I've been working on a short term (seconds to minutes holding)trading system on the ES and YM. The entry is hard, but the exit is making my brain go numb. Seriously. Figuring out resonable profit & stop loss targets is very difficult. Do I use a fixed amount? Do I adjust the levels as the market moves (and is that even possible with such short holding periods)? How tight do I make the stops so I don't get stopped out too quickly? How high is too high a profit limit that I'm now trading a longer trend that will fade to my stop before being reaching my limit? You guys know all these questions and I'm sure have some bald spots, grey hairs and sleepless nights trying to figure them out. I'm not asking for any big gifts, but any rules of thumb or advice will be appreciated. I'll even take all the regular platitudes. Anything! Thanks a lot. I really appreciate all the people here very much.
Give Nitro your methodology....he is the best scalper I know...when I use the word scalp...that means max trade for nitro is 10 seconds long. As far as holding for minutes...nitro can also help you probably. Michael B.
If you have a very high winning percentage, might want to try about 1.5 points for a stop. That seems to work well for the short term systems I have toyed with. It seems to be outside of the noise range for the ES. With 1 point, I would get stopped out too much. But, as with everything else, it depends on your strategy. There is no 1 right answer. Just don't forget that with a scalping strategy that has a high winning percentage, having a stop equal to or greater than you profit target can work also.
Try Risking 2pts to make 2pts(minimum) on a certain signal for 100 trades. If you can do that about 55% of the time you'll have something to work with. Then tweak a system around that beginning.
There are no hard and fast rules, and if you want them, you are already in trouble. If you are an anti-trend trader, one number (really a cluster of numbers) will be "correct" (I have changed my stop depending on market conditions on average once a month it seems.) If you are trend trader, then another number is "correct" (in the trend case, the stops are easier to calc IMHO.) There is a body of work that deals with this question. Although it is very elementary, it is a must read at least at the beginning. I started with this book, did a similar study _myself_ on tick data, and then modified it after some trial and error - I can't emphasize the trial and error part enough. Here is a good start: http://www.amazon.com/exec/obidos/t...104-8410029-8063102?v=glance&s=books&n=507846 Note: I am purely a discretionary trader... nitro