Please commenton this Stop Loss Strategy.

Discussion in 'Risk Management' started by pclark, Sep 12, 2008.

  1. pclark


    Constructive criticism only please.

    1. A stop will be placed upon order entry 1.25 ticks from the entry point.

    2. Once reaching the profit target (2 for this example) the stop will move 3 ticks behind the current price once a new bar is created and this bar is at or above the closing price of the last bar. I will trail with a stop 3 ticks until the below criteria is reached.

    3. If the opening price of any successive bar is below the closing price of the last bar I will close my position and take my profits.

    My first concern is my stops are to tight. This will be used on the ES.

  2. The tight trailing of your stop will ultimately cut in the way of your profits as price likes to test on numerous opportunities support and resistance.

    Being stopped out while getting the correct direction is a cardinal sin in trading.

    Emini Guru
  3. pclark


    OK, that is my fear so, would you suggest the trail at maybe 1.25 also? I am mainly implementing this strategy because I have been using large stops sometimes as much as 2.5 to give a little room for play but this has been working against me. I am trying to find a nice medium between not to large and not to small.


  4. Your stop should be well guarded, if you trail it aggressively it wont be, the stop should be used to protect capital, not profits, profits you ultimately take yourself, consciously.
  5. trade fewer contracts, but use larger stop losses. You need to be able to withstand general noise. Tiny stops will constantly take you out unexpectedly... remember, it is hard enough just to get by the commissions/fees and slippage...
  6. Why don't you backtest your idea?

    Hard price/percent stops usually lead to consistent losses and a losing strategy over time. I would suggest you let the market define your stop via ATR or some other measure of volatility.

    Personally, none of my intraday index strategies use price based stops.
  7. with 5 ticks, you will get stop as soon as you enter into position.

    On active hour, it will a sec to move 5 ticks.

    I use 10 ticks on 5 minutes chart, and get hit half of the time even when I am right on the direction. I am consider increase the size of the stop.

  8. well it depends on your trading style.

    my ES stops are usually -12 ticks, sometimes -16 or -20 depending on the situation.

    i am a reversal trader in general though. i usually hold trades for 30mins to a few hours and trade only a few times a day in the ES. my average target is 20-32 ticks.

    if you are more of a scalper then tighter stops will prob be ok- there are no hard and fast rules.

    in general i dont think tight trails are a good idea for the ES. it chops too much at the moment.

    trails are better suited to things like ZN which is more prone to breaking out and continuing on a huge move with little chop.

    trails in ES will stop you out and cut your profits imo. better to manually move your stop up once you are in heavy profit, that is what i do. i move the trail below a resistance where it just broke out maybe?

    i use logic and my observations of the market for where to put stops, not arbitrary rules like -5

    scaling out of positions at levels is much better than trailing for the ES imo.
    if you want to trail so bad learn to trade bonds :)
  9. pclark


    My problem is I have been moving my stops manually during the trade as BlackBison said he does. I am good for 2 points a majority of the time but have not yet been able to know when it's going to trend/run so I move my stop back thinking I am going to give it some room to play and sure enough it doens't trend and I lose my two point.

    I am just trying to come up w/a way to be a little more hard lined about my rules and if it trends or runs let the reversal take me out.

    I can see where a trend is going to be really hard to do this with because of the reversals and consolidation being larger than my stops.

  10. The problem is the ES is one of the most heavily arbed products in the world. So everytime it moves a tic there are programs fading it. If you are looking to scalp such a product you need to be more flexible in your stops.

    Or you could trade a product more suited to tight stop losses, such as stocks or a contract that isn't so arbed.
    #10     Sep 13, 2008