STOPS: where do u put yours?

[grubs50]

I just wanna see how most ppl decide on where to put their stop-loss when they embark on a trade (day, swing or even position) and if u don't believe in using STOPS can u please give your reasons.
Do u ever move it backwards(increase it)? Does it depend on what u r trading or the instrument u r using ? or even whether u r going short or long?
Personally i use a predetermined number of points but i still feel there r better ways of determining it so ur various views would be of great help hopefully.

 

[rossored]

Personally I just used a fixed number of points, and make sure that I get the entry within those parameters. If I cant, then I wont trade, simple as that.

I never move the stop away from the entry once I'm in, and I never trade without one either.

 

[JTrader]

On FTSE100 shares, 2-3 points max stop loss from point of entry.

 

[anley]

How about working backwards. Seeing what sort of profit potential you're looking at and then deciding what sort of stop looks viable.

Potential profits and potential losses work hand in hand.

 

[grubs50]

Anley, do u mean using money management as a basis for deciding? isn't that what most ppl do?

 

[Cigar]

To be honest.. its 'pain level', which co-incides with about 5/6 points on the Dax futures. Maybe I should trade a lower value contract but I like the Dax.

 

[donaldduke]

To quote quote Dr Tharp:

"Most good traders would agree that risking less than 1% of
equity in a trade (where 1% is the amount you would lose if your
stop loss was hit) is a prudent risk. Risking between 1% and 3% gets into the gunslinging range. Risking any more than 3% is usually financial suicide and the average trader commits financial suicide all the time without knowing it."

What Dr Tharp is saying, is if you have 10,000 pounds you
shouldnt risk more than 100pounds (1%) on any one trade.
You can use this to figure out where your stop should go.
If you risk between 2-3% you will get much wilder swings in
both your profits and losses.

If you are beggining trader you should alway put your stops on
via your broker (rather than mental stops).
The temptation to let a bad trade run is very great...

 

[oatman]

If your entry is based on support/resistance so should your stops.
I try to use a trailer once there's enough in the bin to show a bit of daylight.

 

[china white]

in my case - 0.3% trail = 3.25 pts on ES for "normal" trades, fixed 1.5 pts on scalps with the same trgt

 

[grubs50]

Does the 1-3% rule apply only to day-trading? ...cos IMHO it would require a substantial starting capital to be able to apply it to swing or position trading esp the DOW futures

 

[donaldduke]

grubs50,

It should applie across all types of trading.

It dependends on how much you want to make... And how often
you plan to trade (ie how often you get valid entry setups).

You could get away with a smaller amount if you get frequent
setups you can put your money to work more often and get a
higher return.

If trades are infequent youll need more capital so you make
a larger dollar amount per trade.

 

[grubs50]

Donaldduke,
so u r then implying that one needs, at least £5000, to start swing trading (cos d stop obviously needs to be placed further away).........most ppl tend to start with far less than that..........lol.

 

[donaldduke]

You can swing trade with any amount of money even
£100, but you if you trade propertly ie set you stops around
1-3% and you hope to make 2-10% on your winners.
Then on the whole you aint you going to make much money
(in absolute terms, atleast until you can compound up)

However people with small amounds of capital tend to
set stops at say 10 or 20 (or 50%).. This leads to wipeout
sooner rather than later.

 

[grubs50]

my point exactly! it won't be easy to adhere to the rule with small capital.

 

[Grey1]

The 1% rule guarantees that ( theoretically ) a trader NEVER goes bankrupt and if he has a winning strategy, the edge will kick in to save the trader's capital .. How ever if he does not have the edge then nothing can save his fate.. he will go downnnnnnnnn.,,



Regards

 

[Grey1]

There is a minimum level below which day trading becomes very risky ..( one can not apply proper risk analysis to his trade .. Minimum fund concept ) For US stocks this limit is 25K ..

Regards

 

[grubs50]

Grey1, what do u consider as the minimum level 4 swing trading?

 

[Grey1]

grub,

I am not sure if I know the answer to this question as we have to define the maximum/minimum time frame in the swing trades .. I think the general rule is that the longer the time frame the less noise trading and hence less risk .. As a result one would need lesser capital ..

regards

 

[grubs50]

i'm thinking 1-4/5 days max

 

[adrianallen99]

To get my stops I work out the daily range over a 20 day moving average. I then calculate the average daily price range, and times this by 2 to get a valid stop.

There are old traders and bold traders - but there are no old bold traders. Don't use stops at your peril, decide on your stops before entering the trade - and never move them except in the case of a trailing stop where it will move with the trend.