Stops Yes or No?

[CType 10]

Hi,

 

Ive been searching the forum for a difinitive answer, and the fact that I can't find one is probably all the answer I need.

 

It seems that sometimes a trade gets stopped out, and then the price goes back to where you where expecting it to go when you entered.

 

The question is: Are professional traders just taking your shares cheap, or Is that really just the way the market moved that day?

 

If the pros are just taking your shares cheap is that considered part of the risk of trading? You just set your stop and hope they don't bother with it that day. The lack of any concern from this forum tells me not to worry about it. I would like to know what your opinion is of this practice, if it actually exist, and what can be done about it,.

 

Thanks

Bill

[Tams 20]

do you consider the volatility before entering a stop?

[Tiobingo 10]

My trade strategy always brackets an order, with a target and a stop. I will trade a 2nd position with a trailing strategy as well. Typically, as per my trade system, I enter a trade where my entire trade profile is predetermined; where my entry is, my fixed target, my initial stop.. also, how I manage the trade as it progresses. Where price has to go to trigger some trade mgt rules; reducing risk, locking in a little bit of profit, exiting a position at my predetermined fixed target, and then letting the remainder run with a trailing stop strategy.

 

My entire trade is a component to a greater tradeplan that acts as my roadmap each and every session. I know when I start my session, how long I trade for, and even have a dynamic, self adjusting daily goal setting strategy that guides me regarding my trigger to stop trading. My tradeplan allows me to quit positive on most sessions while also allowing me to take what the market wants to give me, vs what I want out of the market.

 

In the end, I have done my research to establish an edge in the market and that's what I trade and how I trade. The stops are a key part to the overall plan.

 

Hope that helps.

[CType 10]

Thanks Tams, I'm guessing by your answer you would just make sure the stop is reasonable, and not worry about stop hunters.

 

Yes I do, if you mean do I try and stay outside the potential price movement. I use 1.5 to 2 time ATR to place initial stops.

[Tams 20]

Thanks Tams, I'm guessing by your answer you would just make sure the stop is reasonable, and not worry about stop hunters.

 

Yes I do, if you mean do I try and stay outside the potential price movement. I use 1.5 to 2 time ATR to place initial stops.

 

2x ATR is often within 2 standard deviation,

ie. there is a 95.4499736% chance the market will go there without any special MM effort to hunt you.

[BlowFish 10]

2x ATR is often within 2 standard deviation,

ie. there is a 95.4499736% chance the market will go there without any special MM effort to hunt you.

 

Im not sure you can conclude that (though may be wrong ). Within any sample 95% of the data will be within 2 standard deviations so assuming a normal distribution (market data is not normal but lets not split hairs), there is a 95% probability that any data will not be outside 2SD.

[CType 10]

Thanks Tiobingo. I'm getting the impression that I should be more concerned about where to place the stop then I am about getting stopped out by some market manager. That's what I really wanted to know.

[Tams 20]

Im not sure you can conclude that (though may be wrong ). Within any sample 95% of the data will be within 2 standard deviations so assuming a normal distribution (market data is not normal but lets not split hairs), there is a 95% probability that any data will not be outside 2SD.

 

trend bias will skew the distribution to the naked eye.

[Tiobingo 10]

CType, some trades will win and others will lose and you can't be too worried about trying to avoid the losses that fit within the winning results of a system that gives you a winning edge over time. If you try to avoid the losses, you'll wind up ironically, missing the winners and getting the losses anyway. To make matters worse, most people will find some 'thing' to blame rather than their own lack of a well researched tradeplan and their own failings as a trader. You ask an excellent question but I think that the more important questions you need to find answers to are questions like: What should I trade? How should I trade it? The answers to those questions will come from some good old fashion hard work that would result in a good winning tradeplan. Read a lot of the posts on this forum and you'll soon learn that many traders have not bothered to do that kind of preliminary work. You could tell from their questions (and responses). Some have, of course, and you can also tell from what they say. Try to find a good mentor or trade coach.

[wwalker126 10]

ctype,

 

You must never forget to pay attention to volume averages. If the averages are low then its likely that you will find it nearly impossible selling your holdings, even with stop orders. Find a volume range that you're comfortable with and only trade those stocks meeting that range.

 

*Good luck on your next trade*

[blueberrycake 10]

It seems that sometimes a trade gets stopped out, and then the price goes back to where you where expecting it to go when you entered.

 

I find that some of the best entry opportunities often occur right after a thrust/shakeout. I don't know what sort of strategy you use, but you may look at entering a trade only after a test/rejection of the opposite direction.

