[es] Stop Losses: Help or Hindrance?

[RandallS 10]

I've never had more losses than when I started using stops when I wasn't doing well. It made things worse. What I really needed was a better system, which I took that season to work on to get back into profitability.

 

Stops can be used wisely, but they shouldn't be used a substitute for having balls or using common sense. Sometimes the best opportunities are when you buy something and it gets even cheaper.

[bim1 10]

A stop loss could get hit when & if you are not monitoring / fine tuning your open position.

In all other situations, you should be in control.

 

A break or make "Uncle" stop is far enough in price & time not to get hit in normal circumstances.

A "Stop & Reverse" price/time stop acts as an entry/exit/entry strategy and should be used along with an "Uncle" stop.

[bim1 10]

A stop loss could get hit when & if you are not monitoring / fine tuning your open position.

In all other situations, you should be in control.

 

A break or make "Uncle" stop is far enough in price & time not to get hit in normal circumstances.

A "Stop & Reverse" price/time stop acts as an entry/exit/entry strategy and should be used along with an "Uncle" stop.

[ahimsa 10]

Really ,sometime i'm shocked when i read that stop loss is a disaster,because i'm not saying that i use it ever ,but do you know a system for loss less money? if is true that big fish eat little fish is true also that there's a study for put the stop-loss in a specific way.Because sure i'm not ready for loss better with the strategy to don't use stop-loss and cover again with option!personally i heard too many people that lost all their money with an dangerous options crossing.iìm only thinking that maybe his use depends many from the our operating way system .this matter is maybe one of the most important points in trading.

[mbhsi 10]

I appreciate this thread being started. I struggle (probably because of psychological issues) to place and honor my stops and end up managing my trades, which I can usually do fairly well. Example, last week I went long on commodities when everything crashed. It took a lot of work but I ended up flat for the week. But I realize that managing losing trades, is counter productive for me because of opportunity cost lost as well as potential damage to the downside. Also it can wreck havoc on your pysche. In a heavily rotational market, managing trades vs. stop losses works fine but in powerful trends, ie. silver crashing last week, it can be murder.

 

At least my perspective.

[mg1193 10]

For Futures always have stop in place. For stocks no market stop loss. In majority of studies 7% stop loss return is equivalent of no stop loss account.

[ahimsa 10]

thanks for your sure 100% of this words mg1193 ,all us neither will talk because whomever spoke you remember only this.

[JohnHL 10]

May I suggest the following. Same title as this thread!

 

Incredible Charts: Stop-Loss Orders - Help or Hindrance? Part I

 

Remember to read the other two parts of the article. The forum is also worth a look.

[sdoma 10]

Imagine that you are in a trade and the market experiences an adverse event, going against you very hard and very fast. At what point do you start wishing you had a stop in? Put your stop there. If that is a ten tick stop, then it's a ten tick stop. That's a disaster stop.

 

If you want to be more statistically driven, you could graph out your returns per trade and do a standard deviation analysis to eliminate your losers beyond one standard deviation. In essence, you cut out your fat tail losses while keeping the gains. So, if one standard deviation of your negative returns are within 8 ticks, consider putting your stop at 9.

 

If you want to get more sophisticated you could account for your intratrade P/L and adjust your stop that way. That's the most effective but the most difficult.

[bim1 10]

Using Futures Contracts or Options to hedge the actual portfolio is the name of the game for me.

I could start with an Option ( Call or Put ) in the primary stage of a developing trend.

Going against the Trend, I try to buy / sell futures, Day Trade and generate cash.

Here I have original option as a Hedge!

Daily / Weekly profit helps lower the cost of original option.

Do I really need a Stop-Loss order in the market?

For now, it is working well for me.

 

I can sleep well.

