Stop Losses

[gamma]

There seems to be no upper limit for the euro at this time, unlike the pound, which has a limit at 211
The only thing that will change the direction of the euro will be a major event like central bank intervention or production increase by OPEC. (Watch out for sudden moves like we saw on Monday) the above measures will only be temporary until such time as the U.S gets its house in order the dollar will continue on its downward spiral.

 

[bolts]

As i posted a couple of days ago

"btw i have euro to 15650 friday. Hope your not short Watch oil!"

well another weekly target hit within a few pips i cut that a bit close to the bone though 15651 high printed this Friday so far.

 

[forexmilio]

actually nobody can stop loss - always you have to loss so you can win

 

[Kingwizz]

Personally I use Trailing Stop losses. Though this is day trading, on a long-term investment it is likely that one's portfolio will be more diversified & hence losses are likely to have a lesser effect on the overall investment scheme.

 

[oildaytrader]

I did not read the whole thread .I tried and tested all sorts of stops from 10 pips to 100 pips for manual and automated systems .

Smaller stops get you out of really good trades , and there is no second chance to re-enter due to various reasons.The cost of lower stops is often greater than profits lost , as a result of being taken out.

Small stop systems performed horribly and ruined great swing methods, whereas large stop systems made mediocre methods into good made methods.

Let your trade breathe and don't choke it out and run your profits , without letting trailing ,breakeven and other dabbling ruin a good swing trade.

For day trading I use 20 pips , and for automated systems between 45 to 100 pips.

 

[Splitlink]

I did not read the whole thread .I tried and tested all sorts of stops from 10 pips to 100 pips for manual and automated systems .

Smaller stops get you out of really good trades , and there is no second chance to re-enter due to various reasons.The cost of lower stops is often greater than profits lost , as a result of being taken out.

Small stop systems performed horribly and ruined great swing methods, whereas large stop systems made mediocre methods into good made methods.

Let your trade breathe and don't choke it out and run your profits , without letting trailing ,breakeven and other dabbling ruin a good swing trade.

For day trading I use 20 pips , and for automated systems between 45 to 100 pips.

The trouble I find with your argument is that if one lets the trade breathe too much it is probably because one does not have a good idea of the trade direction. That said, I agree with you that stops must not be so close as to miss the good swings. I'm having some trouble getting this right and my alternative is to get right back in if it goes back in the desired direction, again. Quite often I get a lousy morning's trading as a result but, on other days, I take off from the start and this makes up for my bad days.

Letting a trade that is not going to work breathe too much can mean an accumulation of losses that are detrimental to the profits made on a good trade. It all has to be got back.

This is a comment, not a criticism. It's very difficult to get the stop question right.

 

[oildaytrader]

The trouble I find with your argument is that if one lets the trade breathe too much it is probably because one does not have a good idea of the trade direction. .

A very valid point on day trading , cause on 5 m and 15 min we can see where price is heading.On longer time frame and swing trading, I assume we are trading probabilities and haven't really got a clue where it will end up,except we have a hunch of form and direction.Correct me if I am wrong.

On lower time frames like 15 min , I can read the market direction with candles,stochastics,trendlines etc

 

[Ambrose Ackroyd]

My philosophy on stop losses

1. Firstly determine the percentage of your trading capital that you want to place at risk on any one trade. eg. 0.5%,1%, 2% etc. etc. My preference is for it to be no more than 1%.

2. I have 4 "technical" stop loss levels starting with the initial stop loss ( S1).

3. S1 is the furthest from current price and S2, S3 and S4 progressively get nearer to the current price, with S4 right up behind current price.

4. S1 thru S4 are set at predetermined "technical" levels which I will not go into at this stage. There is no arbitrariness - they are set at specific levels which I have decided upon as being good levels and which work for me.

5. Size is varied up or down depending on where the initial stop loss falls. The wider the stop, the smaller the size and risk is never more than 1% of capital..

