================ Well another way to look at losses is; business exspences-sure keep them as low as possible. But no, break even is a loss with comissions/power bill.
That's what I now do. I used to move my stop to b/e after a fixed number of ticks in my favor, then realized that it simply makes no sense to do that. Once the price moves in my favor to the point that moving the stop to b/e makes sense, I then do so. Usually by then price is just a tick or two away from my minimum acceptable profit on a trade. Again, on breakouts and momentum moves, I move stops to b/e very quickly. They either work or they don't.
I pretty much agree with your posts on this subject. You have two choices. You can just sit there passively and let a winner go all the way to your initial stop, which seems to be what most of these people are advocating. Or, you can take the view that a trade that went to 1R has basically validated itself as a winner, and now you apply a different risk control approach to it, namely that you won't let it go to a loss. The way I look at it is that a trade that retraces a full 1R has probably gone sour. My R value is pretty large, at least in the ES, so we are not talking about random noise. One may be able to prove statistically that this approach is suboptimal, but it is definitely not psychologically suboptimal. There is only one thing more deflating than watching a winner retrace all the way to the inital stop and taking a loss on it. That is watching it cruise past the stop because you wanted to give it more room to turn around and take another shot at the swing high. Then of course you end up taking a humongous loss when you finally get out. Anyone who tells me they will never do that is either a liar or running a fully automated system they can't override.
If your chart settings are set up correctly and you experience a sudden drawdown, the probability of a be opp will usually get there as long as you don't start freaking out.
Yes, but how do you monetize psychological comfort? Isn't it just the same skewness preference that causes general public to buy lottery tickets? If you observe that your bankable performance deteriorates markedly as a result of using stops (and it is not necessarily always the case BTW), then it may be necessary to withstand those losses - no pain, no gain. Just reduce size, martingale very rarely (works in indices and pairs if done in moderation), and do use time stops to eliminate perverse selection of exit prices (stops are positively evil in that respect). More interestingly, it is possible for manually executed systems to be consistent on par with fully automated ones. Just study psychological persuasion techniques and use some of them on yourself... I found for example that commitment in writing works very well here. Having to explain in detail and apologize profusely for each and every deviation from the system, especially those dangerous self-reinforcing random... gains. So I simultaneously trade in sim or on paper and make minimizing the tracking error the main objective of my real live trading. See Cialdini's "Influence: The Psychology of Persuasion": https://venturethis.wordpress.com/2010/06/19/influence-part-ii-commitment-and-consistency/
I'm just saying that if a trader sits there and watches a good-sized gain go to his original stop, there is a lot of pressure to give it a few ticks more room. Eventually, that will result in a disaster. You won't see that in backtesting, because your backtesting rules will always exit on the stop. In real life, it isn't always that simple. Also, I think there is a big difference in how one handles a purely day-trading method from a longer-term one. I would be far more likely to let a trade work if it wasn't a day trade and particularly if it wasn't leveraged. For day trades, you really have to work to avoid losses, particularly full stop losses, because you are not going to be getting huge multi-day winners to offset them.
Well said, NoDoji.. Here's a clip which illustrates that point....20 mins long, but well worth the time spent. http://www.ted.com/talks/lang/eng/laurie_santos.html
I know how good it feels to move a stop to a point where you know that there is no possibility of a loss on the trade. But it is an emotional crutch based solely on the avoidance of fear. And in most cases it can really cut into the profits of a successful system.
I don't think the time frame matters. Charts without the time frame displayed look the same, so wouldn't you be managing the stops/targets in the same fashion? Per trade, my max stop is .20, my average stop is .10, my minimum profit target is .20, my average is .30 and I've captured some larger intraday swings of .50 to a little over 2.00. I don't have to work to avoid losses because the number of wins and losses on average turn out to be pretty much exactly what the statistical probabilities I calculated for my chosen setups indicated they would be, and the % of times trades reach profit targets before hitting stops also match up on average. If I were swing trading the same instrument, based on the larger time frame chart (daily chart), it looks like my stops would be between 2.00 and 3.00, and my minimum profit target would be 5.00 with some larger swings possible of 10.00 or more. So in the longer swing time frame my stops are significantly larger, but so are my profit targets, and in either case there would be no reason I'd move a stop farther away if price came close to it, or use a really wide stop that made no sense technically just to allow the trade to "work". I learned the painful way that moving stops or using really wide stops to "let the trade work" means price is proving your trade is no longer valid, but you still believe price is going to get to your initial profit target, and you have difficulty realizing a loss. I swing trade stocks and I manage those trades the same way I manage my day trades.