Discussion in 'Risk Management' started by crgarcia, Nov 17, 2008.
Maybe to reduce losses in case of a 1987-style crash?
Long term trader don't use stop. They exit when trend change.
You can use stops if you need to and want to, but normally the strategy's Exit method will take care of that in the case of a false Entry signal.
The answer is it depends.. on the overall design of you strategy.
I trade long term commodities, at least in my style of trading using yearly, monthly, weekly and daily charts, it tests poorly if I use any trailing stop after I get to Breakeven stop. Once I am profitable of twice risk of trade, my protective stop is GTC and only time it changes is either after rollover or possible end of weekly trend. I will monitor the trade by using weekly bar charts and when Protective stops should be changed, it is only engaged fifteen minutes before last day of the weeks' close. Except in early stages of trade, all exits are fifteen minutes before close on last day of the week, with the exception of the breakeven protective stop.
I had found that by having this type of method, it allowed me to get much more in a big move than have a tighter stop and only get a trickle. The down side of course since at times my protective stop is so far away is loss of open profits, so taking profits of half position is warranted at a pre defined price. There usually only several good size moves a year following 40 odd markets, with the exception of this year.
I think Trading long term should not be about moving the stop, but being able to stay with the trade till market show otherwise.
Did you got out / got stopped the day when crude rallied $20+?
When I sell short futures, I buy call options as a hedge. I normally, when I have a signal be selling new contract highs, lose on many more than I profit by the futures. So I will lose $6-700 on the futures but the keeping the calls up to three days allows me to recoup the losses and make an overall profit on the trade. Past four years I had sold Crude Oil 26 times, twenty-three losses on the futures, twenty of them overall were profitable. Two of the three winners were partial profitable. Where I lose twice is when stopped out on loss of futures and then market goes in original direction and I lose on options too.
Markets that are topping are usually very volatile which to me are a plus if you have set rigid rules, they also tend to be upside down "V," where I have most difficult times are when markets are at 10 year lows, they tend to base for long periods and I have found buying Puts to be waste of cash.
I can see Crude Oil going down to $16-18 eventually. You might laugh, but history repeats itself, just as I knew two years ago about the impending depression in 2010ish timeframe, nothing the government does will stop it. There is no Protective Stop for USA, there is a solution, but no one has the guts to do it.
Very interesting Handle...and very profitable ideas (hedging longer term bets).
Bring on the recession/depression.
Us traders will always have a "job," to keep speculating! Hahaa.
I'm getting "more long term" but I still consider myself an intraday trader.
Yes, always use stop loss orders...always.
Unless all the brokers go .... broke.
Neat post,Handle123 ,i wouldnt laugh at crude oil going to $16-18;
thats what the direction of medium & long term trends [1year]have been & are.Wouldnt be suprised to see it spike up on Iran getting hit on thier nukes, but that is not a prediction.
Like the Pickens plan, & BP ad-beyond petroleum.
Don't know of any gov with the ability to control the economy well.The federal gov did plant a nice forest near here , on eroded farm land in the 1930's, gave it back to the state of TN.Looks nice.
I like the[ medium ] trend change comments, for exits.....Several exceptions to that, like the closer bear market stocks get to zero, risk/reward changes much, before the medium trend does, so some make adjustments there.
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