Moving Stops in Your Favor

Discussion in 'Risk Management' started by NoDoji, Apr 14, 2009.

  1. NoDoji

    NoDoji

    This is a strategy for traders who have no ability to distinguish strong setups from weak setups, and can't figure out the price at which a trade's chance of short term profitability becomes invalidated. Your expected reward on a trade ideally should be greater than your acceptable risk.

    A case in which your strategy would make sense is options trades where you're shooting for a 100% or better return and willing to risk 30-50% to let it play out.
     
    #31     May 30, 2009
  2. iukka

    iukka

    "This is a strategy for traders who have no ability to distinguish strong setups from weak setups, and can't figure out the price at which a trade's chance of short term profitability becomes invalidated. Your expected reward on a trade ideally should be greater than your acceptable risk.

    A case in which your strategy would make sense is options trades where you're shooting for a 100% or better return and willing to risk 30-50% to let it play out."

    Actually You are wrong, very wrong. Profits are taken with some dynamic exit. Normally profits and nost losses are taken with this some dynamic exit and absolut stop-loss level will be hit very rarely. I use this starategy with falling knifes in volatile environment for trading 15 -30 % pull-backs. One case of 20 or 30 hits absolute stop loss which lies under the trend line (for example 50 MA).
     
    #32     May 31, 2009
  3. NoDoji

    NoDoji

    If you watch a falling knife, you eventually get a capitulation bounce. Jump on it quickly, with your stop loss right under the wick of the entry bar. What is the reasoning for risking anything more than that?
     
    #33     May 31, 2009
  4. iukka

    iukka

    [
    If you watch a falling knife, you eventually get a capitulation bounce. Jump on it quickly, with your stop loss right under the wick of the entry bar. What is the reasoning for risking anything more than that?

    Usually this kind of situation arises when stock is in strong upward trend and then falls 3 -10 days in series like a rock. You can't catch this kind of falling knife with tight stop loss successfully, you will be stopped out prematurely.
     
    #34     May 31, 2009
  5. NoDoji

    NoDoji

    Well, I'll close out with this: Given enough time the majority of trades with a 30%-50% stop loss will some day become profitable. However, trading is my sole source of income and time is of the essence.
     
    #35     May 31, 2009