Yes....definitely depends on strategy/mkt traded as well as costs. When I traded at Refco we paid very little commissions (I think our round turns went down to like 20-40 cents on futures)..was not a factor. I know guys today who pay 5.00 RT. Now while they are trading their own cash and keep 100%, they can't go nuts scalping or they will get eaten alive by costs. Also if they have too many Break even trades the costs will hurt. Depends on each person's situation. But I agree with the guys who say moving stops to BE too soon will hurt performance big time.....I have been there. Has happened to me during drawdowns...start trading too defensive...even scared. Completely hinders getting back on track. 5 ticks on CL? Man...isn't that a bit tight? It's flying around 20-30 ticks on nothing lately.
I'm a 1 lot guy and prefer to keep my risk tight...the winners usually take care of themselves..if I can make 20+ tics a day with this strategy I am happy for the moment..and will add contracts as I move forward. I certainly am not claiming I know something everyone else doesn't, just comfortable...I'm always open to ideas and learning though...great thread btw.
From my experience, break even stops are easier to get hit when you're trading on the smaller time frames(under 5 min)....generally speaking. On ES or euro futures I typically trade on nothing smaller than 15 min time frame, this allows me to set my "mental stop" just below the recent swing high or low. I get stopped out much less doing it this way. ...my 2 cents
That's cool. Whatever works for ya. If you can make 20 ticks a day, then size up a bit, can make a great living.
I'm not a fan of breakeven stops or trailing stops. I find that usually they just take you out of winners (or potential/could-have-been winners) at poor prices. I prefer to manage money/risk by scaling out on price extensions in my favor, rather than moving up the stop after such extension. If the trade doesn't perform fully from there, well you gave it all the room it needed and come away with a small gain or loss. If the market just keeps going, there's always another trade and you can re-enter at any time.
Six of one and half dozen of another, I think it depends one the trader and his method. The smaller the timeframe, noise will take out the breakeven stop plus one tic, UNLESS your targets are small, I scalp ES for 3-8 tics, 25-40 trades a day, since I am doing more than a handful of trades a day, I have to have a much lower losing percentage than someone who goes for much larger profits. But I also trade off 60 minute timeframe, use five point stops for swing trading, I use a breakeven stop plus one. It also has to do with the instrument you trade as well, like Crude Oil or currencies, I find for me, they are more directional, so if price does come back, backtesting proves to me, I will get stopped out for a loss whereas I can just get out with 1-2 tics profits. Just comes down to much backtesting to find what works ofr your method.
Yes, i do it and I recommend it. B/E + cost. Typically I prefer .5-1R. However, I also use price action to determine when to go b/e +cost. If you're not comfortable do 1/2 and 1/2 but I don't highly recommend that. You have a fixed entry, and a firm stop. Nothing else. There's been some great traders on here and the ones that succeeded over the long run moved them to break even. Here's an idea that might work for some of you. Do 1/2 @ breakeven and 1/2 left at your original stop. Use a sample set of 30-40 and determine which works better. Obviously different setups will yield different results so try and keep them the same. You certainly have the ability to answer your own questions on here. Great thread BTW. There's a saying "never let a winner turn into a loser"
Moving your stop does not 'protect downside', thats already done with your initial stop. Sounds like the usual forum bad advice you hear over and over (along with all the advice about having a high R on trades). All the traders I know that move their stops to breakeven either are breakeven traders or make very small amounts of money in the long run. All the best retail traders I know who make good money mostly leave stops as they are. In fact, one of the key reasons I myself turned from a breakeven trader into a profitable one was when I stopped tampering too much with stops during trades. After that I started doing very well.
Stops should be placed based on market action, not on your entry price. Otherwise, two traders taking the same setup, using the exact same strategy, but one entered at a slightly higher price than the other, would have different stop placement, and this would clearly be illogical. IMO stops should be placed at a price which will only be reached if the trade thesis is probably wrong.
I agree. Every system I've tested does worse with stops. I use them anyway, but just disaster stops, not stops intended as a normal exit. What are the "other methods?"