6. I day trade and I am very happy if any trade gives me 50 points.

7. I move my stops as follows :-

(a) After I reach 15 pips profit , I move stop from S1 to S2.

(b) After I get to 30 pips profit, I move stop from S2to S3.

(c) After I get to 50 pips profit I move stop from S3 to S4 and I am now right up behind the trade.


S1 to S4 progressively moves the stop towards current price.

On no account move stop backwards, if price reverses then stops will get hit at S4, S3,
S2 or S1.


Using this kind of method with a half-decent trade entry strategy will ensure that you never get clobbered for a big loss.

It works for me but feel free to knock it.

 

[Sang Froid]

Are stop losses any good?
In my early days I would follow the norm which I believed was 30 points I would see my position turn against me hit my stop loss and go my way, After begining to think it was a personal issue the market wanted my money (yes this 1.3 trillion market was conspiring against little old me)
I raised my stop loss to 50 points and the market still cheated me
Raised it to 100 points and now all the banks, hedge funds and private investors got in on the action took my 100 points and then went the way I originally expected

Now I never trade before an economic-news event.
Do not set a stop loss
If I set my entry/exit parameters right it might go down 200 points but it will come back up and let me come out at B/E or a small loss.
I know people will say it depends on how deep your pockets are.
Not very deep really
I aim to make 25 to 30 points a day times my stake, I treat trading as a job
As I am sure a lot of us do
Expecting Realistic returns on your capital, dedication lot of hard work
And taking few knocks should make you more than the average u.k salary

But would like to hear others views and experiences with stop losses.

Ok some great info in this thread not had time to read it all, but the first post by gamma hit the nail on the head for me.

Here's my quandry. I've started using a new strategy based on breakouts from Pivots and S/R as my T/P levels on a daily TF. The problem being that I've read and heard so much about good MM and RR ratios. So.... if my T/P is say at 40pips on R1 then I will set my stop at 25.. at a push 30. If my T/P is at say 50 my stop will be at 30. The problem being now is that while I'm making some nice consistent profits I'm also getting stopped out far too much in what looks like whipsawing action. Price takes out my stop then goes to hit my T/P.

I've heard so much about you must use stop losses etc... and the usual.... RR 1:2 blah de blah de blah. I'm making a bit of profit but at the same time not anywhere near what I could be making if I'd had no stops on for the last month? I could place my stop at the Pivot level but then often that would mean a far greater stop than a T/P which negates RR. Does this make sense?

I might follow gamma and go stop loss less... but after what happened to that tool mdebs it scares me a bit

 

[Sang Froid]

How about the theory that says; if your stop is not in the place that you could take opposite
trade to the one stopped, it was in the wrong place to start with.Only thing should change is the size of your position not the where the stop is placed.

Searchlight

:idea: It's ok problem solved, this makes perfect sense. Also think it was ODT who mentioned above about letting trades breathe, the only thing that worried me was there's breathing then there's hyperventilating.

 

[Hilarymannah]

Gamma,.. Personally, I use a 10pip stop,.I find it's ample indication in the event of a wrong move, using a 5 min chart.
I was originally taught, that a 30 pip stop is essential for " wriggle room ",..but have found to the contrary,... hope this helps! : )

 

[redart]

But then when do you get out of a loser? Are you risking your whole account on every trade you take in the assumption that a bad trade will 'come good' ?
Are we saying that Spanish89 was right all along?

 

[Sang Froid]

But then when do you get out of a loser? Are you risking your whole account on every trade you take in the assumption that a bad trade will 'come good' ?
Are we saying that Spanish89 was right all along?

I see your point and spanish stops are asking for trouble. I'm just sick of seeing my S/L hit only for the price to go where I thought it would pretty much straight after. Without trying to sound too emotional here... I'd prefer it if the price whacked out my S/L and then carried on going that way, than taking out my stop and reversing. At least that way I'd be wrong. At the minute I'm right but not reaping the benefits as my stop is too tight.

 

[Dinos]

There is no hard and fast rule regarding where you place your stop, this has to be where, after your trading analysis of the product you trade tells you where to place it, and at the end of the day its down to you.

