There are indicators like Historic Volatility and then there are simple calcs like Highest High minus Lowest Low over a period of time. Finally, there is the VIX index. Which one does everyone use to help set their stop loss points ? With recent volatility, fixed stops have been getting decimated IMHO. Stops need to be adjusted to this volatility. How does everyone do it ?
I don't use stop orders. I have mental stops. They are triggered when I lose the most money I'm willing to lose on an idea or when the situation that was part of my expectations turned out to be wrong or I no longer have the same confidence in my trade. I'm not a day trader. I'm very good at taking losses and moving on.
Ah...thanks for the response Robert, but technically I am asking for day traders who use stop orders to speak up.
I’ve always used keltner channels on a chart. Find it helps visualize moves. 20 day EMA with 2 atr bands. Helps account for volatility with position sizing and ATR.
Robert's thinking is exactly right for day trading too. I'm a hardcore day trader (did over 9,000 live stock/etf day trades last year) and I use tape reading, P&L, price action, time of day and whole number plus OHLC based stops, depending on the specific chart. I've traded as much as $4.9 million dollars worth of order flow in a single year, w tax return proof I use VIX TRIN and in vs out day S&P market internals to help with position sizing and scaling decisions. For timing, note typically you get pivots at 10am, 11-12 noon buy/sell programs and again after 3pm
Something of critical importance (which the mentioned Keltner setup does address)... A larger target goes with a larger stop!! Such a simple concept so many do not understand and fail to benefit.
Thanks for that idea Meta...greatly appreciated. However, what time-frame are you talking about ? Daily ? Whew, in this market, that's a wide, wide stop. It doesn't apply to someone who is scalping for a few minutes in ES with large size. I wonder if Keltner channels would work on shorter time-frames, say 200-500 ticks ?
So stops based on calculations are worthless you say ? All very impressive credentials, but doesn't leave me with much information. re: "S&P market internals"...what exactly are these numbers ?. And this is not for setting stops, only position sizing , correct ? I am looking for stop setting ideas and rules.
Appreciate that comment and comes back to my idea that stop setting is an art-form. Of course your response provides me with no valuable detail...i.e. "proprietary".