Trading with an edge

the hare said:
So how do you you handle the situation when it doesnt come back, surely you need some sort of line in the sand ?

I tend to set initial stops based on MAE and quite often they'll get hit and I'm OK with that. For some stuff I use no stops and timed exits (other than a 10% disaster stop which thankfully has never been hit). Some years this seams to work much better, and sometimes not , but I will certainly close a pozzy if I see an adverse move and an increase in volatility (I use a method based on a technique Chuck Le Beau suggests which IIRC he calls a YOYO stop).

What I will say is that every bit of retrospective analysis that I've ever done suggests that I should / could be using far tighter stops than I do (I dont do it because I fundementally disagree with any type of walk forward optimisation on the grounds that at some point mean reversion kicks in and it comes back and bites you on the ass) My current strike rate isnt particularly high, so cutting losers quickly tends to work well for me, whereas previously I had a very high strike rate, and was generally quite good on getting entries in the right ballpark so holding through some adverse movement and using a wider stop made far more sense and usually worked out.

I dont think there's a one size fits all answer to this particular question, you just have to do what fits in with the overall philosophy. I know momentum traders who believe that if the entry isnt immediately in profit they'll take a loss, and that works well for them. I also know guys who'll average in and tolerate a great deal of heat, and that works for them.
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Any price which is good to buy or sell should keep the trade in profit. The price not going the way it is intended to is a good time to reverse the trade.
 
nunrgguy said:
Those things don't lead to incorrect stop placement either?
I'd also add, lack of discipline to close trades out, instead replying on a stop.
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You didn't say "incorrect stop placement", you said "tight stops are the number 1 killer". If you can back this up with research (and I doubt very much you can) then I will retract what I said, if not, what you said is spurious. Do you think wide stops would make more traders successful?
 
the hare said:
So how do you you handle the situation when it doesnt come back, surely you need some sort of line in the sand ?

I tend to set initial stops based on MAE and quite often they'll get hit and I'm OK with that. For some stuff I use no stops and timed exits (other than a 10% disaster stop which thankfully has never been hit). Some years this seams to work much better, and sometimes not , but I will certainly close a pozzy if I see an adverse move and an increase in volatility (I use a method based on a technique Chuck Le Beau suggests which IIRC he calls a YOYO stop).

What I will say is that every bit of retrospective analysis that I've ever done suggests that I should / could be using far tighter stops than I do (I dont do it because I fundementally disagree with any type of walk forward optimisation on the grounds that at some point mean reversion kicks in and it comes back and bites you on the ass) My current strike rate isnt particularly high, so cutting losers quickly tends to work well for me, whereas previously I had a very high strike rate, and was generally quite good on getting entries in the right ballpark so holding through some adverse movement and using a wider stop made far more sense and usually worked out.

I dont think there's a one size fits all answer to this particular question, you just have to do what fits in with the overall philosophy. I know momentum traders who believe that if the entry isnt immediately in profit they'll take a loss, and that works well for them. I also know guys who'll average in and tolerate a great deal of heat, and that works for them.
Click to expand...

There is a line in the sand as you put it yes. But as long as, in this instance a day does not close below it the trade is still valid.

Support and resistance levels on larger charts tend to be big zones. Where folks can go wrong is imagining them as single prices where price is going to exactly turn and also not taking near term volatility into account.

Daily resistance could get probed many days on the trot before taking off in the direction imagined. Now if the plan is to hold the trade for days or weeks for hundreds, maybe thousands of pips how many losses can a trader take (at full size no doubt with 'scalper' mentality) with small, tight, "'safe' stops in order to preserve capital". Either the account will blow or psychology will. Even if the trader gets cleanly in no doubt the exit will be for 50 pips because the stop was 25 and there's a 'big trade' coming in the opposite direction:LOL:

No trader has ANY idea if any level is going to hold until it does. Any pure retail trader that says otherwise is full of it imvho:LOL::LOL::LOL:. Which is why giving out price predictions, stop levels and all the rest of the wall p11sing competition nonesense is pointless. Yeah I'll call you high probability levels in advance till the cows come home. Here you go: EU 1.48604-1.51456. Price may not even get there again, even if it does it's hit once and come off, it may go through next time.

