Stop Losses

[BSD]

Again, I'm choking off nothing. If the dynamics called for it, and price were to resume the advance, I'd re-enter. I prefer that to sitting on my hands and hoping. It's also cheaper.

Nothing could be more expensive.

I think the only thing you're doing is creating lots of business for your broker by churning your way out positions that could become great trades.

I totally ignore individual bars or candles, I just look at significant swing lows / highs, until they are breached I'm in, following the path of least resistance until it's clearly over.

Again, I believe your approach has more to do with not being willing to accept losses or sit through minor retracements on the way to greater profits, and again, nothing goes straight up, your main focus is on being right, NOT on maximising profits.

 

[new_trader]

There are already some disagreements on this thread, but I'm inclined to add another one... tight stops can lead to the proverbial "death by a thousand cuts". Placing your stops closer because you don't have enough money to lose, is just waiting for them to be taken out.

The only thing you should be doing until you are proficient - imho - is not putting real money on the line.

Paper trading doesn't address all the issues necessary to become a proficient trader. Whilst study and practice is absolutely essential and invaluable, when you attempt to put what you have learned into practice with live trading you must trade with tight stops. I do about 3 paper trades for every live trade. I also spend many hours studying and practicing outside of market hours or when I don't have access to the market.

 

[dbphoenix]

Nothing could be more expensive.

I think the only thing you're doing is creating lots of business for your broker by churning your way out positions that could become great trades.

I totally ignore individual bars or candles, I just look at significant swing lows / highs, until they are breached I'm in, following the path of least resistance until it's clearly over.

Again, I believe your approach has more to do with not being willing to accept losses or sit through minor retracements on the way to greater profits, and again, nothing goes straight up, your main focus is on being right, NOT on maximising profits.

Since I rarely make more than two trades a day, I doubt my broker is yachting on the proceeds. And since your example hinged on individual bars, where else would you enter?

As for my focus on being right, of course. Why would I want to sit in a trade if I'm wrong? And as for maximizing profits, I seem to be in trades far longer than most people since I'm not frightened out by every little twist and turn.

 

[BSD]

Like I said I only regard swings, individual bars are entirely meaningless to me.

since I'm not frightened out by every little twist and turn.

And if you don't call this exiting with absolute peanuts for absolutely no good reason, I don't know what is:

Okay, example:

Assuming entry at "X", I'd be out.

"Jesse Livermore

I made up my mind to be wise carefully, conservatively. Everybody knew that the way to do that was to take profits and buy back your stocks on reactions. And that is precisely what I did, or rather what I tried to do; for I often took profits and waited for a reaction that never came. And I saw my stock go kitting up ten points more and I sitting there with my four-point profit safe in my conservative pocket. They say you never go broke taking profits. No, you don’t. But neither do you grow rich taking a four-point profit in a bull market.

I think it was a long step forward in my trading education when I realised at last that when old Mr Partridge kept on telling other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements-that is, not in reading the tape but in sizing up the entire market and its trend. "

That's you going after individual fluctuations.

You took a far too premature profit because you cut short a trade for which absolutely no reason exists, as all you had to go on was one single bar, but rather than give your trade room to breathe and develop, you cut your winner short.

 

[firewalker99]

Paper trading doesn't address all the issues necessary to become a proficient trader. Whilst study and practice is absolutely essential and invaluable, when you attempt to put what you have learned into practice with live trading you must trade with tight stops. I do about 3 paper trades for every live trade. I also spend many hours studying and practicing outside of market hours or when I don't have access to the market.

I don't see what other "issues" there could be, apart from somebody not being able to following his plan but that have more to do with the plan not being clear... Anyway, my average stop size on the DOW is about 30-40 points (my average targets are about 100-150 points). Last year in February the average daily range was about 40 points. Am I using tight stops?

 

[BSD]

my average stop size on the DOW is about 30-40 points (my average targets are about 100-150 points). Last year in February the average daily range was about 40 points. Am I using tight stops?

Great trade management there !

 

[dbphoenix]

You took a far too premature profit because you cut short a trade for which absolutely no reason exists, as all you had to go on was one single bar, but rather than give your trade room to breathe and develop, you cut your winner short.

Again.

If I were to enter above the "poke bar" as your example provides, I would exit if price did not move in the anticipated direction rather than sit and hope that it would "develop", much less wait for price to hit my stop. If price then resumed the move, I'd re-enter.

If this style doesn't appeal to you, that's perfectly fine. Yours doesn't appeal to me, either. But we're not trading each other's money, so who cares? Those who are reading all of this can take from it what helps and reject what does not. That's the point -- or at least one of them -- of forums such as these.

