Summary Trade 1 - Corn (Cbot) 21-June-2012 7pm New York. short at 604.50. Stop is over the high at 617.50. Limit Exit is 562.00. 12:50 New York TrailingStop to 603.50 - trade is safe. 24-June-2012 18:00 New York Stoped out at 604.25 Profit = $0.25 risk = $13 of price move. profit = $0.25 risk/win result = 1 : 0
No, I can't say that I know Scott Redler, but if his claim to fame is being on CNBC, I can't say that I really give a shit. What I do know is that my initial stops get hit less than 5% of the time, which means I have to re-enter trades far fewer times than those who place their initial stops at recent highs or lows. Even the best at picking which highs or lows will stick don't get it right 95% of the time, whereas I get my initial stop right that often. I end up saving on commissions because I need to take fewer trades and I don't burn up psychological capital getting stopped out before a trade has a chance to run at least a little bit in my favor and I can reduce risk without taking the maximum loss. So, yeah, I still think setting a stop at a recent high or low is amateurish. You can tell Scott Redler I said so, if you like.
Yep I shoulda bet the farm that your first comment would've been discounting the content due to the mention of CNBC lol. The whole point is you are out of line for calling out "amateurish"... you don't have a clue what an amateur is until you look at the mirror and compare yourself to someone like a Scott Redler and his firm that are moving big money in the market. Google him - watch a few calls and videos and take a look at his TA style and take some notes-- he is a mentor you could stand to get some tips from...
Well, let's put it this way, is putting your initial stop at a recent high or low an unpopular way of placing an initial stop? No, as a matter of fact, it's probably the MOST popular way of placing an initial stop. An initial fixed percent stop might be more popular, but "recent high/low" is at least second most-popular. That ought to tell you whether it's amateurish or not right there.
Very poor argument. Why? Because the key all comes down to timing --what the actual setup looks like with that tight stop that allows one to maximize position size w/o increasing risk...maintaining the 1R loss parameter while setting the stage for larger returns vs a wider stop. U simply cant have it both ways. Of course its a popular method-- and true amateurs will get swept more often than not-- but it has NOTHING to do with their stop loss location--- it has to do with the novice mistakes of ENTERING AT THE WRONG TIME.
Actually, you can have it both ways. I already told you that my initial stop gets hit less than 5% of the time. Therefore, I can size my positions the same "as if" my stop were close by because I know that it's rarely going to be hit. The difference is that I don't get stopped out the 50-60% of the time that the typical "stop at the recent high/low" system gets stopped out. Those systems typically have lower win rates precisely because the stops are so close and then make their profits on the 40-50% of trades where the stop works. Sure, maybe an amateur gets stopped out 70% of the time and can't make a profit because the 30% winners he has just aren't big enough, but that style of stop-setting is known precisely for its large number of small losers interspersed with a moderate number of small winners and some major winners. My win rate is about 65% and my wins are 1.8X my losses, so I have both high winning percentage and a high winner to loser size ratio, which are not supposed to be able to go together in a single system. It's suckers who set their stops like you do who eventually fuel the trends I ride when they need to get back in because they got stopped out and now want another try. Some of my biggest winners have blown through those recent highs or lows and then come roaring back. On the flip side, I catch plenty of "no heat" trades where I could very well have set my stop at the recent high or low. So, maybe YOU can't have it both ways, but I can. Why? Because I understand how to set that initial stop AND when to enter so that the way I set that initial stop achieves maximum effectiveness. My verdict of "amateur" stands.
That's fantasy at 65% at a 1.8 PF *unless* your frequency is glacial -- like 5-trades a year. If you're approaching 5-trades (or more) a week you're BS.