Good question. Investors like to use the words like volatile, dark cloud cover, 3 white soldiers...... Most of the words coined by the investors are not suitable for the traders. Investors and traders cannot see eye to eye. Personally I don't like those terms used by the investors
Hello KCalhoun, Great question and very challenging to answer. I think the following for discretionary manual trading day to day regarding stop loss: If you use big stop, you take big loss and you have alot of work to end the day profitable. If you use small stop, you take small losses, but small losses can add up, then you have alot of work to end the day profitable. Lately I focus more on the reward (taking profits) and not the risk (stop loss). The stop loss lately to me is just not important, and it gets in the way of my thinking. I have also been experimenting with simply not using a stop loss any more. I only care about the reward. So I vote for no stop loss.
Hello KCalhoun, Lately, I have simply not been using a stop loss anymore, and just focus more on The reward (Profit Target) Exiting the trade when I am wrong. Re-Enter the trade. I am starting to think the stop loss takes to much work to figure out and gets in my way, when I just want to exit for a profit anyway. If trade goes against me, and I am wrong, then I simply just exit the trade for a well deserved loss.
Keep on try all the combinations of stops, targets, trails, chokes, BE triggers, Step Trails etc. There has got to be a special combination that give you an edge right ? Eventually you will have your answer. It might take years though. Think about what you are actually doing with static exits. People want the work to be done with the entry, and punt on exits. If you plant a crop, you just don't walk away for 6 months, or worse, just guess what day, what hour, to harvest 6 months later. Put as much effort into your Exits as your Entry. Stay on paper until you do, imo.
Hello Bad_Badness, Good post. However, this will go over alot of traders heads because they do not want to think outside of the box.
I use the previous pivot high/low as a stop point and size my position accordingly depending on the distance from that. Imo you are letting price structure tell you are wrong rather than some arbitrary points number.
One minute ES I use 16 ticks. Five minute ES I use 10 points. 60 minute and higher timeframes ES I use hedges.
As much as I like your thinking it’s still leaving out the critical issue of how to identify a wrong trade and when to exit it. I don’t have a good solution either. One way may be using timed stops. Using preset stops doesn’t work for me because most times they are hit. If I use large stops I might as well exit the wrong trades myself.
Hello Jzwu2017, The best solution is to take your best guess when you are wrong and just exit the trade. That is the best I can do, is hope I am guessing on exiting the trade when I wrong based on my trading skills. And hope my guessing on exiting when I am wrong is correct alot of times per year. There is really not much you can do when discretionary and manually trading. If you want to know when to Exactly exit, build an algo and back test for X,XXX trades, then you know Exactly when to exit. Otherwise, guess and hope.
Specifically how will you know when the trades are wrong? I wonder how many people trade without stops? How to trade without using stops https://elitetrader.com/et/threads/interesting-search-terms.365486/page-4#post-5592984 I like to bracket trade which allows me to set my stop and target and look for more trades or walk away from the screen or grab a sammich...