Making my use of stops more methodical and effective

Discussion in 'Risk Management' started by improvingstops, Oct 23, 2009.

  1. In the past Traderzones has been asked to post spread sheets. He doesn't get around to it for various reasons.

    You can simply check out the various vendor test sites for how a particular trading method is assessed.

    30% a week when doing intraday trading with a method means that you extracted some of the offer.

    I'm not familiar with MAE, since it doesn't relate to the appraoches I use. At one point the Tucson Meetup group examined stops. We checked out the 12 most common methods, all under dynamic conditions. Static stops such as you and traderzones do were not considered since they have no relationship to market dynamics.

    It is possible to develop trading plans that do not involve stops. One factor involves knowing all the time which side of the market is the right side. There is the notion that price movement can be related to the market making an offer. MAE, as described, sounds like a market offer in a specific direction. In your and Traderzones case, the opposite direction of a position. Most people consider not holding positions on the wrong side of the market since no profits accumulate during these hold periods.

    Stops do not remedy this trading conduct as you have pointed out.

    While it is off topic, you may wish to begin to focus on what constitutes staying on the right side of the market and its corrolary doing wash trades to eliminate any losses.

    The key process for this is called Monitoring. I'm sure you are seeing two types of excursions. Traderzones wants you to keep track of the adverse one you allow to happen to you. Sounds kind of stupid to me or maybe he has a hindsight orientation this week.

    When you are making the 30% a week, you do notice the excursions that generate the profit segments. This is a plus since you can keep doubling your account fairly frequently. You account kkeps track of these automatically as you have noticed.

    Any excursion can be monitored. I would log each as long or short and take profits on each. As you long, you see each excursion begin, continue and end. You could use a stop as a reference. As you see price moving away from it,hold the position. If price moves twoards it, then reverse your position and place a stop behind the price movement. In this way you can see price moving away from your stop yey once again.

    another fun thing to do in midday is just enter randomly and then exit as a wash for practice. You can add a tick to cover the commissions when you practice this. It is like taking your bicycle arond the block and not missing any of the turns. Most people can complete several block cycles and not fall off even once.

    Do bracket trades as well. Let the entry take you where the market wants and let the other side of the bracket be a stop. As long as you move away from the stop you keep holding.

    You may discover how profit segments come to an end some day. If you have a neutral bias, then it is easy to make this discovery. Stops deal with where the market doesn't go if you know what you are doing. It is the same for MAE; there aren't any if you know what you are doing.

    I usually lay out my next four trades in advance. As I do trading I keep a list of upcoming trades current. As a neutral biased trader, I look at the end of one profit segment as identical to the next beginning of a new profit segment. This comes about because I divide monitoring information into two groups and one group I analyze is to hold and the other group is to simultaneously end and begin trades. For you the end of a trade would be when the price is finished moving away from your stop; this happens to be coincident with the beginning of the next profit segment for me.

    So for you who makes 30% a week, look at all times to do a trade as entries. If you are holding long, lookfor a good short entry as time passes. If you are holding short, be looking for a good long entry. Obviously this eliminates setting stops since you will be going away from any stop all of the time.

    A fun way to look at this on a screen is to have the market set stops for you. Use the DOM for this since it is a lot of fun. Look for the two walls on the DOM afeter you have entered one of your good trades. Watch the price move in a direction for more profits. notice there is a wall behind your trade and it is moving with your trade as your trade makes more and more money. The wall in front of you moves away too, opening the way for more profits for you to have.

    As time passes, the wall behind you seems to catch up a little and the wall ahead of you gets stubborn and too large to disolve. You guessed it your profit segment has come to an end.

    This is where you get to start your record for Traderzones. He wants you to go from this point onward and measure how you begin to sit through an adverse excursion by holding after price fails to breach the wall and reverses and goes way back past your prior entry. The altenative I recommend is to trade at the wall and actually revese to make the excusion no longer adverse.

    If you are the type of trader who monitors and anotates, then you price and volume annotation depicts where the wall will be unbreachable in advance. In channel type annotating, wall appear at pt 1 2 and 3 and FTT but they do not appear at the BO of RTL's where the overlap of trends is ending.

    It is kind of nice when a trader gets to the place where the Conventional Wisdom is laid aside. Probably at this point a person can recognize that adverse excursion do not occur. They are mythical things it turns out. I've never seen one as a matter of fact. I've heard about them and people who use them on excel spread sheets.

