One 100 point winner or ten 10-point winners?

Discussion in 'Index Futures' started by bmills313, May 28, 2009.

  1. I'm grappling with this issue. I currently use a stops-based exit strategy on the YM and I'm wondering if I should change to more of a profit-based strategy, using limit orders to get me out of the market and then re-enter if I get the proper signal.

    I had a trade today that was a 98-point winner (woo hoo!) but I saw several trades today that were probably 10-12 point winners end up breaking even or losing a couple points and I get more worked up about those than I do about the 98-point winner. It got me to thinking about this issue of whether it's wise to set profit targets and then look for a re-entry signal and try to make that 100-point run with several trades...

    I mean, I love the stops I use and on the big moves I do capture a great deal of the move, but sometimes the smaller moves go from being upwards of 15-points or more profitable down to B/E before it hits the stop.

    What do other traders (YM or otherwise) like to do? I'm not too concerned about the transaction costs (1-point R/T) and if I was worried about them I think I have bigger problems to deal with! LOL!

    I'd love to hear your thoughts...

    bmills
     
  2. Scale out and never let a winner turn into a loss.
     
  3. Thanks, V.

    Another issue I have is when/where to move to B/E if at all. I notice a lot of trades end up being scratch trades because I moved the stop up prematurely, mostly out of fear of a trade going against me, and the trade may retreat but it never hits the stop...yet would end up being a nice trade had I not moved to B/E as early as I did. I guess a scratch trade is lot better than a losing trade, but certainly not as good as a winner...

    If you set an initial risk of say 15 points with a profit goal of 30-points where you want to get out...at what point would you move the stop up to B/E? I tend to think after 8-points I move to B/E but part of me wonders if I should wait until I make the initial risk back (15-points) and then move to B/E to allow the trade to run its course.

    Any thoughts?

    Thanks, again!
     
  4. plyka

    plyka

    since i always work with the exact same issue. Many times in the past I have moved my stop to break even, only to have the stop be hit, i get out at BE, and the NQ run up or down without me.

    What i've figured out is that it depends on the quality of the trade. My goal is to make 1-2 trades per day. However, frequently I am sucked into sub par trades or trades which in the perfect world I would not be dealing with. As long as this habit does not get out of control, it doesn't cost me too much and is very amusing. However in these cases it pays me to move my stop to BE as soon as possible.

    So again, it depends on the quality of the trade. If it is a very high quality trade which you believe in 100%, i would give the trade great leeway and a long time before moving your stop up to BE. These trades I must be sure have failed before i get out. The lower quality the trade is, the less leeway you give and the faster you move your stop up to breakeven.
     
  5. pspr

    pspr

    bmills, those are the 64 thousand dollar questions. Most trading books don't tell you exactly how you enter the market on a signal nor exactly how to move your stops. Even those who post trading plans on ET and elsewhere seem to avoid discussing the exact mechanics.

    Most pull-back or support/resistance systems want to see the market turn before entry. The first question is do you enter at mkt even if the market is moving fast away from your signal point or do you use a limit at the last price and wait or chase the price or do use a limit back at the support/resistance point or somewhere in between?

    If you use a mkt order you will at least be in every trade and every winner. If you use a limit order will will miss some winners but will take EVERY loser. It's a delima!

    Once in the trade how soon to move your stop to breakeven is delima #2. If your entry was good moving to breakeven may get you taken out on a quick move but will save you on a quick reversal. I can't tell you how many good trades I've seen aborted by moving to BE too soon. I've also seen losses pile up from re-entering a trade that still looks good after getting a close/BE stop hit then getting stopped out again.

    Delima #3 and #4 are how close to trail the price and whether to have a profit objective or "let your profits run" and let your trailing stop take you out.

    Generally, I only enter with limit orders but I have been known to chase a price or two, usually to my chagrin. I try to make those decissions based on trade potential and how strong/weak the market is. I usually move to breakeven way before I should but until I arrive at a logical way to determine this, I'll continue to err on the conservative side.

    I was in a popular chat room where the trader determined a support area after the fact then would place a limit order at the S/R number. If the order was filled on a test usually the market would have an initial bounce off the S/R level and he would quickly (in several seconds after entry) close half the trade which allowed a BE stop to be placed below the initial entry on the remaining position. I wasn't that thrilled with the strategy as it created other problems.

    If you find a reference discussing methods to solve these problems please point it out. These seem to me to be the major decissions that will make a trader a winner or loser.
     
  6. I would rather have TEN 10-point losers than ONE 100-point loser because...

    I can swing at NINE more pitches & be more likely to hit some singles or doubles.

    ;)

    GL!
     
  7. Good stuff, gang.

    @PSPR: All market entries; I want in ASAP.

    The end of the day move just now on the DOW was almost speaking to me and this question posed yesterday. I adjusted my strategy today due to the sort of wonky moves (for my strategy, at least) and did everything on profit-based exits instead of just using the trailing stop I usually use.

    At the beginning of the move I hit +8 and my strategy moved the stop to B/E and was stopped out at B/E, which is fine because the retreat would have hit my initial stop.

    So then I saw my re-entry point and hopped back in, went +16 and it pulled back slightly and I grabbed +10.
     
  8. Good stuff, gang.

    @PSPR: All market entries; I want in ASAP. Generally, most entries are at fairly quiet times so I'm not really chasing but every now and then the action picks up and I might hop on a bit later than I'd like...

    Nice baseball analogy, GCSICLRBC...i like that mentality.

    The end of the day move just now on the DOW was almost speaking to me and this question posed yesterday. I adjusted my strategy today due to the sort of wonky moves (for my strategy, at least) and did everything on profit-based exits instead of just using the trailing stop I usually use.

    At the beginning of the move I hit +8 and my strategy moved the stop to B/E and was stopped out at B/E, which is fine because the retreat would have hit my initial stop. Saved 12-points on that one.

    So then I saw my re-entry point and hopped back in, went +16 and it pulled back slightly and I grabbed +10 as the stop moved up to lock in those profits.

    Saw another re-entry point and hopped back in and hit my profit target limit of +20.

    Saw another re-entry point and hopped back in, another +20.

    Saw another re-entry point and hopped back in, but it pulled back enough that I grabbed +10 before it kept on marching onward.

    At this point I was pretty pleased and just decided to call it a great confirmation that the In-n-Out method is probably the best way to play. Granted, my original stops strategy would have grabbed much more of the move in 2 trades and netted probably +90 but I'm stoked to make +60 on 5 trades!

    What's better is that several other trades today ended up B/E or small 4-point winners that would have retreated and hit my initial stop and only 1 or 2 would have turned out to be nice gains had I not moved to B/E or locked in that small profit.

    Thanks, again!!
     
  9. awesome advice, the same philosophy I use!!!

     
  10. Yes and always buy it back if its going to go up after you stop out.


    I do. Doesn't everyone?[​IMG]
     
    #10     Jun 1, 2009