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tight stop really work?
I heard that many day traders (both futures and stocks) use very tight stops. Maybe 4 or 5 ticks at most. Is it really work? Would they often hit by market noises ?
__________________
Before you know how to use a stop loss, you don't know how to trade.
ultimately you're going to have to come up with your own trading strategy that suits you, not something that someone gives you.
Some people become socialist after they've made their money. It's a great device for inhibiting competition.
"You can't calculate the probability a trade being profitable; you can only calculate your exposure. So all you can do is manage your losses, not predict profits"
Depends on where and when you place them.
__________________
I'm handing you no blarney
2 cents.
You must combine your stops with your money management plan.
How much are you willing to risk per trade (%). Does the volatility in your chosen instrument exceed that?
Wiggle room.
Definition:
It's not your favorite dance club.
David
Re: tight stop really work?
Quote from 0008:
I heard that many day traders (both futures and stocks) use very tight stops. Maybe 4 or 5 ticks at most. Is it really work? Would they often hit by market noises ?
Re: tight stop really work?
Quote from 0008:
I heard that many day traders (both futures and stocks) use very tight stops. Maybe 4 or 5 ticks at most. Is it really work? Would they often hit by market noises ?
Only if your entry point is spot on. Stops are the easy part. Its the buy that is the tough one.
And you've just registered today, yet you know everything about this site. What is this, your fifth alias?
Amazing how consistent it is. You read an idiotic post that contributes nothing, and you glance up to check the idiot's username and date of registration.
Quote from 1 in 100:
in many ways it would be so much easier to just ignore the great unwashed
but I won't, OP you registered in 2002
for you to ask such a elemental and stupid question speaks VOLUMES about you
Quote from traderNik:
I personally don't believe that successful ES traders can trade their usual style with a 3 tick stop.
Quote from fearless9:
Interesting thought.
But what if a successful ES Trader is trading his usual style with a 3 tic stop in this market.
Quote from traderNik:
If that's happening, then great, and the trader involved is very good. I assume that most of the guys who are able to do this are scalpers. Maybe one of them will chime in here and tell us that he hasn't altered his strat and that it's working out fine.
My only point is that I assume some guys are adapting their stops and position sizing on extreme volatility/high noise days.
Quote from fearless9:
Interesting thought.
But what if a successful ES Trader is trading his usual style with a 3 tic stop in this market.
regards
f9
Quote from fearless9:
Interesting.
Three assumptions within two posts.
What if Traders follow price waves and are not scalpers.
And what if they adapt their strategy around a 3 tic stop.
What if a 3 tic stop is the constant factor in their trading plan.
Quote from osorico:
Amazing...this aspect remains the same, irrespective of market conditions.
Osorico
Quote from traderNik:
What if wishes were horses?
Price waves? Do you mean Elliot waves? Kondratieff waves? Fib levels? Back and fill? Movement around important S & R? The term 'price waves' has no specific meaning. It's a generic term that could mean different things to different traders. The fact that you're trying to use it as if it has a specific meaning like 'Open, high, low and close' do indicates that you're a believer as opposed to an objectivist.
As I keep saying (it seems to be hard for you to catch this so I'll restate it, and I'll put in bold for you), I don't assume that all traders whose strat involves a 3 tick stop have had to change their approach in these markets. I do believe that some successful ES traders have adjusted their stops and their position sizing in order to adapt to current market conditions.
There. Is that easier for you to understand?
Most of my trading(scalping) is in spot forex. 5-6 pip mentally held stops. The placing of the stops isnt hard if you know how to time your entries and exits with skillfull precision. Its all in the "timing" from my experience(over 3 yrs).
I presently manage 8 accts for friends, and have no problem with consistent profitability. Some ppl know how to scalp..some ppl dont have a clue....
P.S. Those ppl who say you cant make money scalping ES are failures in their own right....
Quote from fearless9:
You are too emotional for my taste tN
Quote from joemiami:
Most of my trading(scalping) is in spot forex. 5-6 pip mentally held stops. The placing of the stops isnt hard if you know how to time your entries with skillfull precision. Its all in the "timing" from my experience.
those that say longer time frame positon trading is the only way to consistently have a chance of being profitable, they lack methodology skills.