 

-bbc

[CType 10]

Thanks bbc,

Right now I'm trying to get familiar with my charting software, and how to code the scans to find what I'm looking for. Also being pretty new at this I thought I'd find what someone else is doing, or has done and just work on that until I get it. There are a lot of books on short term tradeing, almost all of them panned by someone for one reason or the other. I researched the authors and now I have a book by Oliver Velez "Tools and Tactics for the day trader", but it covers swing trades as well. Its a bit old though.

 

I'm going to start trading using only one of his techniques, and just stay with that one until I'm comfortable with it. There is a lot of information on this site that I'll need to digest sometime, but for now I don't want to get back into that information overload condition I was in a few days ago. I 'unsubscribed' to dozens of sites this week only keeping this one, one from Worden for software support, and my account. I had so many ideas floating around my head I didn't know where to start.

 

Well thanks for the information everybody, I'm going in.

 

Bill

[Tams 20]

for those using TradeStation or MultiCharts,

here's an ATR marker to help you visualize your stop bracket.

There is an option to draw the lines, so that you know where the ATR has been.

(this is the same concept as the Keltner Channel).

 

http://www.traderslaboratory.com/forums/f46/atr-marker-5655.html

 

164

[BlowFish 10]

trend bias will skew the distribution to the naked eye.

 

Indeed it will. However that is an argument against your original point . And as I mentioned the 95% rule is for normal distributions (and financial data series clearly are not with there 'fat tails').

 

Anyway on a more constructive note one can look at MAE (Maximum Adverse Excursions) to fine tune stops. It's a bit of a a balancing act really, wider stops more winners but the losses will be larger, narrower stops less winners but smaller losers.

 

Personally I prefer market structure for stops (swing highs/lows) but the world and his brother knows there will be orders accumulated there making them more vulnerable perhaps.

[Tams 20]

Indeed it will. However that is an argument against your original point . ....

 

that depends on which side of the market you are on !

[SIUYA 11]

I'm getting the impression that I should be more concerned about where to place the stop then I am about getting stopped out by some market manager. That's what I really wanted to know.

 

correct.

The market does not care who you are, where your entry is, where your stop is.

wait for the risk reward entries that suit you.

Though there may be traders hunting obvious stops, there is not a global conspiracy of traders out there hunting your stops. (you will always have times your stops get hit then reverse right to the tick, just as you will always have days when you fail to take an umbrella even when you know you should and it then it rains.....another global conspiracy )

[WorldTrader 10]

Getting stopped out is half the fun. I have found that most of my trades retrace after the entry. So, one strategy I have is to have my normal entry and then wait for the retracment. Then place my stop when I do the order. This way my stop is further away than the original stop would have been and I make more when I hit the original target.

Test this out with your strategy and see if it does not imporove your results. Of course the retracment might be a reversal and you stop out anyway..so stop and reverse:)

BW

[emg 12]

Hi,

 

Ive been searching the forum for a difinitive answer, and the fact that I can't find one is probably all the answer I need.

 

It seems that sometimes a trade gets stopped out, and then the price goes back to where you where expecting it to go when you entered.

 

The question is: Are professional traders just taking your shares cheap, or Is that really just the way the market moved that day?

 

If the pros are just taking your shares cheap is that considered part of the risk of trading? You just set your stop and hope they don't bother with it that day. The lack of any concern from this forum tells me not to worry about it. I would like to know what your opinion is of this practice, if it actually exist, and what can be done about it,.

 

Thanks

Bill

 

Here is a strategy on how to make money day trading ES:

 

1) you need a minimum $100K

2) u begin trading 2 contracts. for every $100K increase in your account, add 2 more contracts. dont really need chart. just dom

3) your profit target will be 2pts and no stop but add when the market is not going in your favor. the reason to add because u have that STAYING POWER. the market will always reverse or retraced

4) once u profit, enter again asap. must do this continously nonstop.

5) if the market still cant hit your profit target at the close, swing it

 

That is how you trade. Placing stop means u are asking to get stopped out. In fact, when placing stop really mean u are doing the big funds a favor by getting filled fast.

 

Hope this help

[ochie 10]

I find that some of the best entry opportunities often occur right after a thrust/shakeout. I don't know what sort of strategy you use, but you may look at entering a trade only after a test/rejection of the opposite direction.

 

-bbc

 

Yep. If price approaches a level without any kind of test or violation, it's tough to know if the level (top or bottom) is in and if your stop will live. It's better to see a 'peek' through the doorway and let PA show a rejection. Tim Morge (of MedianLine fame) spent some time documenting what needs to be seen and coined the term "Good Separation." He wrote a pretty good doc imo, which can be found here.

[BlowFish 10]

I like Tims stuff a lot.

[atrader123 10]

CType,

In my opinion, risk control is a must to survive. There are many ways to control risk - price stops, time stops, far out of money options etc.

