I would like to take a poll of you guys about where you place your stop loss orders when you initially enter an ES trade. I usually make mine 8 ticks away from the entry so I lose $100 per contract if it goes against me. I have a real aversion to losing money but paradoxically I think it is costing me big time by getting stopped out too quick. I did 6 trades today with only 1 small winner. I analyzed them and noticed that if I put my stop loss at 16 ticks away from entry I would have had 5 eventual winners without getting stopped out. So I am going to implement this new policy. I am curious what all of you think and do. Thanks!
And if you do not believe the Fed is manipulating markets, pull up the 5 minute AMZN and GOOGL charts today and look at what spooz would otherwise have looked like from 2PM Eastern through the close.
Decide your stop in points. Then for every trade decide where your logical stop should be. If within parameters, good. If not that trade is too risky and pass. That's me. Mostly lol
Don't base your trade plan on a poll, base it on testing. My initial stop is above/below the entry swing. If it's 2 points it's 2 points, if it's 6 points it's 6 points but it is always a legitimate S/R level. I also want to know my risk reward scenario on a trade. You should also know the probability of a trade succeeding. I am not going to risk 6 points to make a potential 3. The tighter your stop, the more but smaller losses. The farther away, the larger and fewer losses. The correct answer for YOU will come from testing and your personal characteristics. Part of that testing can come from tracking MFE and MAE on your signals.
I hear a conundrum in your post. First I'll say for myself, stops are almost always based on the market structure itself. But there are times when I use a money-based only stop: particularly in volatile times, when the overall structure of the trade is either very narrow, or very wide. In less volatile times, as means to accept some (perhaps meaningful) heat, based on a more macro expectation. Structure, narrow, wide, heat, volatility... all are terms relative to MY style and methods of trading. Yours will differ. So without knowing if you are one of the R:R setup traders or not I will say that in the current market environment where double-digit handle moves occur swiftly and frequently, a hard $100 money-based stop is hugely problematic. And that is your conundrum... If you are a R:R setup trader, you are not accounting for volatility. Your own trade debriefing shows success at double risk. An R:R setup trader is likely to have this conundrum, as the reward at that level of risk may be considerably lower. FWIW, personally, I NEVER trade with an R:R ratio in mind. Never have, probably never will. Each trade is it's own.
He needs to incorporate some sort of volatility measure and then correlate that measure to the number of points to assign to the stop loss order. This will take some back-testing. Using tight stops on a day like Friday is just begging for a low win rate.
Dude, This was not our deal. While I am grateful for Monday and Tuesday, the Friday close has left me with a bunch of SPYs assigned. When I write puts, it is not for getting the underlying. What am I supposed to do with all these? If 50$ was not enough, you should has said so. ok, here is my new ask - either go down hard next week, or just moderately up. Am good either way. If going down, would love it if it is based on financials. This time offer is a hundred dollars. Irritated, WNT
I place my stops based on price action. If I'm long, its below a lower low. If I'm short it's above a higher high. Or I'm above/below an area of congestion. I usually try to scale in, because invariably, once you enter, ES likes to retrace before going on. Think of it this way. If you buy, you obviously expect the market to go higher. In order to do that, it has to make new highs. If it makes a new low, then you are wrong, for the moment, so get the hell out. You just have to accept the uncertainty. Some days you just get whipped due to non-directional volatility.