Like i said....some ppl get it...some ppl dont
Quote from fearless9:
You are a thinking man O.
Just forget the rest of your post and focus upon this statement of yours.
It will change your view of price behaviour.
regards
f9
Fearless has his methodology in good working order...
Quote from joemiami:
those that say longer time frame positon trading is the only way to consistently have a chance of being profitable, they lack methodology skills.
Quote from fearless9:
Price waves...fractal nature of the markets
Right. Thank you.
Quote from osorico:
To compensate, I reduce size.
Quote from osorico:
As you know F9, YM is my instrument of choice. Most folks who have seen me trade think I use tight stops (most of the time). 15 YM ticks or less for a stop is my "preference". Volatility has made my preference somewhat less attainable, but it didn't eliminate it! To compensate, I reduce size.
Fortunately, my methods of trade selection are not affected by volatility. The volatility (actually it is the ranges, which is not the same as the volatility) however causes the prudent (thinking) man to be firmly in control.
Osorico
Everything is relative to the individual, some swing and others scalp. I do think every new trader should learn to scalp first. Limited risk, best way to improve market timing and the such. I do think the long term goal should be swing trading, do to the fact that size becomes an issue.
Constantine, you are right about learning to scalp first. If someone can master scalp trading first(we all know it to be more difficult), then the longer timeframe trade methodologies are easier to master. NOT VICE VERSA
generally, people that start out swing trading or take longer timeframe positions have a harder time learning to scalp...
LEARN TO SCALP FIRST, THEN YOU WILL MASTER THE LONGER TIME FRAMES WITH RELATIVE EASE
As learned in quantitative analysis or is it physics?:
the smaller more frequent waves(sound, liquids, markets) set the gears in motion for the bigger waves....
Hmmm.. FRACTAL is word ive heard over and over again on ET.
I have no F%*&%ing clue what that means.
Im going to look it up now. Anyone know of a good site that explains what it is how it works?..its time for me to learn something new for this week....
Quote from joemiami:
Constantine, you are right about learning to scalp first. If someone can master scalp trading first(we all know it to be more difficult), then the longer timeframe trade methodologies are easier to master. NOT VICE VERSA
generally, people that start out swing trading or take longer timeframe positions have a harder time learning to scalp...
LEARN TO SCALP FIRST, THEN YOU WILL MASTER THE LONGER TIME FRAMES WITH RELATIVE EASE
Fearless, and those nasty habits die hard, hence it becomes a steeper uphill battle for them to move to shorter time frames....
Quote from joemiami:
Fearless, and those nasty habits die hard, hence it becomes a steeper uphill battle for them to move to shorter time frames....
Constantine, i agree with you 100% on the emotional control......that was probably the hardest variable to master when I first started trading a few yrs ago; I mean it was really hard for me......
Quote from joemiami:
Hmmm.. FRACTAL is word ive heard over and over again
Stops are predetermined Losses!
You must have an exit strategy that would signal the failure of your Entry strategy. A predetermined Loss does NOT serve that purpose!
Quote from ML_QUANT:
Stops are predetermined Losses!
You must have an exit strategy that would signal the failure of your Entry strategy. A predetermined Loss does NOT serve that purpose!
Quote from fearless9:
You will need to expand this concept, otherwise I am lost
regards
f9
yes they do. I dont take trades with stops bigger then 3 points. and if i do get stopped out, i have a small loss.
__________________
ggoyal
Quote from ML_QUANT:
Stops are predetermined Losses!
You must have an exit strategy that would signal the failure of your Entry strategy. A predetermined Loss does NOT serve that purpose!
Quote from fearless9:
You will need to expand this concept, otherwise I am lost
regards
f9
Quote from ML_QUANT:
You must have an strategy to enter a trade right? If you do then that strategy is NOT correct unless you also know it's failure point, that point is you stop.
Here's the most basic example which will only help you understand the concept and is NOT a real strategy.
Let us assume you are entering a trade based on a 0.3% Zig. therefore you'd reverse or get stopped on an opposing Zag. Hence, while the Stop was totally Mechanical you actually practiced an entry and exit strategy.
