Stop Losses

[dbphoenix]

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 and but it does signify a change of momentum.

So why not exit?

 

[firewalker99]

Theres no correct place! No magic formula!

No there isn't, but it's about defining for yourself what will make you close out.

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

If I'm reading this right, you'll try to exit when price retraces a bit more towards your entry point, for the sake of minimizing the loss? How's that any different from hoping it will return to your entry point?

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

Thank you for your contributions. As for what steve said, well we haven't exactly heard from him since... but the main premise of his argument was that he uses two levels of stops. And that, in my view, isn't exactly the best way of managing a trade. But hey, what do I know?

 

[firewalker99]

So why not exit?

Because it's very likely only the start of a temporary retracement? Are you saying you would exit just on the basis of a breach of a TL? I understand there's always the possibility of a re-entry, but that goes along with a worse price and a greater risk.

How about these examples? In the first chart exiting on the first time price breaches a TL, means leaving a whole lot of points on the table... In the second chart, it's about as good as one can get. Ofcourse, that might not be the main concern of the trader who just wants to get a profit.

But why not scale out then instead, use your stop to protect the other part of your trade and let the trade run till the close or until a definite reversal signal takes place?

Thanks for all the posts today, I'm off to bed now though... to be continued...

 

[dbphoenix]

Because it's very likely only the start of a temporary retracement?

But you have no way of knowing that. You are, however, hoping that it is. Perhaps this is why you phrased your reply in the form of a question.

Are you saying you would exit just on the basis of a breach of a TL?

What is important is what you would do. If you're trading trend, why wouldn't you exit at the break of the TL? If you're not trading trend, why didn't you SAR at the break of the TL?

I understand there's always the possibility of a re-entry, but that goes along with a worse price and a greater risk.

None of which is pertinent at the time that price breaks the TL. You've been given information and you've chosen not to listen to it. Why?

.

 

[tune]

But why not scale out then instead, use your stop to protect the other part of your trade and let the trade run till the close or until a definite reversal signal takes place?

Do either of these charts exhibit a "definite reversal signal".

 

[firewalker99]

Do either of these charts exhibit a "definite reversal signal".

Not to my knowledge, no.

 

[firewalker99]

.
But you have no way of knowing that. You are, however, hoping that it is. Perhaps this is why you phrased your reply in the form of a question.

I have no way of knowing that is isn't either. So one could argue that he's hoping that it is and he exited at exactly the right time. But for the same reason he could be leaving hundreds of points on the table.

.
What is important is what you would do. If you're trading trend, why wouldn't you exit at the break of the TL? If you're not trading trend, why didn't you SAR at the break of the TL?

Reversing into longs is a whole different thing. If I'm inclined to exit a trade, it doesn't lead to reversing, unless I want to be in the market all the time which I don't. If I see a valid reason to enter long I will. So, if I'm trading trend and I would be short in either of those two charts, I would see no reason to exit all of my position. I would definitely see it as a reason to take profits, but why I don't see any reason why I would deny myself the possibility of riding price till the end of the day. If price breaks a major support area, odds are in my favour it will be trending day till the close. Yes, I have no way of knowing that, but on the sole basis of a TL break I would not close out, and definitely not reverse.

However, I might do so if there were additional elements to warrant a full exit and to assume a reversal was likely to take place. For example if there is some long term support to be found at those levels or price has traveled 10-20% of the normal distance this particular instrument exhibits on breaks of support.

.
None of which is pertinent at the time that price breaks the TL. You've been given information and you've chosen not to listen to it. Why?

That depends on what you mean by "not listening". As per your reply, it seems that you take it as a valid reason to exit your trade and walk away, but I don't. If I decide to scale out or move my stops, one could say he is reacting to what price is telling him. So by "not listening" you are basically saying one should exit his position in full.

I've seen breaches of trendlines on the way down or up, only for price to continue much much further on another trendline that could be drawn. As you've said yourself many times in the past, trendlines are only there because the trader sees them or draws them. Why would a break of a trendline signify anything else than a temporary change of momentum?

 

[firewalker99]

Confused...

