Daily Stop Loss and Target

Discussion in 'Risk Management' started by AFX, Mar 12, 2012.

  1. AFX


    Hi All,

    I haven't been around for a while. Been doing pretty well but I am having a little issue which I am sure many have faced...

    I have great days, weeks even but then I seem to be able to ruin all of my hard work with a day or two of ridiculous trading. The days usually start off ok or as normal but then after a few losses I find I just can't seem to pick a good trade.

    Now the market condition will have a lot to do with this, but surely there must be a way to limit my losses on these days.

    So I have been reading a few books and was looking at the idea or using a daily stop loss.

    My question is do any of you guys out there who are successful daytraders use such a limit? Do you believe it is valid? If so what sort of a limit? Half your average day profits?

    Also what about the idea of a day profit target?

    Then further to that maybe a rule whereby you don't give back more than 50% of your profits you made on a particular day?

    I would be interested in your thoughts on the subject. Basically if I can eliminate the days when I blow up, I would be quite successful, but at the moment my equity curve is a little too volatil for my liking.

    I look forward to your thoughts.

  2. emg


  3. danielc1


    You could use a daily stop and/or daily profit target, many traders do this... But there can be more issues with your problem... Be sure that it is not psychological problem or that you are maybe missing a clear and well writen tradingplan. What happens that when you are 'wrong' with a trade, you take the next one, that also go wrong and then a third one that also goes wrong? Do all of the trades you take meet your criteria? or are you bending your rules because of the previous loses, in the hope to make it back?
  4. I currently use .05% per trade risk. 2% daily stop. I try not to limit upside but do limit downside.
  5. N54_Fan


    I use a Target GOAL for each day but I usually do not make it. It is easier to set a weekly goal and achive that or even monthly for me. I do not day trade but i swing trade and find it helpful.

    I try not to give up more than 50% of any "paper" gains I have on a trade. But I am a trend follower so i try to give trends some breathing room so I can make the Big money. As a dya trader and when volatility is an issue I would suggest looking into using some multiple of ATR as your trailing stop loss. When I use that method I usually choose 3x ATR of whatever the middle time frame is that I am trading (I use 3 time frames weekly, daily, 60 min). ATR is a good measure of volatility and helps get you out (preserving profits) when it volatility heats up.
  6. AFX


    Hi All,

    Thank you for your responses!

    Very helpful indeed!

    I do have a plan but sometimes I guess I am trying to recoup losses which is a big no-no... the thing is I know this but still make the mistake.

    Perhaps I need to redefine my plan to make or more systematic...

    I think I need a daily stop loss as a discipline thing more than anything, else I ruin weeks of good trading in a single day.

    I will try that and let you all know how it goes... I guess the most difficult part will be those days where you stop trading and then it starts to setup perfectly...

    We will see.

    Any other suggestions welcome.

  7. A few things I'd suggest.

    A daily goal will just perpetuate your problem. As you said, you have good days. It's the bad days you have problems with.
    Unless I missed it you didn't offer much in the way of details about your current style. If your good days come from avg down losers until they give you that pop that you want then you have a bigger problem that you need to address.

    A couple of things to add that I found helped me. I too would suffer from drawdown frustration and I would either begin over trading or just make a very stupid revenge style trade.

    Your broker should be more than happy to assist you in that. I requested having both my size allowances significantly reduced as well as my loss limit.

    Other things that helped me were trading way less and scaling out of positions. I like knowing I'm breakeven on a trade and leaving the rest to either make me money or leave me with fees. After it hits my primary profit objective I rarely even watch the trade.
  8. danielc1


    I think you have a "psychological" problem and not a "plan" problem...

    You are sabotaging your self when you are having a string of losses. This comes from having a need to be right, making it back and wanting to make a + day in money. Try this for a while: If you have a clear written plan, set for your self the goal to follow your trading rules and reward your self because you are following your rules and not because you are making money. Even when you have a day when you are losing, but you have followed your rules, then you have had a 'good' day. Put your amphasizes on following your rules and not money otherwise you will repeat the mistake over and over again...
  9. AFX


    Thank you for the response. I don't average losers, I trade a intraday swing trading type approach so I have set stops and everything... it is just my strike rate goes down the toilet on my bad days...

    But I hear what you are saying and will look into incorporating it!

    Thanks again
    #10     Mar 13, 2012