The ZZ examle above does not work and is ridiculous as an strategy but best describes the concept of having an exit strategy based on the failure of the entry strat.
HTH
Quote from ML_QUANT:
You must have an strategy to enter a trade right? If you do then that strategy is NOT correct unless you also know it's failure point, that point is you stop.
Here's the most basic example which will only help you understand the concept and is NOT a real strategy.
Let us assume you are entering a trade based on a 0.3% Zig. therefore you'd reverse or get stopped on an opposing Zag. Hence, while the Stop was totally Mechanical you actually practiced an entry and exit strategy.
The ZZ examle above does not work and is ridiculous as an strategy but best describes the concept of having an exit strategy based on the failure of the entry strat.
HTH
Quote from osorico:
As you know F9, YM is my instrument of choice. Most folks who have seen me trade think I use tight stops (most of the time). 15 YM ticks or less for a stop is my "preference". Volatility has made my preference somewhat less attainable, but it didn't eliminate it! To compensate, I reduce size.
Fortunately, my methods of trade selection are not affected by volatility. The volatility (actually it is the ranges, which is not the same as the volatility) however causes the prudent (thinking) man to be firmly in control.
Osorico
Quote from CONR:
That's a pretty tight stop on the YM these days. How many ticks do you typically go for profit wise?
Quote from Thunderdog:
Depends on where and when you place them.
Quote from 1 in 100:
in many ways it would be so much easier to just ignore the great unwashed
but I won't, OP you registered in 2002
for you to ask such a elemental and stupid question speaks VOLUMES about you
Quote from fearless9:
Sorry ML, I don't work with examples that don't work.
Risk.
Talk to me only in terms of risk.
I only understand risk.
Nothing else matters to me but risk.
regards
f9
Quote from BSAM:
Good answer. Good answer. Besides, what if they are hit?
The real question is: Do you have a plan to stay out or get back in?
Quote from Constantine:
This strategy maximizes loses, or would only be acceptable is you are 100 percent correct on all trades.
Quote from ML_QUANT:
The biggest risk is letting your losses run and cutting your gains and worst entering a trade without a strategy.
A predetermine loss robs you of letting your winners run and cause over trading. Stops at strategy failure may have larger losses than 3 ticks but your gains if using a sound strategy will easily cover for that and more.
Now, if you are trading without a viable strategy that defines your entry and exit, then you should not be trading at all and that is your biggest risk right there! If you have an strategy then you should know at which point it has failed and 3 ticks is a random number that does not determine that.
http://www.dacharts.com/articles/_MythTStops.htm
One opinion on tight stops.
1. OP poses a fundamental question. If you have never posed it and analysed the answers, you have blown multiple accounts, or are making money by chance, and are most likely a deadman alive soon to blow up or die slowly.
2. All the answers here are right, but all are wrong.
3. Once you stop talking and are ready to listen and carefully read my answer to the question, I will provide it.
4. The answer is mathematically proven. We know that numbers and math do not lie.
5. The answer should be able to give the numbers and structure of why, how, and when to take stops or profits, and how long you should stay.
I will share later. I want first that you be ready to listen. Once I hear more ayes, RFT will chalk things up.
Being too lazy to run through the hoops of this entire thread, I apologize in advance if I'm merely regurgitating what has already been said. Having said that, a tight stop would always work as long as your entry is impeccable. That is, correct timing is everything in this game.
I cringe at the thought of openly advocating my own system, but if you would like to learn more about timing and other useful things, I encourage you to visit Unholy Grail to Success.
Many interesting posts here,and this last idea,I think I do understand, having recently been practicing it as a focus of technique.
In trading forex, I'm finding it works this way.... Before even thinking of making a trade...I establish a comprehensive pre-trade analysis of all the TA data that means something to me.... for my technique, that means,setting up multipile time frame charts side by side, with CCI, multiple SMA's and fib levels,as well as all trendlines,s/r points and median lines that look important.
this is my data base to analyze. Its a lot of data to look at,and Ive trained my vision to see it all.