    I would add a word to your handle: here. Make it read loggingstopshere
    #11     Oct 24, 2009

  2. Stops are basically an issue for gamblers and novice traders. People need to work on thier entries and market understanding more, instead of working out how much money they want to lose after tossing the proverbial coin. Hope this helps.
    #12     Oct 24, 2009

  3. It's probably the commissions that are killing you. I had the same thing happen to me. Textbook. I switched from no realized commissions to huge ones and it changed my whole game.

    Ran the numbers and realized my size wasn't big enough.

    Since I don't want more risk I actually switched to fixed $$$ stops

    if you want to keep it as simple as possible fixed $$$$ is the way to go. If you REALLY want to do the extra work you can optimize but this is the best way.

    #13     Oct 24, 2009

  4. Improvingstops

    First of all, ignore everything Jack Hershey says. He is the leading guru wannabe. And has made major claims and refused every of the 100+ challenges from many different people for proof of his outlandish claims.

    He is a ruthless misleader of many many newbies on ET. His misdeeds are unbelievably long, and Jack knows how many dozens of misled and angry traders in the last few years on ET against him. Not to mention he has said several times he was leaving, but he has a pathological need to be worshipped.

    Again, avoid him. If you do not believe me, I will send you endless threads of people who have been duped by his Biblical length posts and gibberish approach and God complex he has.

    Anyway, sounds like you are on the right track. If you report progress, I am sure myself and others will give you feedback.
    #14     Oct 24, 2009
  5. hmcp



    I was told early in my trading never lose more than x amount then I learned every setup is different in more volitile mkts adjust stops and reduce size.wider stops may give you a little breathing room to let you trades play out without getting stopped 2 or 3 times then wathing the mkt move after you throw in the towel. My biggest problem was (is) moving my stops to early and getting out of trades with little or no profit trying to avoid a loss.

    #15     Oct 24, 2009
  6. Jack, with all due respect, I'm focused on trading as fast as I can using a variety of analyses that I am intrinsically comfortable with. Proposing that I change that approach is misdirection. I made 1700$ before losses, after commisions, per contract on Friday. I lack not skill, and I have no wish to be permanently in the market (which strikes me as dangerous and tiring, and boring). I made more than 30% this week, but over the past two weeks if I had used the stops as per the chart, I'd be looking at much more. Refer the graph I posted, all real trades.
    So, thanks for your time, but I'll focus on optimising my profits and eliminating my larger losses.

    Dackster-I am neither gambler or novice, although I will always try to work on my entries and strategies to get as much as possible from the market. I averaged 1200$ profits before losses, after commsions, per contract every day this week. However, I left much more on the table.

    athlonmank8-thanks, but I'll keep the stop based on ticks, since I am seldom wrong by 17 ticks, and when I am, I hold longer or average in to get a huge loss.

    Traderzones-yes, I'll set up a spreadsheet, as simple but useful as possible since I make over 30 trades per day. After a few weeks I'll post the results. I will also make a simple flow chart for my routine setting stops (to break my bad habit) and assessing the trade more critically. I want to change my attitude so I am more decisive taking small losses.

    hmcp-thanks, I won't use tight stops. It is too stressful worrying about whether it'll be hit then reversed. I rather want to focus on the market-am I right, or wrong in this trade, and what is the scope of my profit potential. If I am wrong, get out at the cheapest loss now. Let the stop prevent big losses from when I messed up.

    Thanks for all your posts and time.
    #16     Oct 24, 2009
  7. hmcp


    I agree with you . I like to always have stops in place sometimes for unforseen events and sometimes I just want to be stuborn and think I must be right. Most of the time you will realize if you are wrong and get out before you are stopped out. I have learned I ned stops in place to protect me from me.I get a little cocky sometimes.

    #17     Oct 24, 2009

  8. That works too bud. Fixed anything. $$$, ticks, whatever.

    heck, you could base them off of what your target expectations are too but that's got it's own problems.

    Ideally, you want to base it on volatility, but whether you have it too close or too large is relative to whether those conditions will continue. In addition, over-optimizing that strategy can really cost you in the end.

    Most un-stressful way is fixed. Then adjust them from there if need-be.

    Regardless, keep us updated. Im curious to see what you come up with for your strategy.
    #18     Oct 25, 2009
  9. four trades so far....

    No adverse excursions either.....
    #19     Oct 26, 2009
  10. AS usual, proud he can predict the past...
    #20     Oct 27, 2009