Either you changed your opinion about stops, but for someone who's been following your posts for a long time, this is getting very contradictory:

In post 151 you said you took a trade without a stop:

... So, I'd short at the dot. No stop.

In yet another post, from about 8 months ago, there was a very similar signal to the short, instead it was a long entry this time. See post #233:

Enter above the "hammer", stop below.

In another recent example you said:

Does this frighten me? No, (1) because my stop is above all this and (2) volume dissipates as price rises.

Unless a trader has certain "convictions", why would he decide to use stops on one occasion but decide to trade without on another occasion?

The only possibility I see left, is that your definition of what a stop is and what it is supposed to do, is something other than what we assume it is. Also, how does leaving out stops help somebody who isn't able to watch price all day without taking his eye off the screen for a single minute?

 

[BSD]

Crikey, I thought we were done with this and moving on to the beer girls, instead I come back and the thread is going stronger than ever ;-)

Here is my take on trading:

Markets are random.

Why are they random ?

Markets are nothing else than the collective take of all their participants actions, driven by hope, fear and greed, on what will happen next.

Anybody who honestly believes that markets do what technical analysis says they should do next should just watch Gamma Jammer sell 1 Billion Euros and see what happens to all their clever analysis.

That is exactly why markets are random.

You can generate a random chart of anything, and that chart will look exactly like a real chart of a real instrument !

Anybody who honestly believes that a chart of a real instrument will look different than it's random counterpart has just never looked at a random chart.

BUT, where academia got it wrong, is that randomness of markets absolutely does not mean you cannot profitably trade them.

Random charts have tradeable trends just like all charts do.

The real problem is that people like to believe that they are clever, and that they can, through their cleverness, analyse situations, come up with the correct answer, and solve problems.

Ego dictates that people have a real need to believe that success is their very own achievement, while lack of success is usually attributed to circumstances beyond their control.

Lets face it, once you move beyond ego and the need to feel good about your cleverness, you can move on to understand that this is nothing to do with your cleverness allowing you to be right, that this is about nothing else than making money which is perfectly feasible by being wrong lots.

Look, we know that trading has nothing to do with being right...

Brett Steenbarger:

"...As a rule, maximizing batting average/minimizing drawdown comes at the cost of lowering overall system profitability...."

We know that Kenneth Grant, in "Trading Risk: Enhanced Profitability through Risk Control", depicts his experience as risk manager for some of the best and most successful hedge funds, amongst others Paul Tudor Jones funds and Steve Cohens SAC Capital, that:

"ACROSS ALL TRADING STYLES, TIME FRAMES AND TRADERS, ONE RULE HOLDS TRUE:

10% OF ALL TRADES INEVITABLY ACCOUNT FOR 90% OF PROFITS !"


Why do people still insist on wasting time, money and effort on solving problems that do not exist, on trying to outwit what cannot be outwitted, markets that are nothing else than the sum of all our actions ?

There is no pattern that tells you what will happen next, BUT you do not need that to make more money than you can ever spend.

Stop chasing the holy grail, stop believing that if you just keep on studying markets you will one day be able to predict what happens next, you do not need to feel that you understand price to get rich.

Markets can go up, down or sideways, that is all they do.

All you need to make a fortune is to do what any kid in kindergarten could do, grab a chart, eyeball where the path of least resistance is, jump on board, cut your losses when and as they occur, and otherwise ride that trend all the way until it bends.

Trading is nothing than a probability game.

You create your positive expectancy not through reading markets.

You create your net profitability through risk/reward ratios and hit rates.

That is all trading is.

Trade Dante is one of the very few people here who has the potential to get really really rich.

Contrary to what most probably believe Pin Bars have absolutely nothing to do with it though.

If he keeps up what he has achieved with his incredible performance to date, he can move on to an amazing fortune.

He has a style that is scalable, and he fully understands the single most important thing that there is to understand about trading, it's just about probability, it's about nothing else than risk/reward ratios that you create yourself through your stop losses and take profits.

He has a pin bar for an entry with a stop right beyond that, ensuring small losses, while, when he has a winner, he is picture perfect, he rides that and milks it to the max.

