$500 margins gives you 10 lots at that size. That's more than enough. The way to manage risk in the futures markets is through proper money management, not stops that will certainly get tagged. I've been trading futures for 22 years and the two leading causes of failure are (1) being undercapitalized and, (2) stops.
The best way to trade using stops is knowing where traders place them and taking advantage of that fact. I go out of my way to hunt stops and take the other side of that trade.
I would agree as well, but I would also add that "his instinct" that stops maybe touched much more often than people generally think is correct. It is however not an aberration from the market, but rather people's instincts which may not be accurate.
This is the key to trading in my humble opinion. Only thing I might add is to stick with the dominant trend and then search for the counter trader stops, it's gold. NAD
Agree. If surf's up look for a corrective move and an obvious place where the early longs would have their stops. Outside of the first 30 to 60 minutes the market tends to make one false move before it continues it's upward move, or downward should that be the case. Wait until the market comes back to tag stops and take the trigger on the next push up. Just one strategy of many in the toolbox. You gotta know what kind of market you're trading.
EMG, also as Bone pointed out everyone has an "uncle point". A better discussion would be to ask, what are the ways to manage risk effectively? But, of course, every risk is a potential reward. We need to define what "works" means, as well. If you mean to say "stops don't decrease the max drawdown for many strategies or traders" then I would agree. However, stops do decrease the maximum possible adverse excursion in many cases. The relationship between the drawdown and the mae are worthwhile to consider on. The tighter the stop, the lesser the mae, but the higher the probability of getting stopped out (the higher the drawdown). Both the MAE and drawdown are very important aspects of a system. A system with a low drawdown and low MAE is suited to leveraging. Turning the question to managing risk, you can look at a whole assortment of strategies and methods. One other note, each ES contract is only worth appx $64,000 today.
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