd re-enter or not. If you want to manufacture a series of price bars extending to the right side of the chart along with accompanying volume bars, I might be able to address a few principles. Otherwise, I don't see the point in this.

Making something up out of thin air is perhaps not as useful as a real-life situation. So let's assume another chart.

Suppose the lines I drew on the attached chart are important S. Assume one is long for whatever reason, it doesn't matter. His entry is somewhere in that congestion area after the open. At one point does he consider support broken? At what point is a re-entry a valid option? The trader that is contemplating re-entering should know in advance what it is he is looking for. Otherwise he might be thinking "perhaps my S zone is lower", "perhaps I need to check another timeframe to see if I need to get out or not". Perhaps, perhaps, perhaps... If all this thinking needs to be done when the market is open, the trader will often see price go against a great deal before a decision is made. Knowing when to exit, knowing when to admit you are wrong before you enter, is not making ad-hoc decisions. It means you will act on what you see.

So, would you stop yourself out, re-enter, wait a couple of more bars,...

As to the chart you posted, your focus on stops and whether or not to have them and where has everything to do with your lack of a trading plan. Apparently, your plan was to short a break through what you saw as support, reach some sort of profit position ASAP, then hope for the best. You "contemplated" exiting when you got what might have been a reversal signal, but after more than 30 minutes, you continued to do nothing about it. Under these circumstances, then, yes, stops would be a good idea since you are not in charge of the trade.

I didn't say I'd do nothing. I said it'd move my stops closer. As for trading without stops, you still haven't addressed the issue of what one would do (exit, scale out, move stops, leave trade till EOD, till ADR, etc, etc...) if he was short from where I showed, given the price & volume action on the chart.

 

[dbphoenix]

Making something up out of thin air is perhaps not as useful as a real-life situation. So let's assume another chart.

Suppose the lines I drew on the attached chart are important S.

I assume you mean the top one.

Assume one is long for whatever reason, it doesn't matter.

Actually, it matters quite a lot.

His entry is somewhere in that congestion area after the open.

Why?

At one point does he consider support broken?

I certainly hope so. Maybe when it's broken?

At what point is a re-entry a valid option? The trader that is contemplating re-entering should know in advance what it is he is looking for.

True. So what would you be looking for?

Otherwise he might be thinking "perhaps my S zone is lower", "perhaps I need to check another timeframe to see if I need to get out or not". Perhaps, perhaps, perhaps... If all this thinking needs to be done when the market is open, the trader will often see price go against a great deal before a decision is made. Knowing when to exit, knowing when to admit you are wrong before you enter, is not making ad-hoc decisions. It means you will act on what you see.

It's not making adhoc decisions. It's hearing what the market is telling you. All you're hearing is noise. Hope is blocking out everything else.

So, would you stop yourself out, re-enter, wait a couple of more bars,...

I wouldn't have been long in the first place.



I didn't say I'd do nothing. I said it'd move my stops closer. As for trading without stops, you still haven't addressed the issue of what one would do (exit, scale out, move stops, leave trade till EOD, till ADR, etc, etc...) if he was short from where I showed, given the price & volume action on the chart.

Moving your stops closer after watching price move against you for half an hour is the same as doing nothing since you've been told that price is moving higher and you're hoping that it doesn't move high enough to put you in the loss column.

As to my addressing the issue of what you should do, why don't you tell me?

What's the significance of "1"? (For those who don't know, the gray-circled area is called a "springboard", i.e., a preparation for a further advance or decline, as the case may be.)

 

[new_trader]

You make it sound so but no, I don't agree, at least, not in my case. I know what I'm going to do if the trade reverses on me better than how much profit I intend to take when I close in profit. That must mean that I have considered the possibility of a loss before I enter. I suspect that a lot of traders think the same way although, obviously, not all.

Good trading Split

You've lost me, but it doesn't matter. Good trading to you too.

 

[firewalker99]

I assume you mean the top one.

I fear there might be a bit of a misunderstanding here. The references in my latest post were applicable to the chart attached to that post (the one where only a portion of the day is visible), and I was not refering to the chart I posted earlier from the YM.

So my references to 'important S' and all there rest were applicable to this chart:

 

[dbphoenix]

So were mine. And my question remains.

 

[firewalker99]

So were mine. And my question remains.

