Hello everyone. I am brand new to this and had a couple of questions. I started a test account that includes commissions and fees so that I can practice using a system I believe will be profitable. I can't say I know what I am doing yet but I have set up a few basic rules for myself. I would like some input on these as well as any beginner suggestions as 3 days in I did very well my first two days and tody I got a kick in the pants and am almost back to square one. Any information would be appreciated. My basic rules trading a single futures contract type (GC) are as follows. 1) Pre-market open I am checking relevant news (with a grain of salt) and checking the overnight movement. 2) I am checking my Technical indicators to see where the market is. 3) Setting up a layout of the chart/s I'll be using to see what ranges etc 4) Use these indicators to sell and buy when indicated without fail. 5) If I get skittish I pull out. 100% close all positions and walk away. I noticed that the trouble I had today was after I mis-reacted to an indicator and with the time sensitivity of these kinds of trades I got flustered and repeated my mistake twice more. 6) Set exit and stop-loss at the time of the original order. I only have two questions and if anyone can point me in the direction of an answer I am not adverse to reading, practicing or anything else that is required. My first issue is that I cannot find a good range for a stop-loss when a trade moves against me. I feel I am being overly tolerant of loss but when I pared it down it seemed like any bump in the road would result in losing a possibly winning trade. The second issue is that I sometimes find myself looking at side-ways trending and I do not have any method (I know if some but I am not using them currently) of using these. Do most of you walk away from this situation or do you simply change tactics to a different strategy? I apologize if this seems a little simple but I have been at this exactly 3 days and I am looking forward to cutting down on the learning curve by learning from other's mistakes if possible. Thanks in advance for any information,constructive comments or suggestions.
A stop loss should involve a price at which the setup that got you into the trade becomes invalidated. Some examples: 1. You buy or sell the new high or low in a breakout. Your stop should be a fixed tight amount because real breakouts have strong follow-through and failed breakouts often become reversal signals. Either use a fixed stop based on the wiggles that normally occur in the instrument you're trading or, since the best breakouts occur out of a narrow range bar, place your stop just outside the high or low of the entry bar. 2. You buy a dip in an uptrend, or short a bounce in a downtrend, when that pullback finds support/resistance at a price level that keeps the trend intact (usually at the trend line or 20-period MA in your time frame). Your stop should be placed a tick or two outside the pivot low or high where support in the uptrend or resistance in the downtrend was established. 3. You fade a strong move as a counter-trend play when price stalls and pulls back a few ticks. Place your stop just outside the new high or low that you're fading. 4. You short a double top or first lower high/buy a double bottom or first higher low following an exhausted trend in the other direction (confirmed counter-trend reversal play). Place your stop just outside the lower high/higher low or the high/ low of the day. Stops placed this way won't be hit all that often and if they're hit your losses will be small. If the stop out turns out to just be a shake-out and not real break the other direction, you can get right back in. Trying to play small ranges and small choppy trending ranges benefits only your broker. Wait for a real setup or a breakout.
Thanks on both answers I felt the same on the second point just wanted to make sure I wasn't missing something. I am waiting for enough indication to make a move and getting out as soon as possible. I am spending this week checking the stop-loss amounts. I feel more comfortable every day but I can see how much practice and how many changes will be required to fine tune everything.
Hi, I've only been scalping stocks for the past 8 months. I am accustomed to using a % P&L on the individual trade, and when my stop loss reaches a certain % I get out of the trade. Does most scalpers use a % P&L for their mental stop loss? I'm asking this because I'm checking out LightSpeed Trader, and I"m really surprised they don't have a % P&L on their Position window... they have what they call a 'Open P&L', showing the dollar gain or loss, but not a '% gain or loss'. Please let me know what you think... Thanks, Max
I have been using a stop loss based on the indicators I am using which seems to be working much better than a flat point value though at the end you can use either. I am geting much better results. Things are looking good so far. I'll be testing for the next month and a half.
Thanks for replying JRV... If you don't mind me asking, what indicator are you using for a stop loss?
Hello, I apologize for the delay in answering. I am using a function of Average True Range to determine my stops. I am still fooling around with numbers for the period (and learning ninja trader!) but basically I am setting my stop at 2.5 ATR and then closing it to 0.5 to protect profits. I like the fact that ATR scales with the time frame I am using. Like I said I am brand new to this so I can't say how well it will work in the long term but for now it keeps me from thinking in terms of an absolute cash value regardless of the current volatility. It has kept be from banging into stops that I was manually placing based on a perception of range. I am adjusting the stop if there is a significant change ATR such as tends to happen near open with my commodity. Hope I made sense I don't know the technical jargon yet but the easiest thing to do is set up an ATR on your chart. I just googled it so you can Search "ATR Stop"