Daily stop loss/profit targets

[Sparrow 10]

Hi,

 

I thought of sharing this article with the community, it's about calling it quits if you hit your daily stop loss targets and not try to get back your losses.

This can protect you from steep set backs.

 

Cheers

[MrPaul 10]

Sparrow,

 

Thanks for the article, it was refreshing!

 

I can certainly relate to this passage...

 

"If you have been day trading more than a few weeks, I am sure you have experienced that one, terrible day where you look back and ask yourself, “Why didn’t I stop trading after I was down X amount of dollars?†or “I cannot believe I made $500 each day the last three days only to lose $2,500 today because I could not walk away.â€Â

 

I can remember one week I was up about $4,600 by Friday afternoon on the week. By the time the closing bell rang I closed the week out down nearly $5,000 (total losses near 10,000)! That was the single worst day I have ever had trading. I was really undisciplined and arrogant back then :crap:

 

It's all a trial by fire though. Some people just get burned more than others on the way to the top!

[BlowFish 10]

Been there MrPaul - I guess all but those that start out incredibly disciplined have. I think the emotional damage is probably more severe than the financial damage.

 

On the other side side sometimes a coupled of early losses can sort of harden your resolve and you actually really knuckle down and trade well.

 

I guess the key thing is to follow your plan. If you can do that after setbacks (or successes) maybe you don't need the safety valve. If you are prone to going 'off piste' then perhaps limits are good. Pretty much an individual thing.

[Sparrow 10]

Imo it's not only about having troubles with discipline, sometimes the market might act a lot different to what you are used to and your setups fail.

Just having a bad day can be a reason for draw downs for a successful trader.

Blowing more than 10% of your capital e.g. on one day is really a waste, better get back to the drawing board earlier or just stay on the sidelines.

[Er2Junkie 10]

the main problem is that you have to force yourself to see the longrun picture. Even if you stick to every rule you will still face loosing streaks. What really helps me focus is just look at screenshots of good trades I made over and over again. Positiv attitude is half the game.

 

That said I still haven't been able to walk away once I am having a bad day, but I refocus quite fast and my max drawdown has never been out of control.

[torero 10]

It's hard to see tomorrow as a bright future when you're down and want to see it your drawndown reversed. But it's inevitable, the emotional state is already disturbed and contaminated. Any more of those will get the drawdown spiral down even more. Get out while the getting is good. I have those days, I usually fool myself by saying the market is not right today so it gives me a reason to stop trading the rest of the day. But if I convince myself that it's me that needs to do right, that's when that convincing will get me back in and do more harm.

[Hlm 10]

Not sure if this concept has been discussed already but here is a thought:

 

Treat your daily stop no different than you treat your trading stop. It is kind of like trading off your PnL. Trail the stop as the day moves on and your PnL goes up (hopefully).

 

For Example...

 

When I start trading I have a daily stop that is determined by both how much I can make in a day and the type of market condition I expect. In general I do not like to lose more than I can make back the next day. As the day moves on I will move my stop up depending on what the market condition actually is and how well I am doing. During lunch times I usually have another stop above my daily stop. This allows me room to play the lunchtime (if I want to) without getting whipped out for the day in slow volume times. For example, many of you in the chat room saw me hit my lunchtime stop a few days ago. As for targets, I can’t really say I have any (personal choice).

 

Of course this may work for some of you and not for others. It also depends on how well you are at trailing stops. However, I do feel that it is VERY important to have a daily stop that you can make up quickly. Every trader has a bad day. Yes, some days you would have made it all back and more if you kept trading. But I assure you, there are many more where you would have been wiped out.

[torero 10]

Sounds like a great approach. Why haven't thought of that. I would certainly look into this one. To be honest, I haven't come across many books or seminars talking about money management on a daily basis, but this is certain a nugget to take from. Thanks hlm!

[angelaktariel 10]

Great article indeed. I am too new, so haven't had a chance to make too many mistakes, but these kind of articles certainly help me get the right discipline, or at least know what I should be shooting for as far as the type of discipline I need to have to make and keep the profits I earn. By nature I am not a gambler (don't like to loose my hard earned money), so I am learning how to make profit and when to get out, whether by making enough profit by what I set out for myself, or with the right stop loss, in case a trade decision has gone wrong.

 

Thanks!!!

 

Eva

[Pastora 10]

Thanks for the info!

Pastora

[brownsfan019 17]

And here comes the PITA

 

I think it really comes down to YOUR trading styles and what YOUR personal research has shown about this very topic.

 

Example: I know that I will hit rough days. It's to be expected. Friday was one of them. I also know that there are plenty of days where I will take a few losses initially and then the next few trades take it over. Now, if I was not around for those winners, I'd be upset.

 

But, THAT'S ME AND MY TRADING STYLE. I KNOW what to expect based on how I trade.

 

Point is that I do not care for 'one size fits all' approaches b/c it simply does not work in trading. I can prove this article as a complete and utter farce; meanwhile, HLM and others could probably prove the merits. There is no right answer here, but there is always two sides to the coin.