I will tell you all now: I give A LOT of money back to the market in terms of being in profit and then being taken out for break even.

But I make MUCH MORE than I give back by playing this way because when I have a good entry and the price takes off without looking back, you can find yourself at the beginning of MAJOR moves that boast incredible R:R.

That is all that net profitable trading is all about, it's not about being right, it's about making money by understanding that it's just a numbers game.

Next time someone tells you they have a great new system thats gonna beat the markets just give Gamma Jammer a call and tell him to sell one billion worth of EUR/USD while watching your friends pipe dream go up in smoke.

 

[rathcoole_exile]

BUT, where academia got it wrong, is that randomness of markets absolutely does not mean you cannot profitably trade them.

There is no pattern that tells you what will happen next, BUT you do not need that to make more money than you can ever spend.

Stop chasing the holy grail, stop believing that if you just keep on studying markets you will one day be able to predict what happens next, you do not need to feel that you understand price to get rich.

Markets can go up, down or sideways, that is all they do.

All you need to make a fortune is to do what any kid in kindergarten could do, grab a chart, eyeball where the path of least resistance is, jump on board, cut your losses when and as they occur, and otherwise ride that trend all the way until it bends.

Trading is nothing than a probability game.

You create your positive expectancy not through reading markets.

You create your net profitability through risk/reward ratios and hit rates.

That is all that net profitable trading is all about, it's not about being right, it's about making money by understanding that it's just a numbers game.

Just when you'd gone up in my estimation, you post this and...........go up another notch :clap: great stuff, you put into words very easily that which cannot easily be expressed.

Now, about those beer girls ...........

 

[rathcoole_exile]

Do either of these charts exhibit a "definite reversal signal".

does such a thing exist ? Wouldn't we all be multi-billionaires if so ? and not just the poxy multi-millionaires we're stuck with being

 

[firewalker99]

Anybody who honestly believes that markets do what technical analysis says they should do next should just watch Gamma Jammer sell 1 Billion Euros and see what happens to all their clever analysis.
[...]
Next time someone tells you they have a great new system thats gonna beat the markets just give Gamma Jammer a call and tell him to sell one billion worth of EUR/USD while watching your friends pipe dream go up in smoke.

I'm not sure GJ would enjoy throwing so much money at the market to proof a point here In any case, although his one billion might have some effect in the short term, it will be totally neglectable in the longer term. I doubt any single person or group of persons can do anything other than cause short-term fluctations. Consider how much money is in the markets and you'll soon come to realize that manipulating with the fundamental primary trend will require a whole lot more than one billion euros.

But we are drifting away from the stops issue...

 

[BSD]

Now, about those beer girls ...........

Thanks mate

Now, first things first

 

[BSD]

I'm not sure GJ would enjoy throwing so much money at the market to proof a point here

any case, although his one billion might have some effect in the short term, it will be totally neglectable in the longer term.

That's perfectly true.

 

[new_trader]

Everything is known in advance

Crikey, I thought we were done with this and moving on to the beer girls, instead I come back and the thread is going stronger than ever ;-)

Here is my take on trading:

Markets are random.

Why are they random ?

Markets are nothing else than the collective take of all their participants actions, driven by hope, fear and greed, on what will happen next.

Anybody who honestly believes that markets do what technical analysis says they should do next should just watch Gamma Jammer sell 1 Billion Euros and see what happens to all their clever analysis.

That is exactly why markets are random.

You can generate a random chart of anything, and that chart will look exactly like a real chart of a real instrument !

Anybody who honestly believes that a chart of a real instrument will look different than it's random counterpart has just never looked at a random chart.

BUT, where academia got it wrong, is that randomness of markets absolutely does not mean you cannot profitably trade them.

Random charts have tradeable trends just like all charts do.

The real problem is that people like to believe that they are clever, and that they can, through their cleverness, analyse situations, come up with the correct answer, and solve problems.

Ego dictates that people have a real need to believe that success is their very own achievement, while lack of success is usually attributed to circumstances beyond their control.