Anyway, if price shoots straight through and either hits my stop, or it was going my way but comes back on me after I've added, closing below my average price (note CLOSING not just hitting it), I lose. What do I lose? Around 1% usually. If I close because a day closes against me in this instance I lose less than 1% if I have not yet added to my position. I'm always smallest when I first enter and add as the trade goes in my favour. But what I'm not going to do is enter at full size, put my stop in that area and keep getting knocked out: it's head against wall trading. Not only is the market eating you up but you're beating yourself up too. It's funny how those in a rush to be rich end up poor.

In a nutshell all I effectively do is have a plan and an idea of where price may go from and to. If I think it will go far enough (all I am doing is guessing) I think about entering. I then probe the market with minimum size and add at certain points when I'm proven right. If I'm proven wrong I get out for a small loss. Nothing magical or spectacular at all. Trading is guessing mixed with a little experience, trade and money management ultimately. People who talk about skill etc are frankly kidding themselves.

I've not heard of Chuck Le Beau 'YoYo'. Got any linx?
 
kausty said:
Sorry, I am not very well read and definitely not a technical analyst. I am just a poor soul. All I believe is that any price that is good enough to buy, below it should be good enough to sell back and vice versa ?
Click to expand...

Every price has been bought and every price has been sold
 
new_trader said:
You didn't say "incorrect stop placement", you said "tight stops are the number 1 killer". If you can back this up with research (and I doubt very much you can) then I will retract what I said, if not, what you said is spurious. Do you think wide stops would make more traders successful?
Click to expand...


You are quite right
 
Last edited:
Even on a day when the Sensex is doing nothing, there have been 5 great trades from the top 10 stocks in the index......anyone took INFO, ICICIBC, LT, TCS or BHARTI today ?
 
Sorry guys. I have been told not to direct anyone to my blog, but I need traffic there and so I will not be posting the prices here.
In any case I am on IndiTraders and DesiData.
Bye
 
Performance for 27th June is put up.
Will put up the price points in a couple of hours.
 
I have posted the prices for tomorrow the 28th July. Anyone interested can check it out. As I cannot post the blog link here, whoever is new can check me out at IndiTraders or DesiData.....I am still Kausty there.
 
Performance for 28th June is put up. 1st loss in 2 weeks !!
Will put up the price points in a couple of hours.
 
For 29th June, 2011
SENSEX : Buy above 18,529 with stop loss below 18,492
Sell below 18,268 with stop loss above 18,325

For the price points for the top 10 SENSEX stocks you can check the blog out. You can find me at IndiTraders or DesiData
 
For 30th June, 2011
SENSEX : Buy above 18,716 with stop loss below 18,551
Sell below 18,551 with stop loss above 18,716

For the price points for the top 10 SENSEX stocks you can check the blog out. You can find me at IndiTraders or DesiData.

Performance for 29th June is also put up.
 
For 1st July, 2011
SENSEX : Buy above 18,875 with stop loss below 18,722
Sell below 18,722 with stop loss above 18,875

For the price points for the top 10 SENSEX stocks you can check the blog out. You can find me at IndiTraders or DesiData.

Performance for 30th June is also put up.
 
For 5th July, 2011
SENSEX : Buy above 18,944 with stop loss below 18,872
Sell below 18,779 with stop loss above 18,897

For the price points for the top 10 SENSEX stocks you can check the blog out. You can find me at IndiTraders or DesiData.

Performance for 1st July is also put up.
 
For 6th July, 2011
SENSEX : Buy above 18,840 with stop loss below 18,780
Sell below 18,692 with stop loss above 18,725

For the price points for the top 10 SENSEX stocks you can check the blog out. You can find me at IndiTraders or DesiData.

Performance for 5th July is also put up.
 
Back after my holidays.....regular updates again at the blog till my next holidays !!

For 18th July, 2011
SENSEX : Buy above 18,627 with stop loss below 18,512
Sell below 18,448 with stop loss above 18,627

For the price points for the top 10 SENSEX stocks you can check the blog out. You can find me at IndiTraders or DesiData.

Thanks
 
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