What are some good rules of thumb for stoploss setting for swing (overnight+) trading? I'm using 2:1 profit vs. loss targets but because I cannot watch my trades all the time intraday I set trailing stops as I can throughout the day so I don't end up flat as often, at least that's the goal. Its not working too well. My poor P&L with stoploss settings lately is mostly since I began leaning to shorts more often. I try to use a trailing stop above prior intraday resistance levels as my shorted stock falls but lately they always come up and get me then head back down. Obviously the simple solution is widen my stop limits (duh) but that must then include a wider profit target per trade to net profit among the combined trades which by definition also means a lower total of profitable trades vs. flat/loss trades. More importantly I'm uncomfortable with too wide a stoploss. Might this mean I'm simply picking bad setups in the first place or am I being too non-aggressive maybe? An example from today: http://www.cg-imt.com/homestuff/sepr.jpg I shorted and then followed SEPR down today and when it hit $12.30 I moved my stop down to $12.51 to guard against a reversal just above the most recent intraday resistance at 11:40AM, 11:50AM, and 12:05PM (white horz. line). Well as you see the intraday reversal took me out right after 1PM today so I missed out on the last big drop of the day and the other 24cents of move and likely more downside Friday. Am I being overly wishful and just taking the same "woulda-coulda-shoulda" everyone else is taking i this market or is there a piece missing in my stoploss strategy. I know most of you are daytraders so much of this won't matter to you since you're there to watch it minute by minute but I'd appreciate hearing strategies or advice from any swing-overnight-multiday traders here. Thanks
Niterider - might be the way you're identifying your support and resistance . For SEPR today the key SR zones were 13.05-13.06, 12.91, 12.61, 12.30-12.31, and 12.16
risk points should be a function of volatility (in my opinion). A stock with a $2 average daily range needs more room to swing its elbows than one with an average $1 daily range, etc. etc.
Determine where you want your stop on whatever timeframe you are trading from. If you use multiple charts to trade from stick with your primary. I mention this since it was a mistake I made for a long time. If someone mentions support/resist levels or pivots they will vary based on what timeframe you are using. A 15 cent stop on sepr is within what I would consider the noise level of the stock, almost any short term price whippage is going to hit you unless you are lucky and hit a nice clean move( :eek: ). When you place a stop its your decision if you want to add a nickle or so of wiggle room, depending on your trading style or position size and when you decide that the trade, based on your reasons for getting in, needs to be closed.
Just a fwiw from a wtfdik, but you may consider watching the Fibonacci retracement levels as stop loss points. Also, the market is sideways more than it is trending. Back in the day, you could set a trailing stop and end up with 4 or 5 point gains, but that is just not the case anymore. Quite often, you have to take the profit when it is there.
I knew I'd have to adjust. Just looking for more of a methodolgy. Today will be a good test with the job data coming out.
How did you calculate/determine the support and resistance levels? It looks like 2 of them are the previous day high and low but what about the other 3. Brutus
Thug, Could could you explain what you mean by Fib Retracement and how you would use it to set a Stop-Loss price. What move (near term or bigger picture) would you use for the retracement levels? An example would be greatly appreciated. Thanks, Jeff.
You simply should not use stop loss orders when you trade. If you cannot monitor trades well , then wait until you can. Setting alerts makes sense, but stop loss orders will cauese you nothing but grief, as they seem to have caused already. Don
Brutus - The previous high and low happened to cluster with two SR projections. I've attached a chart from the TP software I'm using that illustrates. Don - Telling people to never use stops is probably the worst bit of advise I've seen you give. You didn't even acknowledge the needs of different trading styles and different traders - might be a revelation but the whole world doesn't trade like you. If you're scalping around or can (and want to) watch the screens constantly, you probably don't need stops (unless you're slow on the trigger). But with swing trading (either intraday or multiday) where you might be in a position for anywhere from a minute (if you caught a bad entry and it immediately goes against you) to several days depending on how it progresses or cases when you can't (or don't want to) watch the monitor like a hawk, it's just stupid to fly without stops and it's silly (or at least naive) to suggest that these traders should try (or not trade because it doesn't conform to how you trade). What do you expect? A trader who's potentially going to be in a trade for hours can't even go to the bathroom or have lunch because they have to sit by their screen? Better to risk having your stop tapped prematurely than have to be a slave to the screen. Alerts are useful - especially as a cue to tell you that you might need to do something (like change your stop) when you're not hovering over your screen - but their not a replacement for stops. The primary problem people encounter using stops is if they don't put them where real support/resistance is most likely. You might still get hit then with the price topping/bottoming right at your stop, but if you set them well that shouldn't happen much and supposedly you're setting the stop where your trading plan says to get out anyway - so normally you want to get out and there's no reason you have to execute the exit manually.