Discussion in 'Risk Management' started by crgarcia, Jun 25, 2008.
Since you expect it to return to the actual point, soon or late?
The only time it's acceptable IMO, is if you've identified the possibility at time of execution, and have a specific trade plan for such. Otherwise, absolutely not. All you are doing is replacing any edge you may have with "hope".
And if a few dollars commission to re-enter is a factor, assuming you've identified a re-entry as a valid oppourtunity, the trade is likely inappropriate for your trading style and/or methodolgy.
I think it's okay at times. it's just a matter of your percent of losses/winners and what market you're trading. Try it on paper and see how often you would get stopped out.
I've seen some successful traders risk five times more than they stand to make and more because the odds are good and they have deep pockets. They make consistent money, but get big losses now and then. You don't want to be around them on a bad day. lol
I personally wouldn't do it. If the market's choppy, I don't trade it.
When the markets not trending very hard, sometimes I'll put my hard stop further away then where I "soft" stop myself out and admit the trade is wrong and look for exit. On the NQ especially, the market moves itself by stopping traders out then reverting til it finds support again. You can avoid being those traders that get stopped and instead take the position of the bots that clean up the stop-out money. You risk another point or so per trade, but over half the time you can get out for a more favorable exit than 2 or 3 points from my experience. You need to remember that you still must put in a hard-stop in case of a market-event, but it can be further away than you plan on stopping yourself out... of course it takes a little bit of discipline.
Stop placement is directly related to the strategy being traded. There is an idea perpetuated in the retail world that risk reward needs to be 3x1. That is complete nonsense. The system must have positive expectancy, and the person trading it must fully understands it and have the personality to trade it.
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