If you were truly serious about getting answers that specifically helps you... Post charts via the same time frame you made your trade along with showing exactly where you enter and where your initial stop/loss protection was placed. Why is that information important? There's no one size fits all solution here. There's only a solution that fits your trading style and that solution can't be given to you unless WE know and see exactly what your doing what exactly. With that said, most traders that have problems managing their stops also have problems with other things in their trade management along with misunderstanding the price action they're trading. Once again...post the info. If not...I expect to see you again with a similar like question several months or more from now. P.S. You've asked this question before a long time ago and the answers back then obviously didn't help. Mark
This is a very interesting topic but there is nothing written in stone about what the correct stoploss should be. It really depends on your strategy. If you trade breakouts you need big stops because you'd need to survive the likely retracement. If you trade countertrend, I personally wouldn't use large stops because you don't wanna have a trending market against you. I don't trade countertrend anyways, so I am not experienced in that field. I agree that stops should be adjusted according to current volatility. The higher the volatility, the higher the stops and the profits as well. I used to overthink stoploss management too much in the past. Today I no longer care about getting stopped out. Of course it ain't funny, but it's part of this game and I always want to make sure I lose small when I am wrong. If you learn how to keep losses small, half of the job is done. If by using tight stops you tend to get stopped out too often, then you should re-consider your entry technique because something must be wrong there. I think a decent intraday trader should be hitting above 60% day in day out. That's very doable and anything below that should make you think about polishing your trading plan, especially the entry part. The exits are very difficult as well but that's not part of this thread, so I don't wanna get off topic.
<i>"Of course that could always be proven wrong with real-time results in the P&L thread. Simple enough.-------->>> I've posted enough of my results on the various threads of ET. I have no intentions of making a commitment to the P&L thread and if you don't believe I'm as profitable as I say I really don't give a shit."</i> Well, with all due respect, your actions shout out how profitable you are. So it appears you do actually give a darn. As for the newbs, stops, etc. it's really simple. Anyone who has a viable trade-entry method (which includes correct directional expectation AND entry at key price locations) will use stops as an effective tool for risk management. Anyone who lacks a viable trade-entry method simply hasn't evolved that far as a trader yet. So they use crutches like averaging down, fading the trend moves after-fact that they didn't have skills to identify in the first place before price broke directional, etc. Use of stops for those developing traders is a hindrance, because they are still painting with a roller brush instead of artist's camel hair tool. Use of stops for a professional is merely an exit where supposition was wrong. Simple as that.
I tried exactly what you suggest I'm missing and I can tell you it simply didn't work but perhaps we could agree on something else. There are as many ways to trade as there are traders and because one trader is not successful trading without stops doesn't prove or even suggest another is not. However, I will be the first to tell you a non-stop/scaling method in the wrong hands will quickly blow up. At any rate, the most common thing I hear among struggling traders is, "I was right on the trade but I lost because of the stop." When I see a thread like that I add my 2 cents so I suspect you are right, I do actually give a shit because I used to travel that road. <i>Anyone who lacks a viable trade-entry method simply hasn't evolved that far as a trader yet. So they use crutches like averaging down, fading the trend moves after-fact that they didn't have skills to identify in the first place before price broke directional, etc.</i>------->>>> I would agree that trading is an evolutionary process and all traders need to constantly evolve to changing market conditions but averaging down and fading trend moves is not a crutch. I can assure you it's a highly profitable method. A trader should trade within his or her level of competence and if that is fading the trend and scaling into a position then so be it. My method will evolve when my P&L tells me to make changes. Until then....the trend is NOT my friend.
<i>"I tried exactly what you suggest I'm missing and I can tell you it simply didn't work but perhaps we could agree on something else. There are as many ways to trade as there are traders and because one trader is not successful trading without stops doesn't prove or even suggest another is not. However, I will be the first to tell you a non-stop/scaling method in the wrong hands will quickly blow up. At any rate, the most common thing I hear among struggling traders is, "I was right on the trade but I lost because of the stop." When I see a thread like that I add my 2 cents so I suspect you are right, I do actually give a shit because I used to travel that road."</i> OK... I agree with all of that, and it's very well spoken to boot. My concern was giving fledgling traders permision to forego stops. That is tactical suicide. They do not have the skills needed to tell when a pullback ends and becomes a true change of direction. Instead, they hang onto every trade hoping moves going against are pullbacks. Eventually and inevitably, one reversal against them is fiscally fatal. A trader who relies on scaling long into a move lower fundamentally missed the short side of that swing. If it's a -20pt ES drop from highs to lows and a fade-trader scales into the lower 8pts of that 20pt range, who is selling into it? That's right, the traders who know how to identify directional probability AND know how to profit from it. That's my point. It is easy enough to learn directional trading and ride directional moves from consolidation breakout to end. That allows trading in synch with tapes, rather than against them. The biggest swings happen with directional trends... trend defined as the dominant price direction at this moment in time. Fade trading is a seriously tough game. Advocating that and/or foregoing stops to fledgling traders almost assures them of inevitable loss. Yes, many if not most of their trades go against them to some degree before working. That's because they still suck at finding high-odds entries. It only takes one big directional surge against a stop-less position to end their career. Without question that exact scenario has played out countless times, every day for weeks now. In any event, I apologize for sounding antagonistic or gruff. I have seen too many emails from failed traders who lament pulling that stop "just one time"... one time too many. My sincere congrats on your structured success. There is no easy money in our profession, we all earn every cent no matter how it's gleaned.
You bring up some interesting points and I think you are correct in that I should be a bit more careful suggesting new traders not use stops. And....there are certainly days when I'm sitting, waiting for a 250 point drop to end so I can buy it and in the process, wondering why I am not short. Then I get that gentle reminder when I try to catch the next continuation and my stop gets tagged. Trading is just a brutally hard sport and for whatever reason I have found fading and scaling to be the easier way.
The "big one" can only kill you if you're over-leveraged. In which case it's not the "big one" that killed you - it's excessive use of margin. With rational position sizing, stops are not only unnecessary, they're counter-productive.
Not particularly. I will admit I do it sometimes. The rational at the time (like today) is that I have a strong feeling (gut) that I am on or going to be on the right side of the market. Instead of increasing my initial risk I add to the position after the trade has proven to be, at least at the time of observation, on the right side of the market. I am a strong proponent of listening to your gut but doing it very systematically in line with your system. Some may call it gambling or improper management of a trade. I just do what works. Oh well, not really going to get into all that right now.
Ummmm... are you even trading this market? A 4 tick stop won't even last 10 seconds nowadays. I used to trade with a 3 tick stop and hack my way in a few months ago. Not anymore. EDIT: If this thread dies after this post, I'm gonna be pissed. I've been the last poster on at least 5 recent instances. I promise I don't have VD. Double EDIT: I feel better now. Got my shots.