Lets face it, once you move beyond ego and the need to feel good about your cleverness, you can move on to understand that this is nothing to do with your cleverness allowing you to be right, that this is about nothing else than making money which is perfectly feasible by being wrong lots.

Look, we know that trading has nothing to do with being right...

Brett Steenbarger:

"...As a rule, maximizing batting average/minimizing drawdown comes at the cost of lowering overall system profitability...."

We know that Kenneth Grant, in "Trading Risk: Enhanced Profitability through Risk Control", depicts his experience as risk manager for some of the best and most successful hedge funds, amongst others Paul Tudor Jones funds and Steve Cohens SAC Capital, that:

"ACROSS ALL TRADING STYLES, TIME FRAMES AND TRADERS, ONE RULE HOLDS TRUE:

10% OF ALL TRADES INEVITABLY ACCOUNT FOR 90% OF PROFITS !"


Why do people still insist on wasting time, money and effort on solving problems that do not exist, on trying to outwit what cannot be outwitted, markets that are nothing else than the sum of all our actions ?

There is no pattern that tells you what will happen next, BUT you do not need that to make more money than you can ever spend.

Stop chasing the holy grail, stop believing that if you just keep on studying markets you will one day be able to predict what happens next, you do not need to feel that you understand price to get rich.

Markets can go up, down or sideways, that is all they do.

All you need to make a fortune is to do what any kid in kindergarten could do, grab a chart, eyeball where the path of least resistance is, jump on board, cut your losses when and as they occur, and otherwise ride that trend all the way until it bends.

Trading is nothing than a probability game.

You create your positive expectancy not through reading markets.

You create your net profitability through risk/reward ratios and hit rates.

That is all trading is.

Trade Dante is one of the very few people here who has the potential to get really really rich.

Contrary to what most probably believe Pin Bars have absolutely nothing to do with it though.

If he keeps up what he has achieved with his incredible performance to date, he can move on to an amazing fortune.

He has a style that is scalable, and he fully understands the single most important thing that there is to understand about trading, it's just about probability, it's about nothing else than risk/reward ratios that you create yourself through your stop losses and take profits.

He has a pin bar for an entry with a stop right beyond that, ensuring small losses, while, when he has a winner, he is picture perfect, he rides that and milks it to the max.



That is all that net profitable trading is all about, it's not about being right, it's about making money by understanding that it's just a numbers game.

Next time someone tells you they have a great new system thats gonna beat the markets just give Gamma Jammer a call and tell him to sell one billion worth of EUR/USD while watching your friends pipe dream go up in smoke.

I'm a practitioner of "EVERYTHING IS KNOWN IN ADVANCE"

 

[firewalker99]

So why not exit?

Going back to a chart you posted couple of weeks ago, I've annotated what should be your entry if I look at the charts you posted at that time. If I recall correctly (please correct me if I'm wrong) I thought you said in a follow-up post that you stayed in all the way down for the rest of the day. So how is this example different from the one I posted? At your convenience, two charts attached, 5-min and 2-min.

 

[BSD]

I'm a practitioner of "EVERYTHING IS KNOWN IN ADVANCE"

In terms of results, I totally agree with you.

 

[firewalker99]

I'm a practitioner of "EVERYTHING IS KNOWN IN ADVANCE"

So you cross the street without looking then? :whistling

 

[black bear]

Still confused, agree and disagree arrr painters don"t no there assssss from thier..

Crikey, I thought we were done with this and moving on to the beer girls, instead I come back and the thread is going stronger than ever ;-)

Here is my take on trading:

Markets are random.

Why are they random ?

Markets are nothing else than the collective take of all their participants actions, driven by hope, fear and greed, on what will happen next.

Anybody who honestly believes that markets do what technical analysis says they should do next should just watch Gamma Jammer sell 1 Billion Euros and see what happens to all their clever analysis.

That is exactly why markets are random.

You can generate a random chart of anything, and that chart will look exactly like a real chart of a real instrument !

Anybody who honestly believes that a chart of a real instrument will look different than it's random counterpart has just never looked at a random chart.

BUT, where academia got it wrong, is that randomness of markets absolutely does not mean you cannot profitably trade them.

