As I said you can't use fixed stop if you don't have an inner knowledge of the market (model but in the large sens it must not always be a formal model like mine but can be recurrent "intuition" acquired by experience) so yes it is better not to use fixed stop (implicitly tight) for newbies because the probabilities that they will stopped could approach 1
On NihabaAshi's point, I would probably add a qualifier... never let an "acceptable" profit become a loss or breakeven... without such a qualifier, it would all too often not be feasible to ride out the initial micro-wiggles after an entry in order to achieve the sort of larger move that AllenZ talks about... the caveat is of course for scalping with a R:R ratio of around 1:1, where I will wholeheartedly agree with NihabaAshi without the need to impute my additional qualifier... Once again (as with most things), subtle methodological nuances are somewhat contingent on the combination of R:R ratio, opportunity factors, and hit rates... under certain parameter combinations, it is probably statistically more desirable to be less stringent on trade management than under other R:R, hit rate and opportunity factor combinations... Just my 2 cents... a highly debatable area...
Try moving that +1.5 move to BE + .25 so it won't turn out a loser. When entering a trade, you should have a good enough entry, where you know exactly what price you want to be out at and what price you expect the trade to go. A filter to taking the trade is having a 1:1 risk reward ratio or better. Personally I use a 2 point stop and it is rare I get shaken out of a fake reversal unless it is "extremely" volatile.
As far as your point of never letting a profitable trade become a loser I guess this is true up to a point. For the intraday swing trades I can be up .75 in a trade have it come back to where I am down .5 in a blink of an eye. However at that point the trade can still produce a big winner of 5 or 6 points so I don't want to blow out of the trade yet. My targets are not really fixed either. They evolve and change as the market conditions change and the time element of the trade change. I was thinking fixed stops and initial stops could be improved upon to evolve with the trading environment. I am basically trading with trendlines so I am trying to come up with a better method to manage the noise of the emini. Sometimes the trendline is holding on a 5min chart yet the price trades thru your trendline by a point or so which could also include running up a 1.5 points and pulling back 2.5 points. Also once the move gets going unless it breaks fast the moves can be fairly choppy. Do you have any suggestions for non fixed trailing stops?
I have tried what you said about the moving to BE but the problem that I have had is that many times I have been in what would have been a 7 point winner or so but was stopped out because of one of those wacky spike moves where I was up 2 points it pulls back to my entry and stops me out on the trailing stop and then moves back up. That is what I am trying to alleviate, so I was hoping to come up with some better ideas for trailing stops and initial stops. I, like everyone else, are driven crazy by this where you pick the winning trades, but fail to capitalize on the move.
Some good points made, particularly by profitseer. There are many things to consider. Personally, I like to use market action rather than an arbitrary price movement to dictate exits. The initial stop is a disaster stop that I really hope doesn't get hit. Generally I have a pretty good idea if things are looking ok or not and I ideally will exit quickly if they don't feel right. I know from backtesting that tight stops are not optimal and will often destroy a good system, but backtesting can't capture your feel when you're in the trade. After the trade has cleared the noise zone, however you define that, then it is a question of first, protecting b/e, and second, deciding what will dictate your exit. I feel a trailing stop is a very poor method of exiting, because you are always getting out on weakness(if long). Still, you don't want to give the whole trade back if you miss a better exit. What I like to do is first, try to hold till the close, second, try to exit on a spike, third, exit on a pattern failure or reversal bar, and finally, if I'm still in a trade that is profitable but losing altitude rapidly, try to retain at least 50% of max profit.
This is where backtesting can be very useful. You identify how big the "noise zone" is for your entry method and timeframe. For you, maybe it's 3 points since you are getting whipsawed using 2 points. I think using max adverse excursion analysis can be very useful in setting initial stops as well. You may find you are better off using less size and tolerating larger swings or vice versa. You also have to accept the probabilistic nature of trading and live with the fact that nothing is going to be perfect.
Cornholetrading: I prefer to use the geometry of the price pattern leading to an entry to give me clues on where to place my initial stop. Equally important is the ability to quickly re-enter once you realize that you were stopped out prematurely so that you donât miss out on the true move. As for the trailing stops, again, I like to let market action determine my placement. Fast furious movement = tight stop; slow grinding motion = wider stop. If the market, trips my trailing stop, then itâs off to the next trade setup. Kermit
No, I am not risking 1:1, with -4 and the targets at +6 and +9 that are frequently hit and a trailing stop it is never that much. I have one system where the stop is -5 and it is fixed, but profits are frequently 15 ES pts and better. You want to catch bigger profits you should not be concerned about losing 5 pts. No risk no reward. Also, these are mechanical systems, many people who offered their advice here trade in a discretionary way and settle for 3-5 pts. I aim for bigger targets and trade less frequently (not always every day), so want to give the market some room to breath before it goes in my direction. In another system the initial stop is -3, and then I trail 1 pt after 1 pt of advance, but this month I have been getting stopped too often by the trailing stop, a fixed stop would do a better job this month.