1. OP poses a fundamental question. If you have never posed it and analysed the answers, you have blown multiple accounts, or are making money by chance, and are most likely a deadman alive soon to blow up or die slowly. 2. All the answers here are right, but all are wrong. 3. Once you stop talking and are ready to listen and carefully read my answer to the question, I will provide it. 4. The answer is mathematically proven. We know that numbers and math do not lie. 5. The answer should be able to give the numbers and structure of why, how, and when to take stops or profits, and how long you should stay. I will share later. I want first that you be ready to listen. Once I hear more ayes, RFT will chalk things up.
Being too lazy to run through the hoops of this entire thread, I apologize in advance if I'm merely regurgitating what has already been said. Having said that, a tight stop would always work as long as your entry is impeccable. That is, correct timing is everything in this game. I cringe at the thought of openly advocating my own system, but if you would like to learn more about timing and other useful things, I encourage you to visit Unholy Grail to Success.
Many interesting posts here,and this last idea,I think I do understand, having recently been practicing it as a focus of technique. In trading forex, I'm finding it works this way.... Before even thinking of making a trade...I establish a comprehensive pre-trade analysis of all the TA data that means something to me.... for my technique, that means,setting up multipile time frame charts side by side, with CCI, multiple SMA's and fib levels,as well as all trendlines,s/r points and median lines that look important. this is my data base to analyze. Its a lot of data to look at,and Ive trained my vision to see it all. If it looks like some clear vision showing me a high or low 'target' that looks worth considering,I then see where the current price is residing within the whole picture,and then I spend a while watching price action ,on all time frames, to get a 'feel' for the market sentiment. This becomes the context within which I watch price action. and the price action confirms the ta data,and the TA data confirms or validates the price action (candles,especially at key s/r points fib lines etc) A big part of the pre trade analysis is also looking at what price might do if it goes 'the other way' to my 'anti-target'...and I factor that data into my awareness of what to look for if the trade should not confirm correct. -- what would that price action look like. Now,after watching price action at key s/r levels, in all time frames, awareness of clock time,etc At such point where I see this sort of 'confirmation of my analysis'.... I would Enter a trade.....and then watch it carefully like a hawk, in the 30 sec/1 minute/5 minute/etc,up to and thru the 1 hour time frame,...and Any price action that fails to prove my analysis correct,becomes a red flag alerting me to the possibility of a need to reverse or exit. Ongoing analysis and 'feel' will tell me how off the mark I might be,whether to hold for a while longer or exit or reverse. The idea of placing a stop somewhere is based on the whole big picture of all the analysis I did pre-trade... and most of the time the stop will be set at the standard places like the previous swing high/low or maybe even the one before that...maybe 30 pips or 20, or 40. to be used Only as a safeguard against catastrophic loss. The Real 'stop loss' is the complete Vision of awareness I have from all the pre trade analysis...I know where all the s/r points are ,I follow exactly what price action is doing on all time frames at all s/r points, I 'feel' the strength or weakness of these movements at these times, and each candle is telling me something...that my trade is still ok, or feels dangerous, ...thats the real stop loss,I discovered . its about what price action is telling you in each candle you look at. and all the data that combines to paint the picture. I hope this all didnt sound too convoluted. In my mind, its crystal clear.
if you learn about "trailing stops" you will never have to use a "tight hard stop"...please research this before using it...
Now, if you are trading without a viable strategy that defines your entry and exit, then you should not be trading at all and that is your biggest risk right there! thats exactly what I was trying to get at, ML. good posts
Part of the reason why I'm interested in this thread is because this risk issue,and risk aversion, was my biggest problem I had to overcome and I just recently achieved that. I was setting all my stop loss at 3 or 4 pips, trying to perfectly time my entries. I got pretty good at finding the right entry moment, which ,in forex, meant I was eeither right on the minute, or maybe 2 or 3 minutes early...and that was pretty good...but even in doing that...the basic price action was zig zagging up and down as it does, and my 3 pip stop was getting hit 90 % of the time. thats exactly what some poster said with the phrase death by 1000 cuts. thats what happened to me. and in fact its exactly what I lost in dollars until I finally learned how to use the stop loss tool correctly. and started learning how to trade correctly. As I said, for me, the real stop loss is to have a complete understanding of the analysis, ahead of ever pulling the trigger, and knowing what to look for in either direction if the trade does not prove correct.
I don't think type stops work for a lot of reasons. I trade the ym, dax, and ftse with 10 to 12 point stops and no trailing stops. I found anything less would get you stopped out routinely. I have a question though. Where does this 98 percent of day traders fail non sense come from. If I call myself a day trader does that mean I really am 1. How long were surveys done for and from what year? Were they stock or futures traders? I hear the swing and long term guys constantly bash us day traders and throw out the facts from who knows where. I would think the vast majority of swing and long term traders fail too at the same rates
unless you undertstand what is wrong in your post, you will not be trading 1 year from now. i guarantee it. ps: information is from brokers. they have the records. if you survive 1 year while trading, then you are already in the top 10%