I trade ES fulltime and I can tell you, the big boys know by experience approx how far away the small position day traders typically set their stops from their entries. I typically set my stops 10-15 ticks away from my entries and dont get stopped out much(maybe 3 out of 10 times approx) on a 15-30 min chart. Also depends on how much whipsawing(if any) is going on within the last hour. The more whipsawing, the farther away I set my stops. This is a tactic thats only learned thru lots of experience watching market behavior day after day. My advise to you: take a 15 min and 1 hr ES chart print out every day and build an almanac of daily charts that will help you see how far away your stops should be. Thats what Ive done for the last 2 yrs. It has helped me enormously...
Alot of this depends on the size of broker (or in the UK spread betting firm) you are working with. Brokers DO hunt for stops, it is in their software - and I have personally spoken to coders who have done so for certain brokers. It's only when you begin working with professional traders - that you begin to learn how to get around these tricks. It can be done though, I have been trading profitably and earning a living from trading for 5 years now. If you have commitment and the right guidance - it is very possible to succeed. Good luck guys.
And so the question is, do you place your stop even farther away, thereby arguably both playing chicken with the stop hunters and incurring the risk of being on the wrong side of a genuine countermove, or do you set your stop even tighter and risk being stopped out more frequently albeit more cheaply each time. The general quality of one's entry timing should be factored into this assessment.
The don't have too they can look at a chart and see where the are at. How do you think wicks on candles are formed? Using a fixed stop inside the range of the last move is just asking to get stopped out. Place a stop in logical place above/below swing high or low.
At the risk of introducing statistics to this random discussion, the topic is what backtesting is all about. It even works well on random entry, which encompasses most systems traded by ETer's.
I agree, the swing high/low tactic works well too as long as the time frame chart is AT LEAST 15 min...... generally speaking
I used to have tight stops but with the algos now I usually scale in over 2-4 handles the mkt is crazy sold 1036, 37 and 38 on tuesday high was 38.50 and it took me so long to make 4 handles on it went home and it drops to 13.50 and yesterday I got it good kept fading the thing all the way no retracement what so ever. you just gotta pick levels and watch order flow. People got f#cked when it dipped to 1004 and yesterday got steamrolled when it blew through 45 and did not stop even after 3:00pm all the way up to high close of 59. You almost got to trade SPY options if you wanna position trade. The days you got it right you take it off too early and when you are wrong it is bad. there are billions of dollars behind these programs so dont try to beat it just take your little nut out everyday. some days I literally see thousands of cars go through with no movement it is quite a thing these programs have done to trading and edge there are also programs that trade options against SPY and ES so you get weird moves sometime on nothing.
Yes, if I was the OP I would look at 1) can I improve my entry to the point where my stop is at a safer level without taking more risk or 2) is making the stop wider worth the extra risk to make sure you are really wrong. More than likely if he just moves his stop without improving his entry his system will just have another problem to deal with. It is just a question of expectancy in the OP's trading. I don't know if he is a discretionary or system trader but no one can provide this answer for him. If his trading is not profitable overall it won't matter what he changes of course. However, if he can determine his expected win/loss ratio with some degree of accuracy then knowing what do to would be clear.
I think backtesting is critical, but there are two issues to consider. First, regardless of what the testing may suggest, I personally would not do something outside of my comfort level. For example, backtesting may suggest very large stops as being optimal. Regardless, I would not cope well in that environment. Second, because we cannot predict the future, backtesting can only provide us with approximations which we must interpret with fair allowances for error. Against that background, and in the face of uncertainty rather than genuine probability, I prefer to err on the side of caution. And in so doing, I would be disinclined to engage in large leaps of faith, which large stops require. But maybe that's just me. I have employed, and continue to employ, testing for entry timing with a view to keeping stops as tight as reasonably possible. I prefer my ill-timed leaps to result in small sprains rather than clean breaks.