 

Once YOU KNOW what works for YOU, then you can decide whether a stop loss target is a good idea or not. It obviously works for HLM but I know that it works for him b/c he's already done the research. I have no doubt that HLM has done the research and work necessary to be able to say what he did.

[DbPhoenix 42]

There is no right answer here, but there is always two sides to the coin.

 

Unfortunately, it's more like a dodecahedron. And therein lies the rub.

[Hlm 10]

Once YOU KNOW what works for YOU, then you can decide...

Exactly...in this business there are many ways to get the job done. The money management I described works very well for MY style of trading. I probably play much tighter than your standard active daytrader. When possible I like to save the gambling for the poker table . The main purpose of my post was to show an example of a dynamic style that's different than what's normally taught. I do feel very strongly that one should have a thought out daily stop placed in advance. How much and if it's dynamic depends on your style. I will leave it at that before I start quoting Kenny Rogers song "The Gambler".

[brownsfan019 17]

Exactly...in this business there are many ways to get the job done. The money management I described works very well for MY style of trading. I probably play much tighter than your standard active daytrader. When possible I like to save the gambling for the poker table . The main purpose of my post was to show an example of a dynamic style that's different than what's normally taught. I do feel very strongly that one should have a thought out daily stop placed in advance. How much and if it's dynamic depends on your style. I will leave it at that before I start quoting Kenny Rogers song "The Gambler".

 

:o

 

Key is to find what works for you.

 

Now, back to PokerStars.

 

:rofl:

[Sledge 13]

I'm looking to transition to an even longer term trader- trading off Daily charts. I trade Forex and would like any insight as to stop loss (in this case it would be profit protection)

I'm aware that it depends on the currency. Anything with CAD or JPY you must allow larger spread, but I don't want to set it so tight, I cut my profits short- I want the winners to run.

 

Anyone trade Daily Forex charts that may lend assistance?

Trailing Stops may be for fools, I have been experimenting with them for years, on and off, and seem to be too tight (even 85 pips) at times.

Sledge

[BennyHey 10]

We've all heard this one: Let profits run, cut losses short"

 

When you have a daily Profit Target you are in effect not letting your profits run. I also think it adversely effects your trading psychology. How will you ever know what you are capable of making in a day if you are automatically quitting at a set number??

 

Have a great week ya'll

[SwingTradinJay 10]

I think the idea of a daily MAX loss-stop loss...

 

is to prevent a sort of burning-of-the-cash jumping into the fire behavior?

 

Because once your down, you're going to make bad trades, even the best do it, I've seen it happen to an awesome trader friend of mine...

 

It's all about understanding how YOUR own self will react to loss, and taking protective measures to trade another day. And in futures and FX, you must be careful and logical (while still taking defined risks).

 

There is a fine, fine line between gambling, and trading..

Folding early in texas hold em is a strategy I use often, and I also "fold" or stop out early in trading too, because the market is like a black hole if you're not careful!

[hedonQ 10]

The daily stop maybe designed to limit your capital commitment where the market might not be as fluid.

Of course, you need to know if this applies. Or maybe your trading skills for the day are not where they should

be to manage your profitable trades.

 

I always operate from two angles

1. my setups are profitable over time

2. preserve the capital.

 

There's some distribution of losing and winning trades. Approaching the daily stop loss, I can

cut the size in order to execute extra few more trades beating the loser/winner distribution.

This is a sort of defensive mode. It allows you to take that extra trade where you normally wouldn't if

your daily stop is hit. Even at the reduced size I can make up the losses with a one or two

good trades.

[ptcm88 10]

I have been having same problem. It's so hard to walk away when you're down.

 

result this week

 

mon: +$290

tues: +$220

Wed: +$820

Thur: +$60

Fri: guess what ? -$1,260

 

I was very sick about it. Could someone here with this kind of problem but later able to find solution to correctly modify his behavior tell us how to tackle this problem ?

 

many thanks in advance...

[MightyMouse 12]

You should only stop trading if you are making mistakes.

There are only 4 trading mistakes:

1 Getting in when you were not supposed to.

2. Getting out when you were not supposed to.

3. Staying in longer than you were supposed

4. not getting in when you were supposed to

It doesn't matter if you make or lose money when you commit one of the above 4.

 

Losses from trading are not mistakes; they are part of the game.

 

You shouldn't be thinking about your wins and losses when you are trading. If your set up appears, take it as if it were the first trade of the day. If you are affected by wins and losses, your mind is not yet where it should be to trade.

[Tams 20]

>It doesn't matter if you make or lose money when you commit one of the above 4.

 

not understand the above,

and the inability to discern the difference between lucky win from true win,

will eventually separate the wannabies from the long term survivors.

[TimRacette 11]

I agree with Hlm, as for daily targets I also have no set target. If the day is providing good setups then I trade them till they fail, if the day is slow I trade less. The month is usually filled with a handful of average days and a few great days.