I can't give you an answer as to why anybody would be long, because I see no reason to be long myself. I was trying to build a hypothetical example to illustrate something else, but unfortunately the focus seems to be diverting to something else, like entry strategies.

It seems I'll need to make a chart of my own after all. Let's consider the YM chart again and assume there are no reversal signals and no warning signals. One is short from the break of support from the previous day. He has no stops. Assume volume shows no peaks and is on average the same on all bars. Then, out of the blue, comes that major spike which closes way back right down. For the sake of the argument these are 1 minute bars, or even smaller. What does one do if he's not having any protective stop in place?

I take it you might have considered the springboard to be a potential warning signal that a temporary reversal might be imminent. If that's the case, than let's assume there was no springboard and the spike and subsequent rally upwards came apparently out of thin air (or some totally unexpected news or w/e).

 

[firewalker99]

This begs the question is it correct that we take our exit in the form of a close hard stop which is located away from the mean price(indeed at an extreme from the mean price) against the direction of our expectation!? To me the answer is no!!

You've already provided the answer to your question. No it is not correct to place a stop which is located away from the mean price or whatever price level you had in mind, but this has more to do with the correct placing of stops than with the use of stops themselves. I'm under the impression that you - as did steve on that other thread - are arguing against the use of fixed hard stops because for some reason all those stops of you guys are triggered at "an extreme from the mean price".

So to be completely clear!. The way i would have played it would be to have a hard 'get me the f**k out!!' stop placed! (for me it would be 40). I would have placed a limit to exit at BE! if i didnt get filled i would aim near the succeeding swing high, and so until conclusion!

If you have a hard stop in mind at 40 points, it's the same as having any other means of stop in place. The fact that you aren't stopping yourself out earlier, is because you're still hanging on to that belief that price will turn back to breakeven. Yes, sometimes it will, other times it won't. Your limit exit at BE is nothing more than an illustration of wishful thinking.

 

[firewalker99]

Moving your stops closer after watching price move against you for half an hour is the same as doing nothing since you've been told that price is moving higher and you're hoping that it doesn't move high enough to put you in the loss column.

As to my addressing the issue of what you should do, why don't you tell me?

What's the significance of "1"? (For those who don't know, the gray-circled area is called a "springboard", i.e., a preparation for a further advance or decline, as the case may be.)

As you took the time to annotate the chart, I'll try to answer your question even though it's not really related to the point I was trying to make.

At "1" there is a surge in volume and buyers manage to push price up quite a bit from where it had fallen: as this is a 5-min chart all this action is contained within a single candle. The next two bars would confirm selling is over for the time being, low volume, not much selling pressure, price manages to stay around the same level.

At "2" price breaks free of the TL you've drawn. This might not mean selling is over, but it signifies a change of momentum and thus a warning signal. "3" points towards the fact that sellers aren't quite done yet, as shown by a rise in volume. The springboard is touched from the other side when we reach "4". Price again consolidates but notice the remarkable absence in volume ("no-demand" at "5"). Much more demand and reaction when price reaches "6" on increased volume, after which we make another swing higher. So no LrL, and thus perhaps warranting an exit from shorts. The new attempt higher ("7) however occurs on decreasing volume ("8") and on "9" we break lower. Not sure what else to tell about "9". 10 is a potential selling climax, notice how along the way down volume has been noticeable increasing strongly, picking up pace again. Anything after that is hard to tell, because it's lacking any volume and the markets close.

True. So what would you be looking for?

If I was stopped out on a trade and would be looking for a re-entry, I'd wait for price to confirm it's change of direction by a move in the opposite direction confirmed my volume. It's likely I'll wait for price to "pass" a certai point before entering the trade, but that's perhaps more down to personal style. Some will wait longer until there's more confirmation, others won't. I don't see why everybody needs to do the same in order to be profitable.

 

[dbphoenix]

Let's consider the YM chart again and assume there are no reversal signals and no warning signals. One is short from the break of support from the previous day. He has no stops. Assume volume shows no peaks and is on average the same on all bars. Then, out of the blue, comes that major spike which closes way back right down. For the sake of the argument these are 1 minute bars, or even smaller. What does one do if he's not having any protective stop in place?

I take it you might have considered the springboard to be a potential warning signal that a temporary reversal might be imminent. If that's the case, than let's assume there was no springboard and the spike and subsequent rally upwards came apparently out of thin air (or some totally unexpected news or w/e).

