QT, stick with me, as I'm going to master this stop thing! I realize that there are times when my intuition tells me to exit and it's probably correct, but it SEEMS that more frequently leaving the initial stop in place and letting the trade play out to an intended target setup is the optimal choice. I may have several days of treading water while I work this, but it's got to be done. I think I will post a thread about it in Trade Management and hopefully get some experienced feedback. Your comment about FAS later in the day is interesting, because I too saw the stochastics oversold and contemplated a trade. However, I know that stochastics stop working properly in a trend and FAS had well established a downtrend at that point, so going long became too risky for me. It became bottom picking, and I prefer to go long on a higher low off major support (as with APOL this morning).
Hi BP, I have gladly joined the stop loss cult and if you read through this journal from January through yesterday, you'll see that making an exception to using stops just 5% or less of the time can result in serious setbacks. I began to learn about technical analysis in the late spring of last year and started day trading in mid-July. Since this is what I do for a living, I've been putting many hours into it, so it's been a crash course (in more ways than one). Am I crazy to hope that I can cram into 1 year what takes most traders 5 years to master???
NoD, You seem to talk a lot about whether or not to average in to a position. What about selling half (or some pre-defined amount) when your trades moves in your direction, making it easier to keep your initial stop in place for the remaining shares, and thus, not missing the bigger move? Definitely more of a question than a comment...
As most traders said it took them 5 years or so to become profitable, we may have to face the fact and think about it really hard. The initial thought that comes into my mind is that there is something in trading that just takes that long (5 years) to become clear. Have you thought about the possibility that there is some fundamental truth in trading that you don't know yet?
No. Never thought about that possibility. Never crossed my mind. Been in regular contact with several very successful traders and they all like me and want me to be very successful; ergo, they would've revealed the fundamental truth to me if it existed. (Don't even say it. I already know it: I just ruined all my chances of these guys ever revealing to me the fundamental truth of trading by using the word "ergo" in a public forum.)
NoD, I know you follow geez - that guy is absolutely consistent when it comes to stops - figure out how much you can risk for each trade and set your stop and walk away - works for Mr G
Hmmm.. perhaps there are a few nuggets of information there that could help me- can you elaborate on what you mean by "stochastics stop working properly in a trend" I've lost some good bread doing that exact same trade in Fas about 6 times now, and its never done what it was supposed to- stopped me out everytime, and I was giving it some wiggle room too (which ended up hurting even more) I'm all about stops, and I know I can be disciplined enough to use them- its just the stop-after-stop-after-stop thing that I fear- but perhaps I'm experiecing that because I'm trying to play stuff like FAS (and at the wrong point in the trend?)
Hi Boosh! Someone emailed me the same idea. Thing is, I was very comfortable shorting it @ 25.00, but once the market opened and it had pulled back well below 20.00, it was no longer appealing to me in either direction, because I had no idea what to expect.
Price moves up or down and stochastics reach an overbought or oversold condition. If there's still power in the move at that point, the stochastics just wiggle around in that area. So if you're trying to pick a top or a bottom based on stochastics, you'd better have a) very tight risk management, or b) an ample trading account to average the position as it continues to run against you.