If it looks like some clear vision showing me a high or low 'target' that looks worth considering,I then see where the current price is residing within the whole picture,and then I spend a while watching price action ,on all time frames, to get a 'feel' for the market sentiment. This becomes the context within which I watch price action. and the price action confirms the ta data,and the TA data confirms or validates the price action (candles,especially at key s/r points fib lines etc)
A big part of the pre trade analysis is also looking at what price might do if it goes 'the other way' to my 'anti-target'...and I factor that data into my awareness of what to look for if the trade should not confirm correct. -- what would that price action look like.
Now,after watching price action at key s/r levels, in all time frames, awareness of clock time,etc
At such point where I see this sort of 'confirmation of my analysis'.... I would Enter a trade.....and then watch it carefully like a hawk, in the 30 sec/1 minute/5 minute/etc,up to and thru the 1 hour time frame,...and Any price action that fails to prove my analysis correct,becomes a red flag alerting me to the possibility of a need to reverse or exit.
Ongoing analysis and 'feel' will tell me how off the mark I might be,whether to hold for a while longer or exit or reverse.
The idea of placing a stop somewhere is based on the whole big picture of all the analysis I did pre-trade... and most of the time the stop will be set at the standard places like the previous swing high/low or maybe even the one before that...maybe 30 pips or 20, or 40. to be used Only as a safeguard against catastrophic loss.
The Real 'stop loss' is the complete Vision of awareness I have from all the pre trade analysis...I know where all the s/r points are ,I follow exactly what price action is doing on all time frames at all s/r points, I 'feel' the strength or weakness of these movements at these times, and each candle is telling me something...that my trade is still ok, or feels dangerous, ...thats the real stop loss,I discovered . its about what price action is telling you in each candle you look at. and all the data that combines to paint the picture. I hope this all didnt sound too convoluted. In my mind, its crystal clear.
I agree with saliva, timing is very critical. its everything.
if you learn about "trailing stops" you will never have to use a "tight hard stop"...please research this before using it...
Now, if you are trading without a viable strategy that defines your entry and exit, then you should not be trading at all and that is your biggest risk right there!
thats exactly what I was trying to get at, ML. good posts
Part of the reason why I'm interested in this thread is because this risk issue,and risk aversion, was my biggest problem I had to overcome and I just recently achieved that. I was setting all my stop loss at 3 or 4 pips, trying to perfectly time my entries. I got pretty good at finding the right entry moment, which ,in forex, meant I was eeither right on the minute, or maybe 2 or 3 minutes early...and that was pretty good...but even in doing that...the basic price action was zig zagging up and down as it does, and my 3 pip stop was getting hit 90 % of the time. thats exactly what some poster said with the phrase death by 1000 cuts. thats what happened to me. and in fact its exactly what I lost in dollars until I finally learned how to use the stop loss tool correctly. and started learning how to trade correctly. As I said, for me, the real stop loss is to have a complete understanding of the analysis, ahead of ever pulling the trigger, and knowing what to look for in either direction if the trade does not prove correct.
I don't think type stops work for a lot of reasons. I trade the ym, dax, and ftse with 10 to 12 point stops and no trailing stops. I found anything less would get you stopped out routinely. I have a question though. Where does this 98 percent of day traders fail non sense come from. If I call myself a day trader does that mean I really am 1. How long were surveys done for and from what year? Were they stock or futures traders? I hear the swing and long term guys constantly bash us day traders and throw out the facts from who knows where. I would think the vast majority of swing and long term traders fail too at the same rates
unless you undertstand what is wrong in your post, you will not be trading 1 year from now. i guarantee it.
ps: information is from brokers. they have the records. if you survive 1 year while trading, then you are already in the top 10%
Quote from riskfreetrading:
1. OP poses a fundamental question. If you have never posed it and analysed the answers, you have blown multiple accounts, or are making money by chance, and are most likely a deadman alive soon to blow up or die slowly.
2. All the answers here are right, but all are wrong.
3. Once you stop talking and are ready to listen and carefully read my answer to the question, I will provide it.
4. The answer is mathematically proven. We know that numbers and math do not lie.
5. The answer should be able to give the numbers and structure of why, how, and when to take stops or profits, and how long you should stay.
I will share later. I want first that you be ready to listen. Once I hear more ayes, RFT will chalk things up.