For example (AND THIS IS NOT WHAT I DO), say you traded the M30 (trend) and enter the trend off the M1, for the purpose of this simple analgey, I will use the Parabolic Trend indicator only, eg we get an M30 green or long signal, and take every trading signal of the M1 into the trend, the psar levels between the M30 & M1 are different, it depends what or how you interpret the issue, a) are you trading the trend, and place the stop at the psar of the M30 and ride the (Trend) range higher and take in you stride any pullback which happens within the M30 trend providing the psar doesn't change, or do you trade trade the the M30 direction and take trades off the M1 into the M30 trend and use the (M1) psar stop to get out asap enabling you to bank the pips along the M30 trend, and enable you re-enter the trend again off the M1 into the trend, therefore, as close to the price action asap.

So many options I guess, its really is down to your trading strategy issues with regards Money management and risk / reward and I guess plain common sense

Think that makes sense, or does it??

 

[Splitlink]

I see your point and spanish stops are asking for trouble. I'm just sick of seeing my S/L hit only for the price to go where I thought it would pretty much straight after. Without trying to sound too emotional here... I'd prefer it if the price whacked out my S/L and then carried on going that way, than taking out my stop and reversing. At least that way I'd be wrong. At the minute I'm right but not reaping the benefits as my stop is too tight.

Have you ever considered, after planning where to put your stop, using it as an entry point? Lots of traders must be doing just that!

 

[Sang Froid]

There is no hard and fast rule regarding where you place your stop, this has to be where, after your trading analysis of the product you trade tells you where to place it, and at the end of the day its down to you.

For example (AND THIS IS NOT WHAT I DO), say you traded the M30 (trend) and enter the trend off the M1, for the purpose of this simple analgey, I will use the Parabolic Trend indicator only, eg we get an M30 green or long signal, and take every trading signal of the M1 into the trend, the psar levels between the M30 & M1 are different, it depends what or how you interpret the issue, a) are you trading the trend, and place the stop at the psar of the M30 and ride the (Trend) range higher and take in you stride any pullback which happens within the M30 trend providing the psar doesn't change, or do you trade trade the the M30 direction and take trades off the M1 into the M30 trend and use the (M1) psar stop to get out asap enabling you to bank the pips along the M30 trend, and enable you re-enter the trend again off the M1 into the trend, therefore, as close to the price action asap.

So many options I guess, its really is down to your trading strategy issues with regards Money management and risk / reward and I guess plain common sense

Think that makes sense, or does it??

Makes a little sense... too close to scalping for my liking, too many chances for me to overtrade, and Parabolics just look like a load of dots on my screen

I take your point though, by looking at different T/Fs there are multiple places where a stop could be placed. I'm interpreting your post as I think you are effectively saying don't place a stop at a set level i.e 30 pips for every trade but place the stop based on a level as determined by the market. If I enter a trade based on what the charts are telling me, and set a T/P at a level the charts are telling me, why then do I place an arbitary stop? At least I think that's what you're saying but I've not had a cup of tea this morning yet :cheesy:

I've just been reading up on ATR for stop placement and 2*ATR sounds intruiging. Will need to backtest over the weekend but food for thought.

 

[Sang Froid]

Have you ever considered, after planning where to put your stop, using it as an entry point? Lots of traders must be doing just that!

I have but found I was overtrading my account and more often than not was revenge trading for being wrong. Dangerous ground for me. I trade 6 pairs and one trade per pair per day. Right I'm right, wrong I'm wrong, but hate being wrong when I'm really right

This is just the rules I've written for myself to stop me overtrading which was a big obstacle for me to overcome.

 

[Splitlink]

Ah! If it's revenge trading, that's no good!

No, I mean the cold, calm decision to decide that where you put the stop is, probably, what the other side is thinking as a good entry point.

 

[foroom lluzers]

 

[darktone]

"Stops are for fools!" said a few great traders in the Schwager books. Seems reasonable in some cases