 

[Rhody Trader]

...when you attempt to put what you have learned into practice with live trading you must trade with tight stops.

I will reiterate - trade small, trade small, trade small.

If you use tighter stops than your system says you should use you're doing two things. First, you are teaching yourself not to follow your system. Second, you are increasing the odds that you take a loss, so you're degrading the performance of your system. That, in turn, will probably encourage you not to believe in the system in the future.

 

[new_trader]

I don't see what other "issues" there could be, apart from somebody not being able to following his plan but that have more to do with the plan not being clear... Anyway, my average stop size on the DOW is about 30-40 points (my average targets are about 100-150 points). Last year in February the average daily range was about 40 points. Am I using tight stops?

Proficiency is when you can predict the turning point and direction of the market with near certainty and this is done through study and practice. You must also develop the confidence to back up your opinion with money and this can only be accomplished through live trading. The issue about stops and where to place them will make more and more sense throughout this process.

 

[BSD]

If this style doesn't appeal to you, that's perfectly fine. Yours doesn't appeal to me, either. But we're not trading each other's money, so who cares? Those who are reading all of this can take from it what helps and reject what does not. That's the point -- or at least one of them -- of forums such as these.

I still don't have a clue what you're on about that you hope to achieve sans the benefit of a crystal bar and all on the authority of a single bar per where you said you're leaving the virgin trade in my example above, with nary a countermove or retracement of any definable sort in sight anywhere, but that last part is definitely true enough.

So we'll just agree to disagree.

 

[firewalker99]

Proficiency is when you can predict the turning point and direction of the market with near certainty and this is done through study and practice. You must also develop the confidence to back up your opinion with money and this can only be accomplished through live trading. The issue about stops and where to place them will make more and more sense throughout this process.

Seems like we'll have to disagree on that one... Proficiency - at least in my book - has to do with being able to clearly identify which signals you are looking for and trade those signals as per your plan. Trying to predict the exact turning point might be a fun exercise, but apart from that, why bother?

As for 'the issue about stops'... if it only starts to make more sense during the period of live trading and not before, well...

 

[new_trader]

Seems like we'll have to disagree on that one... Proficiency - at least in my book - has to do with being able to clearly identify which signals you are looking for and trade those signals as per your plan. Trying to predict the exact turning point might be a fun exercise, but apart from that, why bother?

As for 'the issue about stops'... if it only starts to make more sense during the period of live trading and not before, well...

You quoted me out of context but I think I should still clarify by changing the last sentence to - "Throughout the whole process".

 

[firewalker99]

I still don't have a clue what you're on about that you hope to achieve sans the benefit of a crystal bar and all on the authority of a single bar per where you said you're leaving the virgin trade in my example above, with nary a countermove or retracement of any definable sort in sight anywhere, but that last part is definitely true enough.

Perhaps - considering the fact that dbphoenix first stated he wouldn't take that signal in the first place - it is conceivable that - assuming you are to take a trade based on a pattern of which you aren't entirely convinced it has a high enough chance of succeeding - you will want to see it move in the right direction immediately.

On other occassions, (different pattern, different situation, different price action), where you see a trade that has a high probability of succes, you won't exit on the account that the first couple of bars/candles/... don't exhibit the behaviour you are expecting to develop, but instead you hold on and see what hand the market deals you.

From that perspective, decisions are made based on the market dynamics, but also taking into account the context of the decision. Having said that, this would mean it is perfectly okay to on one occasion exit rather quickly after the entry if it does not do what you expect it, and on another occasion hold on a bit longer. Context, price, dynamics... am I making sense?

 

[chump]

BSD,
the point your are missing is that every trade has a 'style' that reflects what is going on technically to price at a specific point in time. In your example you will note that the 'style' for price when this setup works is for it show almost a unidirectional sense.That is bid and ask spreads (increased volatility) ,offers little or no buy the correction (dip) opportunity, being an a abrupt reversal of sentiment where people have only just taken a breakout you now have this shock value of people scrambling to cover ..etc etc which is why it is almost "unidirectional". All of this is what makes this setup 'style' .It's also why if tha 'style' does not manifest there is no point in sitting and waiting and watching price take your stop out.
For example...this pattern below..has no resemblance to what we were expecting. Not close enough to even wonder so why wait for the maximum excursion loss unless that is we are simply hoping it will still go our way ?

I suspect what we have here is a more fundamental difference seated in the style of trading we prefer..that is more discretionary as opposed to more mechanical and that is really just a personality thing about which there is no universal right or wrong.

 

[BSD]

Perhaps - considering the fact that dbphoenix first stated he wouldn't take that signal in the first place - it is conceivable that - assuming you are to take a trade based on a pattern of which you aren't entirely convinced it has a high enough chance of succeeding - you will want to see it move in the right direction immediately.

