Stops

Discussion in 'Trading' started by ratrader, Jan 19, 2011.

  1. Handle123

    Handle123

    I believe that entry is like 10% of a method, tighter the entry, quicker to the profit, but this applies more to scalping than going for bigger profits such at 3.00pts or more in ES, the other 90% is money management of the trade which includes stops if you use them, I don't if you are scalping the ES, too many times of quickly trailing the stop and I take profit and stop could not be canceled fast enough by the platform and now I am in opposite position.

    The amount one risks on a trade has little to do on smaller timeframes, when so many say you should aim for 3 to 1 profit to risk is a joke to me. Too many see the risk as an end all, why not try to read the market better and get out before the stop is hit. And one of the ways many traders over look is "Time," how much time to stay with a trade that is going nowhere, how much time to stay with a trade that is negative, how much time to stay with a profitable trade. Too many traders only look at how many tics the trade has gone against you to figure out your protective stops and then find the 80% of winning trades you want to keep and this is best way to find optimum stops.

    I use several different tests you won't find in any books besides time as in minutes and seconds, I use winning trades in a row, losing trades in a row, and why would I use this? Ten years of backtesting show me shows me two losing trades in a row happen once a month, so if I sustain this heavy loss (I average down on all trades), and three losing trades happen once a year, I can 2.5 times size after two losing trades in a row. And why test how many profitable trades in a row? Find the mean of these and start reducing size. I also use number of breakeven trades (but these are profitable cause I Ave down), many breakeven trades tell me when market is in chop with no follow through. Another test I do has to do with daily range as I take a ten day average of this, I have to know where price is from high to low, if ten day Ave is 12pts and price is 10 pts from the lows of the day, I don't want to be taking too many more buys, will be checking for counter-trend trades and at 12pts, will not take any more buys.

    Through my testing breakout trades are better on 2nd or 3rd time of same pattern, so many are going opposite of the pattern, like me and many others, so there are many false breakouts and that is where you probably sustain your losses. If you start checking out higher timeframes for trendline breaks offer more true breakouts whereas 1-5 minute trendline breaks offer more false breakouts. Same often applies to longer term trading of stocks and commodities like in triangles.

    What is sort of disgusting, after having PC's nearly 25 years and software, the average trader has little choices for charting/ testing unless you have programming skills, one of the best things I ever done back in the day was to go to local university and contact one of the professors, he made it a class project of what I wanted done and I paid for pizza party after semester, and professor still uses the program.

    One of the best pieces of advise I ever got was from an elderly trader on the floor, always buy at steep discount when everyone is selling and always sell at step premium when everyone is buying. I do this in long term trading commodities and day trading Indexes.

    Have a fun weekend all.
     
    #11     Jan 21, 2011
    birdman and beginner66 like this.