How do you use stops, when your position is too big?

Discussion in 'Trading' started by qll, Feb 1, 2007.

  1. qll


    As my account grow, I found that stop does not work well.
    I was in 18.11, it went up to 18.40, I set market stop at 18.18. Then it wend from 18.2 to 18.14 within seconds. If I use stop limit, I am worried that my position may not get out quick enough.

    So for those big traders, how do you use stops? Or you just seperate your account across different stocks?
  2. which stock are u talking about?
  3. How do you use stops, when your position is too big?

    Hi gll,

    Assuming you knew your position was too big prior to entry...

    I would be more worried why the trader is violating their position size rules or money management rules.

    However, lets say for some reason you didn't realize your position was too big until after your entry.

    That's why you should set an easy initial profit target (not your real goal of the position) to exit a portion of your position at a profit.

    Essentially reducing your position size so that it's no longer too big.

    Thus, why you saw your price go from 18.11 to 18.40 you should have exited a portion of your position (reducing your risk exposure) at a profit to have a better management of your risk exposure.

    In fact, in this particular situation, the initial scale out of a portion of the position at a profit also gives more wiggle room for the remainders to reach whatever dollar amount goal you had for the overall position.

    I'm also hinting here is that your left hand (trailing stops) should know what the right hand (profit targets) is doing.

    Simply, its tough trading as a one arm trader when you really aren't handicapped.

  4. qll



    I mainly trade on earning news. I found they swing big and mostly swing to 1 direction. They either go all the way one way or reverse within the first 30 minutes. Such as GOOG, JDSU, WEBX yesterday. In GOOG and JDSU's case, the premarket and first few minutes direction are fake.

    If you always take some profit off the table not adding positions in this very likely trending cases, how do you make big profit?

    I was doing this pretty well last summer. Recently all my trades end with loss. AMTD, T, JDSU, WEBX...

    What I have found recently is that good earnings on AMTD and T will not take the stock to new high. Not so bad news in JDSU still send it lower. Seems the market setiment is very bearish. (I mainly long so I only pick long directions in earning plays.)

    I wonder how big guys manage million dollar accounts just for day trading. It is really kind of hard to get out, when the market moves fast againt you.
  5. Hi gll,

    You asked a question (your question that started your thread) as if your position was too big to be managed via whatever stop method your currently using as if you've violated a position size management rule or as if you've violated a money management rule.

    Now it seems like I've misunderstood your question.

    It seems like your question was this...

    How do traders manage their stops with a large size position?

    That question being rephrased has nothing to do with someone breaking a money managment rule but everything to do with someone trading large position size.

    Analogy: I bought shoes too big is different then saying I wear large shoes because my feet are big.

    With that said, I never said I don't add to a position.

    Thus, your now asking a completely different question.

    Now, to answer your new question.

    I do ADD to a position and I don't do it because I'm trying to catch a big move.

    I usually only ADD to a position after I've already bank some profits.

    For example, lets pretend I can trade 50 contracts of the Russell 2000 Emini ER2 without violating my money management rules.

    However, current market conditions keeps my largest size no more than 15 contracts due to the overall shrinking volatility (less volatility equals more risk).

    Now lets say for whatever reason I get a Long signal when my bias is Short.

    I then take the trade with a smaller position size like 9 contracts.

    The position goes my way and I exit 3 contracts at the first profit target level.

    Later I get another Long signal even though I'm still holding 6 contracts.

    Most likely I'll ADD 1-3 contracts to the position but never more than the prior contracts I had scaled out at the first profit target level.

    To ADD more than what had been scaled out prior is essentially taking on more risk. Thus, avoids increasing the risk of the trade if I ADD too much in comparison to the risk analysis prior to the original entry.

    Now, lets pretend its a completely different trade for a different reason such as one involved with a market seasonal tendency (cycle)...

    That's when I'll think I can catch a big move.

    Simply, I know prior to entry when I should and when I should not be attempting to catch a big move.

    With all that said, if you ain't trading a million dollar account...