There are, however, reversal signals and warning signals. Volume does have peaks. Nothing is accomplished by pretending that none of this exists. TF is, however, immaterial.

As for the springboard, whether or not I consider it to be a warning signal that a temporary reversal might be imminent is irrelevant. In any case, it's there.

You say that you don't understand the difference between a stop and an exit. I've tried to explain it to you with no success. Therefore, I suggest that you don't understand the difference because you're not hearing what the chart is telling you. If you do understand what the chart is telling you, you should have no trouble answering the question I asked.

At "1" there is a surge in volume and buyers manage to push price up quite a bit from where it had fallen: as this is a 5-min chart all this action is contained within a single candle. The next two bars would confirm selling is over for the time being, low volume, not much selling pressure, price manages to stay around the same level.

Fine. Now, you've said "managing your trade is about trailing price and moving up your stop." While this is debatable, it does suggest a trend-following approach. If that's the case, what is the significance of "2"?

 

[darktone]

You've already provided the answer to your question

Not so much a question as an observation!

but this has more to do with the correct placing of stops than with the use of stops themselves

Theres no correct place! No magic formula!

If you have a hard stop in mind at 40 points, it's the same as having any other means of stop in place.

No its not, because i will actively attempt to exit before hand. Most will hope their stop wont get hit! wouldnt you agree!

Yes, sometimes it will, other times it won't. Your limit exit at BE is nothing more than an illustration of wishful thinking!

Exactly! There is no knowing! :clap: ... Dont forget the bit about attempting to exit as pa unfolds if be or better is missed!

At this point im leaving thread.. its been cool.. But i dont feel like i can add anymore to what ive already said..

Like i said.
All the best.

Ps: steve did not say dont use a hard stop. As i read things he said you dont have to hang in there until your hard stop is taken! Thats the difference!

 

[dbphoenix]

At "2" price breaks free of the TL you've drawn. This might not mean selling is over, but it signifies a change of momentum and thus a warning signal. "3" points towards the fact that sellers aren't quite done yet, as shown by a rise in volume. The springboard is touched from the other side when we reach "4". Price again consolidates but notice the remarkable absence in volume ("no-demand" at "5"). Much more demand and reaction when price reaches "6" on increased volume, after which we make another swing higher. So no LrL, and thus perhaps warranting an exit from shorts. The new attempt higher ("7) however occurs on decreasing volume ("8") and on "9" we break lower. Not sure what else to tell about "9". 10 is a potential selling climax, notice how along the way down volume has been noticeable increasing strongly, picking up pace again. Anything after that is hard to tell, because it's lacking any volume and the markets close.


If I was stopped out on a trade and would be looking for a re-entry, I'd wait for price to confirm it's change of direction by a move in the opposite direction confirmed my volume. It's likely I'll wait for price to "pass" a certai point before entering the trade, but that's perhaps more down to personal style. Some will wait longer until there's more confirmation, others won't. I don't see why everybody needs to do the same in order to be profitable.

I see you revised your post after I posted mine.

You say that "2" breaks the TL I've drawn. What TL would you draw? If you wouldn't draw one, how are you tracking the trend? If you're not tracking the trend, why are you "trailing price and moving up your stop?"

 

[firewalker99]

You say that you don't understand the difference between a stop and an exit. I've tried to explain it to you with no success. Therefore, I suggest that you don't understand the difference because you're not hearing what the chart is telling you. If you do understand what the chart is telling you, you should have no trouble answering the question I asked.

I've tried to give a comprehensive definition, but nobody replied to it. So either everybody defines stops & exits in their own way, or I'm just not making any sense at all.

 

[firewalker99]

I see you revised your post after I posted mine.

You say that "2" breaks the TL I've drawn. What TL would you draw? If you wouldn't draw one, how are you tracking the trend? If you're not tracking the trend, why are you "trailing price and moving up your stop?"

I see no reason to draw another TL. I'd probably start mine more to the left (depending on what's overnight) but anyway, I agree with what you've drawn. But does a break of the TL warrant an exit? It's by no means a reversal a signal on it's own but it does signify a change of momentum.

For the record, by "trailing price" I don't mean the type of classic trailing stop where the stop is adjusted each time price fluctuates.