What is your strategy when a trade goes against you

[jperl 11]

You enter an intraday trade long, and the trade immediately goes against you.

What do you do? Here are several possibilities:

 

1)You exit the trade at your preset stop and wait for a new entry

2)When the price action hits a support point, scale in

3)When the price action drops below a support point, reverse the trade and increase size.

4)exit on the close of the day and take a loss whatever that is.

5)exit when my risk tolerance is hit.

 

There may be other options.

Let's here from you and tell us what you would do.

[walterw 10]

Me : option 1... cheers Walter.

 

pd : new entry would be complete new setup...

[TheBramble 10]

Option 1, but without the "...and wait for a new entry".

 

If you're wrong, you're wrong. Get on with frying other fish.

 

By the same token, just because you called it wrong last time, doesn't mean you stay shy of that stock. It has no memory of you.

[brownsfan019 17]

I am option #1 as well. There's no point of placing a protective stop if you have no plans to honor it. When you are wrong, get out. You can get back in when the time is right.

 

Now, with that being said, I think stop placement is key here as well. If you have a stop that is routinely being taken out and then the trade moves in your favor, you might need to adjust your stop placement methodology.

[Guest cooter]

I am option #1 as well. There's no point of placing a protective stop if you have no plans to honor it. When you are wrong, get out. You can get back in when the time is right.

 

Now, with that being said, I think stop placement is key here as well. If you have a stop that is routinely being taken out and then the trade moves in your favor, you might need to adjust your stop placement methodology.

 

Which also means that your entry might be suspect too. And thus your trade setup might not be truly valid.

 

Risking 4 points on a stop to earn 1 point won't make you much $$$ in the long run, will it?

[Soultrader 12]

Im a mixture of 1 and 3 except I dont increase size.

 

Depending on the area of S&R, I may have a stop double the size so it will reverse my position.

[brownsfan019 17]

Risking 4 points on a stop to earn 1 point won't make you much $$$ in the long run, will it?

 

I don't think so...

 

I also don't recall saying risking 4 pts to make 1 was a good idea either. :p

[brownsfan019 17]

Which also means that your entry might be suspect too. And thus your trade setup might not be truly valid.

 

I disagree. If your method says to enter based on XYZ, then you enter based on XYZ. We can't say the a setup is not 'valid' if you enter your trade based on the conditions you set. If your conditions are met, then that's a valid trade regardless if it's the greatest entry point possible. The point I was making was that the protective stop placement is very important, esp at the start of the trade. Reason being that many traders are too eager to place an initial stop too snug (since that provides comfort knowing you are not risking that much) or moving your initial stop too quickly (for sake of protecting that little profit). I constantly have to monitor my stop movement b/c I am eager to get that stop moved so that I can't 'lose'. Well, if you get ticked out of a trade that is a winner, you just 'lost'.

[Guest cooter]

I constantly have to monitor my stop movement b/c I am eager to get that stop moved so that I can't 'lose'. Well, if you get ticked out of a trade that is a winner, you just 'lost'.

 

So when do you move up that "wide" spread then? Sounds like a touchy-feely sort of "rule", rather than a hard-and-fast trade parameter, no?

[Guest cooter]

I disagree. If your method says to enter based on XYZ, then you enter based on XYZ. We can't say the a setup is not 'valid' if you enter your trade based on the conditions you set.

 

Sure, we can. Your ENTRY may be valid, but based on the faulty premise of your trade setup which may not be valid.

 

If your conditions are met, then that's a valid trade regardless if it's the greatest entry point possible. The point I was making was that the protective stop placement is very important, esp at the start of the trade.

 

 

And the point I was making is that your trade setup might not be valid to begin with, especially if you are always getting stopped out.

 

Of course, your definition of valid and validity might vary....

[wrbtrader 10]

You enter an intraday trade long, and the trade immediately goes against you.

What do you do? Here are several possibilities:

 

1)You exit the trade at your preset stop and wait for a new entry

2)When the price action hits a support point, scale in

3)When the price action drops below a support point, reverse the trade and increase size.

4)exit on the close of the day and take a loss whatever that is.

5)exit when my risk tolerance is hit.

 

There may be other options.

Let's here from you and tell us what you would do.

 

I'm a strong believer to map out the trader prior to entry.

 

Anyways, my contingency plan involves #1, #2 and #3 depending upon the price action at the time of the trade.

 

Mark

(a.k.a. NihabaAshi) Japanese Candlestick term

 

"Volatility analysis is a doorway to consistent profits."

[brownsfan019 17]

Sure, we can. Your ENTRY may be valid, but based on the faulty premise of your trade setup which may not be valid.

 

 

 

 

And the point I was making is that your trade setup might not be valid to begin with, especially if you are always getting stopped out.

 

Of course, your definition of valid and validity might vary....

 

Coot - how do we define 'valid' then? I guess that's why I'm not understanding here...

[Guest cooter]

Coot - how do we define 'valid' then? I guess that's why I'm not understanding here...

 

 

Simple. Validity refers to (in this context) a strategy that yields a statistically significant positive expectation of return (assuming that was the result you intended to achieve).

 

Remember, you can design, test and implement a strategy that does not yield a positive/winning result.

 

And you can enter and exit correctly per this setup.

 

Just because you execute this setup correctly, does not make it a winning strategy if the premise upon which your strategy was designed was flawed to begin with.

 

And that's my point.

[brownsfan019 17]

So you are saying that if the strategy itself is flawed, your doomed no matter what, right?

 

If so, doesn't that go w/o saying? I mean, a losing strategy will lose over time no matter what. Hopefully everyone here understands that basic premise.

 

My point was that you can in fact have a winning strategy that is easily turned into a losing one b/c of stop placement and stop movement. Therefore, if you find yourself often watching trades go in the direction you wanted but only after being ticked out of the trade, examining the stop placement is needed. And that minor change can make a big difference. And back to the topic on hand - if you are 100% comfortable in your stop placement, then you simply allow the stop to be hit (to prove you are wrong) or let the trade go.

[dalby 10]

"If you have a stop that is routinely being taken out and then the trade moves in your favor,"

 

if that is ROUTINELY happening, then i agree - the trade setup IS faulty.

 

clearly, you should set your ENTRY where this "setup" places the stop

 

cause if the stop is hit there constantly, then it moves in your favor, then THAT is where you should be entering.

 

that's kind of self-evident

 

a big part of my trading is knowing how retail trades - where they place their stops and entries because then i know how to trade - NOT like retail. after all, most retail traders lose money

 

if u enter at price X, and price routinely takes out your stop at X-10, why not set your ENTRY at X-10?

[Guest cooter]

Unfortunately, this is the kind of "self-evident" stuff that supposedly "goes without saying" which trips up many a trader, newbie and seasoned alike.

 

Just because one may "think" his or her trade setup is "valid" does not make it so. Analyzing and breaking down your flawed and winning trades can help pinpoint the errors in recognition or execution, and determine whether the strategy was really worthwhile after all.