    Don't worry about about how others are doing it because their trade management rules most likely can't be used by someone trading a much smaller account.

    My point, if I was trading a multi-million dollar account, I would be trading with a different set of trade management rules after entry and I'll be trading different trading instrtuments in comparison to what I'm currently trading as a Futures Trader.

    With a multi-million dollar account I could easily afford to ONLY trade market seasonal tendencies (cycles) and they only occur 5-20 times per year depending upon the futures trading instrument.

    Therefore, don't make the classic mistake of using trade management rules of a big size trading account, managed funds et cetera...

    When your only trading a small size account in comparison.

    General rule, as the account grows, less risks are taken along with a decrease in the need to catch a big move.

    By the way, I'm not sure how multi-million dollar day traders of stocks do it but I'm fairly sure (a good guess) they are scaling into their position while at the same time not loading the boat sort'uv speak...

    They probably are also scaling out of their positions.

    The question now...what are the specific rules your using as a trailing stop method? :confused:

    P.S. Re-read your most recent post and compare it to something I said above involving taking a trade against your overall market sentiment.

    Position size management is an excellent way to manage increasing or decreasing risk exposure.

    (a.k.a. NihabaAshi) Japanese Candlestick term
  6. squeeze


    A stop order is basically a market order that it triggered at a price.

    The way to do it in bigger size is to use the price to trigger an algorithm that then does the order without creating too much market impact. You could use something like a fairly agressive volume participation algo.
  7. When a position has grown too big, i reactivate my deactivated stop.
  8. if you are using trailing stops you might consider having multiple trailing stops. which slowly scales you out as the price drops. to help prevent one large movement jumping over your main stop. maybe sell 50% off at the 50% distance from your current stop. another 25% at 75% to your current stop. and the last 25% at your current stop. something like that might help reduce slippage.
  9. Hi, there is a very simple solution to this problem.

    Stop too tight = over trading and inefficent ratios.
    Trade size too big = too much tension and stress for the trader.

    Solution = decide on max loss in advance ( mine is 1% of equity )

    view chart to determine maximum contra trend fluctuations, then set stop to 3% more than that. The stop cannot be raised until you maximum contra trend fluc. + 3% measured down from the high is smaller than the stop distance.

    Eg buy at 90, with 30% stop loss (measured down from the all time high, NOT FROM ENTRY), if the all time high is 100, then you cant raise the stop until >103 is achieved.

    This will give a tiny trade with a very wide stop, which could be more than 30% away.....

    When your 1% risk is reduced by 50% as the position goes your way, then you may add to your trade, to increase risk back up to the new 1% of equity level.

    Trading in this way will mean up to 5 entries are required to achieve maximum trade size, but it is done without ever risking more than 1% of Equity!

    The result is less trades getting stopped out, and usually only happens if the stock has a MAJOR problem.

    Greatly increased risk reward ratios, huge potential gains from holding long long term.

    Think of it like this....its easy for a stock to grow 10% in a month, right?
    But its not easy for u to have a massive trade on that stock without having massive risk...right?

    If you keep a high quality growth stock from 5 years, it could be worth 500%- 1000%-3000% more than you paid for it, right?

    Do the maths and dont trade for entertaiment, TRADE FOR PROFIT!

    You can see my open trades and note the stops are wide! Note my profits from 6 years trading are 16,000% and that is even after taking out living costs!

    the excel sheet has it all inside.

    Hope this helps!
  10. Hey Precision, has strict spamming rules and you are spamming because you do not have permission to post your link to your website that contains fee-based material (the link is also the exact same area of your fee-based indicator that's an Easy Language Code).

    I'll be surprise if your post is allowed to stay here for the remainder of the trading day.

    If you want to be a paid sponsor to have the privilege of posting your website link...

    You should contact Baron whom owns

    If your just trying to share some free info from your website...

    Just upload it as an attachment because excel is allowed as an attachment and you will see the below sentence at the bottom of each message prior to posting the message...

    Valid file extensions: gif jpg png doc xls pag txt pdf zip

    #10     Feb 2, 2007