Trade at B/E.. would you do it again?

Discussion in 'Risk Management' started by JoshDance, Jan 13, 2011.

  1. I day trade eminis and hold my trades anywhere from a few seconds to an hour or two. Typically, when I open a position I have a 5 to 8 tick stop, with usually a 5 to 8 tick target 1, and a longer target around 15 ticks.

    When I open a trade and it is hovering around breakeven or +/- 2 ticks, and then it fails to follow through as I anticipated, I often ask myself: would I still take my position now, even if I could get in at the same point, knowing what the market has just generated? In other words, do I feel strongly enough about my original decision to make the trade again, or better yet, do I feel strongly enough about it to add to my position right now?

    I feel like even if the trade goes my way, it was dumb luck because I expected the market to go about it in a different way, and that even if it was a winner, I just happened to be on the right side of the crowd. Does anyone have any thoughts on staying in a trade or exiting a trade when this kind of thing happens?
  2. in the past 6 months, how many long ES trades did you close out for a loss or a 5-8 tick gain?
  3. OP, I prefer to let the market make my case for me. The market should prove I'm wrong. This should mean the market hits my stop and I'm out and waiting for the next opportunity.

    If the trade has gone in my favor and pulled back to break even I reassess the situation like you said. Many times the market has given new signals about the direction it wants to go and I act accordingly.

    There is nothing worse then flatting a trade and seeing it doesn't hit your out and then goes in your dielrection to your target.

    I don't know where is heard this but... 'amateurs go broke taking big losses while professionals go broke taking too small a profit'. This alludes to the transaction fees etc and not being right a high % of the time. So when your right you need to capitalize!!!
  4. joe4422


    With the ES your break even will often be played with. Your risk should be small to begin with, and your target should be set in place, so I always promise to either take the stop or the target, no compromise. However, if the market begins to trend in my direction, I will add more and put a stop at break even for the whole position.
  5. There is no reason to wait for your stop to get hit, if your original trade idea is not validated by the recent price action.

    For example, if I want to enter a scalp on a momentum breakout, but prices stalls around an S/R level, then my trade idea might no longer be valid. If so, I might exit with everything from a 1 tick profit, breakeven or a few ticks in the red.

    This week I had a trade where I simply was a little early. Price did not validate my trade idea as fast as I expected, but my 2-point stop was still far away from the swing high and I still believed we were set for a sell-off. In that situation, it made sense to let my trade breathe and see if my original idea played out. It did :)

    Other times I have lost conviction on a trade and slowly watched desperately as I`ve "hoped" the market will turn around, while moving against my stop.

    So, there is a difference between letting your trade breathe and holding onto a trade AFTER you seen evidence that rejects your original hypothesis.

    What do you think? :)
  6. Exactly...we should understand that hard stops is based upon the price action at that moment in time. Thus, as time passes, the price action can change for the worst in the "current price action".

    Thus, if there's evidence that the price action is going to continue retracing against the trade position...exit the trade before it reaches the stop. However, reality is that this is something most newbies will not be able to do because it takes a ton of market experience to apply such successfully on a consistent basis.

  7. Will have to look and see--I'm inferring that you're I can answer my own question by doing the math?
  8. Thank you everyone for your replies...
  9. Yes sir :)

    Today was the perfect example of a situation where I should have exited instead of waiting for my stop to get hit.

    I shorted ES @ 1289,50 on downwards momentum and considerably negative and persistent TICK readings.

    I expected to see us sell off immediately if my trade idea was correct.

    1290 was a significant support level and the open bar (violation of another rule) I shorted, did NOT close below 1290. Further, price slowed down considerably with TICK pulling back to positive territory.

    With price hovering around my entry and never moving a tick in my favour, this was my perfect "get the hell out of the trade at B/E or for a few ticks loss instead of waiting for your 1,5 point stop to get hit".

    It`s always easy to see after the fact, but I believe this is a skill that can be learned :)
    #10     Jan 18, 2011