 

I think the problem is most people trade with notion they are right till market proves wrong i.e., wait to get stopped out at their hard stop. Better way in my opinion is to aggressively manage position to break even. The goal should be to play the game for free (i.e., with stop at break even) as often as possible. Not many people do that or think that way. Myself and other professional traders I know do that.

 

I see you are looking for a system. My suggestion, pick a simple trend-pullback method, one market, one time frame and spend next few months just trading on simulator only one setup making around 1000-2000 trades. Then the method will become yours. Challenge is not finding a system but ability to do the above.

 

I don't think realistically an individual trader can compete with professional firms on mechanical or fundamental based systems. Better bet would be discretionary trading.

 

Good Luck

[atrader123 10]

CType,

In my opinion, risk control is a must to survive. There are many ways to control risk - price stops, time stops, far out of money options etc.

 

I think the problem is most people trade with notion they are right till market proves wrong i.e., wait to get stopped out at their hard stop. Better way in my opinion is to aggressively manage position to break even. The goal should be to play the game for free (i.e., with stop at break even) as often as possible. Not many people do that or think that way. Myself and other professional traders I know do that.

 

I see you are looking for a system. My suggestion, pick a simple trend-pullback method, one market, one time frame and spend next few months just trading on simulator only one setup making around 1000-2000 trades. Then the method will become yours. Challenge is not finding a system but ability to do the above.

 

I don't think realistically an individual trader can compete with professional firms on mechanical or fundamental based systems. Better bet would be discretionary trading.

 

Good Luck

[Fibtrader 10]

Hello

 

Here is the best way to take a trade:

 

Lets say we want to short corn at a resistance value of 594 2/8.

Once price hits 594 2/8, WAIT DON'T SHORT IT.

Let price go down and then wait for the retrace / test back to 594 3.8 or a little higher.

If it doesn't retrace and the trade runs away from you let it go, it's a missed trade.

 

BE PATIENT, trade with the sim until you get the hang of it.

 

Fibtrader

[otjm 10]

Hi,

 

Ive been searching the forum for a difinitive answer, and the fact that I can't find one is probably all the answer I need.

 

It seems that sometimes a trade gets stopped out, and then the price goes back to where you where expecting it to go when you entered.

 

The question is: Are professional traders just taking your shares cheap, or Is that really just the way the market moved that day?

 

If the pros are just taking your shares cheap is that considered part of the risk of trading? You just set your stop and hope they don't bother with it that day. The lack of any concern from this forum tells me not to worry about it. I would like to know what your opinion is of this practice, if it actually exist, and what can be done about it,.

 

Thanks

Bill

I am assuming you are talking about stop losses. There seem to be all sorts of opinions as to where to place stop losses, and I have read numerous comments that too many traders place them a specific percentage away, or a specific amount away, and tend to get stopped out easily. whether it is specific action by certain individuals "hunting" stops, or jsut the normal action of the market due to various strategies, when you are out, you are just as out no matter the cause (hunter or otherwise).

 

I believe it is Charles LeBeau who recommends a 3x Exponential ATR stop as a chandelier stop. Those, too will get stopped out, but the original stop (placed at time of purchase) is used to protect capital and to provide the figuring point for how much to purchase, and the traveling stop, once you are in profit, is to protect profit, act as a selling stop if there is a reversal, and cover you if you do not have a specific sell target.

 

I saw one program (which escapes me now) where they used a 4 ATR stop consistently (which of course limits even more the size of purchase).

 

It may be that you are placing the stop too close; increasing the amount of ATR may reduce the number of times you are stopped out. However, it also limits the size of purchase. On the other hand, it may let you run longer without having to re-group and purchase back in. As they keep saying, there is no Holy Grail.

[montja 10]

Hi,

 

In ly thoughts, there is no definite answer to that question, the reason is that you never will be able to avoid getting shaked out unless you just don't trade

 

I'm a pure discretionnary trader. The result is that I seldom set hard stops as i prefer to rely on price action to determine if I should hold or exit a trade. But i always define a maximum risk that i can accept.

 

By the way, I try to adapt to the profile of each period (day or time of day) modifiyng the way I manage my trades. As a result, most of time market doesn't seem to offer good R/R opportunities, I just avoid trading that period, and when despite these precautions price action doesn't go as expected, I get out, not waiting to get stopped out or that my max risk to be reached.

 

That 's for day trading. Of course in addition you must consider that different trading timeframes (Scalping, DT swing ....) require different exit or protection strategies.

 

Well. that's the way I do things, but I wouldn't pretend there is no other ways to manage risk.

 

Ps. Sorry for my approximate english, I'm not a native