On other occassions, (different pattern, different situation, different price action), where you see a trade that has a high probability of succes, you won't exit on the account that the first couple of bars/candles/... don't exhibit the behaviour you are expecting to develop, but instead you hold on and see what hand the market deals you.

From that perspective, decisions are made based on the market dynamics, but also taking into account the context of the decision. Having said that, this would mean it is perfectly okay to on one occasion exit rather quickly after the entry if it does not do what you expect it, and on another occasion hold on a bit longer. Context, price, dynamics... am I making sense?

Absolutely, that makes perfect sense.

Although my example was just intended as an example, never minding if one liked it or not, ie it was just intended as an example to let DB explain his point which I feel just isn't coming across by demonstrating with a picture, always the best way to explain stuff.


Eg I think I'm explaining clearly enough what I'm doing.

Not saying at all that that is the only way or even the best way, but at least people can follow what I'm on about.

I trade my setups the same old way over and over, I go in and say I have no clue what will happen next, I'll just let price show me, while giving price rope to breathe.

For me a setup like the 2B is valid until price shows me I'm wrong by invalidating the setup.

If you're trading moving averages crossovers you've backtested a long signal is only invalidated until the MA's cross back over again.

Again, MA's just by way of explaining my point.

I'm out with a loss only if the setup is invalidated.

If price goes my way, I try and pull my SL up to breakeven as quickly as possible.

And, once that happens, I just trail my profits.

In other words, I just always let the market show me what's happening, I never anticipate whats going to happen or cut a trade short arbitrarily when there is nothing to warrant that.

I just try and hang on as long as the trend is going my way, fully accepting that a trend is not a straight up development, it's ensuing higher highs and higher lows, meaning if I want to maximise my gains, I need to be able to sit through retracements.

To be honest, I do not believe it is possible to catch every swing in the market, for the simple reason that I believe anything can happen in markets at any time, all it takes is one massive order to totally change the technical picture.

My example of the 2B was just an example to let DB show us his trade management to explain the point he is making about stops being nonsense, but I just really do not understand at all where there is anything even remotely resembling a reason to exit the trade here where he says he'll be out:

Okay, example:

Assuming entry at "X", I'd be out.

Particularly in view of this statement:

And as for maximizing profits, I seem to be in trades far longer than most people since I'm not frightened out by every little twist and turn.

I suspect what we have here is a more fundamental difference seated in the style of trading we prefer..that is more discretionary as opposed to more mechanical and that is really just a personality thing about which there is no universal right or wrong.

Chumps Pic:

Chump, I do get your point.

But, and that is where styles really do differ, to me that's still a viable signal, on the grounds that to me trading is at the end of the day just a probability game, it is just a numbers game, not a game of predicting what will happen next, which in essence one is doing by exiting when it's not going straight up.

Just because it isn't going straight up right away isn't to say that it won't at all, which would offer me a great trade.

Catching every single swing just isn't feasible I think, all that leads to is churning up your execution costs while jumping in and out too much.

But then, different horses fro different courses.

;-)

 

[tune]

If what you expected to happen did not happen, getting out as soon as you realise that it is not happening sounds like a fair idea.

 

[dbphoenix]

In other words, I just always let the market show me what's happening, I never anticipate whats going to happen or cut a trade short arbitrarily when there is nothing to warrant that.

Neither do I . . .

But you and I have different criteria for invalidation. Can you not just accept that and let this go?

 

[BSD]

If what you expected to happen did not happen, getting out as soon as you realise that it is not happening sounds like a fair idea.

But that's the thing, if you're going for a big multi R move, a move in other words where you will be sitting through retracements, then you don't really know what will or won't happen unless you give a trade room to breathe and develop.

But that said, and as DB says above, to each their own.

Have a nice weekend all.

 

[rathcoole_exile]

If what you expected to happen did not happen, getting out as soon as you realise that it is not happening sounds like a fair idea.

what if you have no expectation ?

 

[rathcoole_exile]

Chumps Pic:

Chump, I do get your point.

But, and that is where styles really do differ, to me that's still a viable signal, on the grounds that to me trading is at the end of the day just a probability game, it is just a numbers game, not a game of predicting what will happen next, which in essence one is doing by exiting when it's not going straight up.

Just because it isn't going straight up right away isn't to say that it won't at all, which would offer me a great trade.

Catching every single swing just isn't feasible I think, all that leads to is churning up your execution costs while jumping in and out too much.

But then, different horses fro different courses.

;-)

I'd welcome the 2nd low, the retracement as a second opportunity to add to my Long positions