I have an ongoing discussion with a trader friend of mine over the issue of stop loss and profit targets in relation to day trading or intraday trading. The main market we both focus on is the FTSE100 futures. He basically follows various trend following systems on a minute bar chart with a 5 or 20 period moving average. Most of the time he sees a lot of small profits slip from his hands and end up closing and reversing positions with small losses. Very often at the end of the day these small losses add to a relatively large one and even at some stage if he manages to find a good move it is often not big enough to cover the previous losses. The only time he wins is that if the first or the second trade is successful, ie producing a large move. My disagreement with him is that as an intraday trader he should only be looking for a few ticks, maybe 3 to 6 points because most of the time a 20 or 30 move does not happen on every trading signal from the model. The only way to make large gains is to trade a longer time frame, say hourly or daily or weekly. But then he will need wider stops which he is not prepared to risk, Opinions and comments on this subject will be most welcomed. Bob
..for intraday trading profits, the name of the game is small ticks with big volume. 3-4 ticks with 100 contracts...
If you are going for 3 or 4 ticks what size stop loss would you use. My own opinion, although contrary to most written advice is that the stop should be larger, maybe 15 or 20 ticks. This would give the trade the chance to make its 3 or 4 ticks. What do you think?? Bob
I think you must have a very high success rate to use these parameters. You'd need 5 winners for every loser just to break even. If it works for you, go for it, but it seems like an awful lot of risk for a minimal gain.
Do you think it is the same with intraday stock trading, best to try for small gains on large share amounts?