Random charts have tradeable trends just like all charts do.

The real problem is that people like to believe that they are clever, and that they can, through their cleverness, analyse situations, come up with the correct answer, and solve problems.

Ego dictates that people have a real need to believe that success is their very own achievement, while lack of success is usually attributed to circumstances beyond their control.

Lets face it, once you move beyond ego and the need to feel good about your cleverness, you can move on to understand that this is nothing to do with your cleverness allowing you to be right, that this is about nothing else than making money which is perfectly feasible by being wrong lots.

Look, we know that trading has nothing to do with being right...

Brett Steenbarger:

"...As a rule, maximizing batting average/minimizing drawdown comes at the cost of lowering overall system profitability...."

We know that Kenneth Grant, in "Trading Risk: Enhanced Profitability through Risk Control", depicts his experience as risk manager for some of the best and most successful hedge funds, amongst others Paul Tudor Jones funds and Steve Cohens SAC Capital, that:

"ACROSS ALL TRADING STYLES, TIME FRAMES AND TRADERS, ONE RULE HOLDS TRUE:

10% OF ALL TRADES INEVITABLY ACCOUNT FOR 90% OF PROFITS !"


Why do people still insist on wasting time, money and effort on solving problems that do not exist, on trying to outwit what cannot be outwitted, markets that are nothing else than the sum of all our actions ?

There is no pattern that tells you what will happen next, BUT you do not need that to make more money than you can ever spend.

Stop chasing the holy grail, stop believing that if you just keep on studying markets you will one day be able to predict what happens next, you do not need to feel that you understand price to get rich.

Markets can go up, down or sideways, that is all they do.

All you need to make a fortune is to do what any kid in kindergarten could do, grab a chart, eyeball where the path of least resistance is, jump on board, cut your losses when and as they occur, and otherwise ride that trend all the way until it bends.

Trading is nothing than a probability game.

You create your positive expectancy not through reading markets.

You create your net profitability through risk/reward ratios and hit rates.

That is all trading is.

Trade Dante is one of the very few people here who has the potential to get really really rich.

Contrary to what most probably believe Pin Bars have absolutely nothing to do with it though.

If he keeps up what he has achieved with his incredible performance to date, he can move on to an amazing fortune.

He has a style that is scalable, and he fully understands the single most important thing that there is to understand about trading, it's just about probability, it's about nothing else than risk/reward ratios that you create yourself through your stop losses and take profits.

He has a pin bar for an entry with a stop right beyond that, ensuring small losses, while, when he has a winner, he is picture perfect, he rides that and milks it to the max.



That is all that net profitable trading is all about, it's not about being right, it's about making money by understanding that it's just a numbers game.

Next time someone tells you they have a great new system thats gonna beat the markets just give Gamma Jammer a call and tell him to sell one billion worth of EUR/USD while watching your friends pipe dream go up in smoke.

BSD

Great post again, hope you had a good weekend

Why are you not bothered regards low SR BSD :?:


Does that not increase risk of ruin :?:

What do you consider a good enough SR :?:

I agree you and TD could get the mother of all wins, you may well be speaking from experience but you could also imho get the mother of all loss"s to imho

TD works for some one else while waiting for the big win, he is already comeing under pressure to modify his method and stops to fit prop firms rules, which I would assume are there for good reason.:?:


SR 25% risk per trade 2%

10% chance of 9 losers in a row = drawdown of 18%

5% chance of 11 in a row = drawdown of 22 %

1 % chance of 17 in a row = drawdown of 34%

put 2 bad runs close together and och ! if its a full size bank

appreciate an answer, out for most of the week but will catch up with thread later and post if I get a direct reply.

Have a good one all, whatever your chosen SR :clover:

 

[jonj]

as a newbie i would like to say,having read most of this thread,that they must be a point ,surely,where the reason for entering the position in the first place becomes nul and void at some point when the price goes against you.to stay in the trade any longer must be living in hope!!??
therefore why not put hard stop at that point??it just seems to me to be pointless NOT putting stops as long as you give your trade room to move.??