[swisstrader1 10]

I always trade with a stop in the market and my stops are quite close (maybe too close?) to the market. In the FDAX, which is my favourite market, my stops are generally about 8-12 ticks (4-6 points). I put them in the market and I dont believe the market is evil and hunting for my stops (come on, who cares for my few contracts?!). However, i might move them further away if I think im correct in my thesis for this very trade if f.e. price is trading down to my stop on very little volume and I see buyers lifting the offer (if im long)! I do exactly the same thing if I think im wrong though, meaning I might have a 10 tick stop in but might close the trade at -4 ticks f.e. thus limiting my losses. That way i am able to decrease my average loss to under 6 ticks although I mostly using an initial 8-12 tick stop. That stop is not based on a number of ticks but on market structure where I put the stop 1 tick above/below the previous swing/bar high/low. I have heard many times that placing a stop 1 tick above/below the bars high/Low is a suckers play, but honestly I dont see any other logical placeto put the stop unless there is a nerby support or resistance level to lean on (which might increase my stop but at the same time i decrease my size)!

Maybe someone can give me an advice on where you would place your stop in a countertrade? Lets say the market trades up to a resistance level and you get short because you think buyers are running out of steam. Where would you place the stop if price got rejected at resistance? 1 Tick above the bars high?

[wrbtrader 10]

Everybody uses some sort'uv a stop even those that say they don't use a stop.

 

There are mental stops, hard stops, money stops, time stops, margin stops and many more. Simply, any reason you use to exit a position...that was a stop. Yet, the key is that if you're in a losing trade...don't get married to the trade because it's not uncommon for new trade opportunities to appear while stuck in a losing trade. Traders married to a losing trade will ignore those new trade opportunities and that's not efficient trading.

[TimRacette 11]

It is never the stops fault for taking you out of a position, the problem lies within the entry. If you find your positions are constantly stopping you out try cutting your position in half and doubling your stop size.

 

It's all relative.

[avir4tg 10]

I agree with all the comments that "position sizing" is key when calculating how big or small a stop loss should be.

 

I submit the only badly placed stop loss is not using one - at all that is. If anyone (short term day trader) was trading the eminis on 7/15/2011 you could eaten some big losses being on the wrong side without stops. There were several whippy, multi-point moves in the e-minis. My observations are that most traders let their losers run, and cut their winners short. If a trader doesn't have the discipline to get out of a losing trade, don't you agree they MUST trade with stops? Trading without stops is arguably the #1 ruin of failed trading careers.

 

From my experience it makes sense to use different stop loss strategies based on your trading time frame. If you're a long term trader, larger stops seem appropriate. Short term traders will typically go with tighter stops. Either way I'm a big advocate of knowing exactly where I'm going to get out before I fire on a trade.

 

I'm a very short term scalper so when I enter a trade I automatically have my stop loss entered. If I'm trading the TF I start with a 10 tick stop. With the ES I'll use an 8 tick stop, etc. I'm very active in managing and adjusting both my loss and profit stops based on how the trade is working out. I like to use the swing high/low indicators as guides on stop placements.

 

My strategy works very well for me, however I'm sure it wouldn't work for others. The most important thing is to incorporate a stop loss plan that suits your trading system and that you can follow instinctively. No right or wrong answers on this thread.

[ME2 10]

Thank you for your time. I am a trader who doesn't use stop losses, because I never know where to place them. I intraday trade, and sometimes I see where they would get stopped out if I'd placed them below this candle or above that one. Does anyone have any practical tips for placing stop losses?

[ahimsa 10]

Thank you for your time. I am a trader who doesn't use stop losses, because I never know where to place them. I intraday trade, and sometimes I see where they would get stopped out if I'd placed them below this candle or above that one. Does anyone have any practical tips for placing stop losses?

 

 

The stop-loss use is a choice that a trader must do before open a position.if you are a scalper depends which time frame used,and how during your trade, usually.the traders that don't use stop-loss are awareness to the consequence and the dangers and don't like use it.but its also true that not ever is simple close the trade without saw the loss far away.if you really want use stoploss ,i think that you must do some weeks of demo.you can start to use a time frame to 5 or 15 minutes,and decide to put the stop loss not so tight.in this way the stoploss don't close too much early your position.If you don't are a scalper but you work with a more wide breath,you'll use stoploss with more flexibility.