Quote from fearless9:
IMO they are too lazy to think the puzzle through clearly, or they trade OPM or they are most likely paper tigers on this site.
Given the fractal nature of the markets and the account size at risk to position trade volume I cannot see the point.
But that is just me.
regards
f9
Quote from short&naked:
Who said you have to risk more to position trade?
Quote from fearless9:
As I said, it is just me.
my reasons are....
. increased overnight margins.
. weekends. Do you really want to be long over a weekend.
. close to close days that yield bugger all points, or worse still reverse against your trade, when it would have being a nice profitable intraday.
The exception to this was the 'carry trade'
But as I say, this is just me.
regards
f9
Stops that are too tight will give the trader a false sense of security as they believe they are keeping losses to a minimum. Unfortunately, it also creates more decision making. The less decisions that have to be made, the more chance of success. It's better to lower the position size and trade with a correctly placed stop and make less trades/decisions. Never rosk mor thanh 2 percent of TLNW and you'll give yourself a much better chance.
tight stops only work if you pick close to tops or bottom.
A 4 point stop won't work if there is consistently 20 points of "noise."
yes tight stop works. like 2-20 point stops. super small like 1-8 ticks doesnt work usually, unless you are prepared to scale out and let winners run.
stops larger then 20 only works when your swing trading. but swing trading is more dangerous then daytrading.
It also depends on the volatility of the markets and how well they respect technical levels.
This is just another of those threads that typify peoples lack of understanding of just what it is that they are trying to achieve.
Everything in a Day Trader's strategy must relate to something (price behaviour).
True, there are a few absolutes in a traders life such as yesterday's hi/lo or todays open etc etc but this is because they can no longer be effected by price behaviour.
They have passed the test.
They are fixed in time.
A day Trader does not have this luxury.
To be effective and efficient he/she must by fluid at all times and their stops will naturally reflect this mindset.
And so back to the question "tight stop really work?"
The answer is "it all depends"
... what is price doing right now
... what is considered tight
... what bar size are you looking at right now etc etc ...
I know that ET'ers are seeking answers to specifics concerning their trading style, but be aware that any one change to your strategy will effect everything.
If I were to pass on any one little piece of information that I have gained in the last twelve years it is
"think from the top down, but look from the bottom up"
regards
f9
Quote from college_trad3r:
but swing trading is more dangerous than daytrading.
4-5 ticks (pips... etc. etc.) would work if you are comfortable with scratching a trade.
All about the entry.
4-5 ticks (pips... etc. etc.) is an major outlier.
Seriously... that's what stops are for (you're placing a limit against outliers...)
If stop orders are a placed to trigger yourself to let go of a trade, you're not fit for trading.
Quote from TSGannGalt:
If stop orders are a placed to trigger yourself to let go of a trade, you're not fit for trading.
"Positions established must be reduced and removed until or unless the market proves the position correct" - Phantom of the Pits.
If you are struggling with stop placement this is a rule to live by. Don't wait for the market to prove your position wrong! If the position isn't correct get out with a small loss or small gain.
It doesn't matter whether you are day trading, swing trading or position trading this rule will help you keep your loses minimal. I always have a hard stop in as a backup (more of an emergency stop) and would only not constitute a significant loss if the market runs against me.
Here is a thought for the devotees to this thread.
Some Posters are adamant that stops should be outside the 'noise'
Does this mean that they wish to have a change of trend take out their stop.
regards
f9
Quote from fearless9:
Here is a thought for the devotees to this thread.
Some Posters are adamant that stops should be outside the 'noise'
Does this mean that they wish to have a change of trend take out their stop.
regards
f9
"Noise" is subjective. Some pairs have 50-100 pips as "noise".
What's your comfort level?
Quote from davidmaria1:
"Noise" is subjective. Some pairs have 50-100 pips as "noise".
What's your comfort level?
It's "noise" if price doesn't hit your stop, and you profit.
It's a "spike" if your stop is taken out, you blame the broker and lose a couple $.
Quote from davidmaria1:
It's "noise" if price doesn't hit your stop, and you profit.
It's a "spike" if your stop is taken out, you blame the broker and lose a couple $.
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