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I've found that taking small stop losses in the ES doesn't work well. What I do is I read the tape and monitor my trade and try to exit at a better price then taking a hard stop. This requires setting a larger stop and requires one to be skilled at tape reading. I think only hard stops set a good bit away have a chance to work as well.

 

For people who use tight stops, I mean I don't understand that because let's say you're trying to catch a rally or trend and you get stopped out. Okay then what are you going to do? Quit? Go home? Not if you want to make any money. You're going to have to try again.

 

Its the same with trying to catch a reversal... let's say you're off 3 points vs 2 points. You take a 2 point loss and it reverses at 3 points and rallies to 4 points. So, let's say you jump back in. You just lost 1 point profit.

 

Tight stops can easily eat your account up. Let's say you recognize you are wrong at -4 ticks but how often does the market tick back up at least 1 or 2 ticks? If instead of taking the 4 tick loss you took a 2 tick loss -- that's saving 2 ticks per trade which can add up. Sure, on occasion a trade will run against you and you'll end up taking a much larger loss. My rule of thumb is to use a stop 3x-4x my target size. I've found in testing systems and in my own personal trading that such a ratio does work the best. The trick is that I almost never let my stops get hit -- instead exiting before they get hit. This will have the effect of reducing the size of the losers and winners to a ratio closer to 1:1 which has benefits. A good day trading system might only average $50 per trade.. so if you can get 1 or 2 points consistently then why not take them?

 

I would almost never use a 4 tick stop loss -- an HFT system can blast 4 ticks off the book and you get an instant reversal. That doesn't mean I won't take a 1 tick or 2 tick loss.. I just wouldn't set a stop at that level. I never average out my positions because I'm almost always able to exit at a peak or a low -- not necessarily a top or bottom.

 

I try to keep my risk per day at or below 5% but sometimes I've risked up to 12% of my account on a single trade. Risk levels of 3%-5% are fairly reasonable for a skilled trader.

-

Curtis

The Market Predictor

 

 

  Lisyara said:
Have been long in ES few contracts just before the first strong leg up today and got smacked by 4 tick stoploss.. :crap: and later almost got screwed trying to catch few ticks of reverse at around 9.15 and missed only to be carried over to the next top at 10.45 and there I was with almost half of my account buying power load of shorts against the super strong rally... :( Jesus, I am still tired.

Just wanted to ask you guys do you ever try to average out or just simply take loss and look for a better level to jump in? I ve been trading already for a while and know that the rule is you stop the loss and take the profit but several times my few of the most rewarding days were when I averaged out the wrong entry and then enjoyed the nice run in my direction being with a slightly bigger position in the market compared to my usual first entry size...

 

Tnx for honest replies

Edited by Predictor

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  Lisyara said:
Bakrob tks for yr opinion, btw whats yr average entry size as account percentage or contract number?

 

I trade 1 contract for every $10K in the account. If my account were at $20K then I would use 2 contracts and my max risk on any individual would vary between 1% $200 and 2% $400 of account size. A $200K account would support 20 contracts. This is what works for me and my psychology.

 

Thea reality is that my stop typically is a minimum of 6 ticks even if the structural high or low that i may be trading calls for say, a 4 tick stop. I won't use less than 6 as I have found that there is a 2-3 tick noise factor at times or a program buy or sell can knock you out of a decent trade.

 

Typically I use an 8 tick stop based on some support - res or a recent high - low and if the volatility has increased (like Aug 2011) then I would increase the stop and reduce the contract size.

 

I have found that averaging $200 per contract per day is an achievable goal and produces and excellent income.

 

What I have described above in my mind is the smallest realistic stop that works on the ES. I trade the ES because of the liquidity and smaller contracts like the YM or NQ require larger stops as the noise factor is higher. (The smaller contracts are more easily pushed around)

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Thanks gents.

 

Thats what i have figured out for myself as well for a 100k account max 10 contract risk.

Managing so far 600 usd on 3-4 contracts 4-5 trades a day 2-3 before main market and 1 or 2 later.

Shorting 1365 at 11.20 1362-1363 a desired exit.

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Trailing a stop 1 or 2 ticks below the 5Min Bar low has captured this entire move up ... Now flirting with a move up off the IBH and above the VWAP with possible 1372 and higher in the cards. We'll see.

