NiteRider Your 12.70 entry point is good, that is where I would enter too. Your first stop of 13.01, although a little too high, is also ok. But your second stop of 12.51 is too low. Check the chart in my earlier post and you will see that the first time it hit resistance was at 12.61. You could argue that the first channel was much steeper, but that would been unrealistic- because the channel would be too narrow too steep, and we know that realistic channels normally run at roughly 45 degree. Any way the point I want to make here is that P&F charts give you the best and earliest indications of where support and resistance ought to be. To reinforce this point I am going to show you yet another chart. Just look at the current state of the QQQ. I also would like to ask you guys about the merits of mental stops v actual stops. Although I monitor my trades constantly, I find it difficult to execute mental stops: By the time my order is entered usually the bloody thing is miles away from that mental stop (I use Datek- may be I should look for a faster broker - may be IB). On the other hand, Nasdaq stops are based on the ask/bid prices and that can trigger your stop when the price is nowhere near that ask/bid. In one occasion Datek executed my DELL limit (not market) stop sell order without even the ask price being reached (I traced all Level II asks and could not find a single ask that would have triggered that stop order) when I called Datek, they made some excuse about the Level II data having some problems. And, the funny thing about that execution was not that the order was executed, but it was executed at higher price (say stop order was at 25.44, and execution was at 25.47!). Care to guess what Datek said when I raised that point with them: "Oh. Youâre lucky you got a better price than your order". Lucky! the bloody thing shot to 27.0 plus immediately after. Any way, any input in the merits of these two different systems would much appreciated.
I quit using mechanical stop losses became someone always seems to take my measly one or two hundred shares at or near the low of the day. I think there a lot of small-lot traders and when big buyers wants to get the a lot of shares they find a way to soak up all the small lots. And if you set you stop too far away from the market, what good is it anyway? If you're trading, watch the market and your stocks. If you're building a portfolio, do your due diligence, and buy stocks that you want to hold because anything can easily drop twenty percent or so, and thankfully there really ain't all that many enrons so can sell at some point if it doesn't work out for you.
FWIW - I quit using stops at all, I found that trading NYSE they were just targets to be taken out, when we had larger spreads I could get away with it, now my reading style is daytrading and I will have the opportunity to be watching my plays all day......I did (over 2 years ago when I traded options exclusively) use stop limit orders with good success, but now that I trade straight equities, <my experience> is that their not working well for me at least at this current market, maybe I haven't learned how to set good stops, I can always learn more.....I use more mental stops or have my trade entry and exit points written down in front of me as I enter the trade. Just my .02 cents worth... good trading all.... mrktwiz
nljones5, The name of the game is to stay in the game. You may be lucky and get away with it many times- But one day the price will run so fast you just can't get any order executed unless you already have a stoploss. When that happens, you wish you had a stoploss no matter how far away from where normal price action was taking place. And this is propably the number one cause that leads to players being thrown out of the game all togther. So, when the pros say never trade without stops (Mental or actual)- I think I would buy that. ssb. p.s. My mother tongue is not English.
I have to agree with Don and those who advise against stops if you are an experienced daytrader. I have lost a lot because of stops often to see the market come back to my entry or slightly above . If you are a newbie you should definitely place actual stops because you may buy or sell at the range extremes or act on false breakouts and it will not come back (at least that day). Here is what I try to do I enter a large stop that hopefully will take me out in case of technical failure (connection, software problems etc.) on stocks it will be like 50 cents or more, on ES 3-4 points sometimes more (if the market goes that far against me I was wrong to start with and it is likely going the other way) I also predetermined before entry the level of my mental stop which is much tighter. If my mental stop is hit I will often exit half the position (I 'd rather lighten up when I feel the heat)and wait until it comes back as soon as it comes back to breakeven I 'll exit the rest of the position unless it's very strong .
NiteRider, Thanks for the additional information. I just took a closer peek at SEPR with the additional info. I'm not going to tell you if your stops are too low or too high nor am I going to tell you if you should use stops or shouldn't use stops. I make it a point to scale out of profitable positions in hopes of catching a bigger profit with the remaining shares. With that said...if the market conditions change or your having second thoughts...regardless where your stops are it...exit your entire position at the current price of that moment before your stops are hit. Thus, you seem to be a little concerned about missing that last big drop towards the end of the day on May 2nd, Thursday. If you were still feeling good about your analysis in SEPR and the market conditions was comfortable for you...your stop placement methodology shouldn't be alter. Also, in hindsight, it's obvious that a better short entry at a higher price would have afforded you a lot more room to play with if you were using a scale out strategy. I think it's something you should test to see if your comfortable with it into of exiting a profitable position all at once. In addition, were you monitoring SEPR prior to 10am est. More importantly, did you notice any short opportunities via your own trade methodology between 0947am - 0954am est? Nihaba Ashi
There are many reasons a stop loss should be used with caution. If you've had a good stock for long time you can trigger the stop on a bad market day and incur taxes at a time when you don't want to do that. From what I've seen most good stocks come right back up after a fast melt down. History is mostly on my side. If you're in a bear market, you have plenty of time to decide what to do on a case-by-case basis as you watch your gains slip away (a feeling I know well). Also, if a stock splits and you're not paying attention, you can get stopped out when it's the last thing you wanted to do. I do occasionally set stops when I buy a new stock if I can't be around to keep an eye on it, but in general I don't think they're much good.
I became profitable once I STOPPED using stops to 'protect' me. (Hope I don't jinx myself! :eek: ) If it's going against you (and you can usually 'know' or feel that it's a loser), then just get out as best as possible. You don't need a stop to take you out -- get yourself out! and quick! But I learned a great deal by losing money with stops. Now I look at a chart and try to detemine where would I have previously placed a stop -- and now I use those areas for entries and targets. Hey, works for me!
Very interesting point 3dog, I agree, once you acquired some experience the risk of entering before a big move against you are very reduced. If the trade doesn't work out as you thought after a while it's best to try to get out the best you can.