 

 

11:40 UPDATE program sell kicked in to take out the trailing stop 64.50.

Edited by bakrob99

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1357 was the daily prior swing high June 19. The low today was 1357 as buyers came in at the prior resistance and have rallied this market up 9 handles. Bullish sideways lunchtime action with buyers stepping in at 12:30 ish in my opinion we can put in a test of the highs later today and with better than expected NFP report tomorrow will test 1385 area. ( Daily 127 Ext is at 1384.75 )

 

Any move below 1362 would get me to question this projection.

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UPDATE: 13:48 1368.00 hit (1 tick away) as expected. ReEntry into long on pullback at 12:50. Waiting to see if buyers step in here to drive this to a test of highs.

 

This last push up gives a little over 10 handles from the low and the market likes to take a pause after that extent of a move. Let's see what develops.

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Passed on a nice short setup on the 1368 gap fill, then found nothing worthwhile to get into. Market pulled back exactly as I anticipated. Obviously - should have taken the short. Interesting to see what develops for tomorrow with the NFP.

 

I have a feeling it's going to be a ride.

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  Lisyara said:
Thanks gents.

 

Thats what i have figured out for myself as well for a 100k account max 10 contract risk.

Managing so far 600 usd on 3-4 contracts 4-5 trades a day 2-3 before main market and 1 or 2 later.

Shorting 1365 at 11.20 1362-1363 a desired exit.

===============

Just to report on the above: the price touched 1362.25 on 11.40, closed the short.

 

BTW it looks like i am severely bearish compared to few guys here, I am trying hard to understand why would anyone be long ES in this kind of macro environment and cant figure it out. And specifically this Friday 29th last hour window dressing is totally out of my mind. Why? As always, would very much appreciate your thoughts.

My arguments:

1. Europe - far from being solved, and most of the region is in a recession with Germany getting worse

2. China - when the Partydecided to cut rates this is for too much of a signal that even them understand that the things are deteriorating

3. US still being brightest spot and economy still growing, looking into the coming 2 Quarters - jobs, retailers and earnings report all are weaknesses.

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Hi guys. I haven't really looked at the markets over the last couple of days, but a quick observation is we balanced yesterday just below the lower part of prior balance. Given NFP's in a few, this isn't especially shocking behaviour and I expect some directional movement either today or into next week. We shall see.

 

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Watch out for the poor data so higher easing expectation move in dollar. So far it has moved higher, but I suspect there's a drop in it. Mind you, if it does I'm sure there'll be people waiting to short euro at 'good' prices. Anything goes! Lol.

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Obama is about to speak. The ES feels like it's being held up somewhat and there's no break in the delta so to speak. I think there's some potential for a test down to somewhere around that 41.75/42.75 area, but current action has me questioning whether it will be now. Still, anything can happen and with a speaker you never know if something will be said and the market will bolt either way. But I think given the action, imho the risk to shorts currently is rising. Not to say it won't break. Just that there are a few signs to the contrary right now. :2c:

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haha, still pushing though now!! I was about to say we were verging on a 1tick new low fail and dollar index was looking like it was primed for a reversal. This is the thing is with trading. Weighing up possibilities and trying not to get spooked out of a good trade. This is a very obvious argument for scaling out if you are a discretionary trader.

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Pretty narrow range for the first hour of trading especially considering the news.

 

Anyway - for me it's been very good as I have had setups for buying the lows and selling the highs which have all worked out So I can call it a week and go do something else.

 

Note that the 4 pushes (swings) down sine 915 EDT have gone for 4.5, 4.25, 4.00 and 4.75 pts before rallying 3.5, 3.0, 4.0 and now just 2.5.

 

As I type we're taking out the low again so my 30min chart suggest much lower ... low 40's

 

Have a great day

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Still "one-timeframing" as we have been all day so far. Will be watching the previously mentioned area closely when(/if) it gets there and then whether or not we stop one-timeframing (i.e. takes out last 30min range high by at least 2 ticks).

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I think if we take that are we'd be looking at the open as a target. However, I have had a sneaking suspicion that we'd get a neutral day since fairly early. Doesn't mean it will happen. But you know when people are in buy 'mode' even when we retrace there will be people looking for good pullbacks to get onboard. In fairness the NFP's weren't terrible either.

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