Aggressive break even move or let the price fluctuate ?
- Thread starter Leob
- Start date
I go breakeven when I get a new entry signal at a different level. Keep going until I get an exit signal. Easy peasy.
I limit the size of trade by volatility, and tend to trade pairs (long A short B) which further reduces risk. Across a trade (cumulative PNL of A - B), I have a loss limit of around 10%. On individual names, I have a hard stop at 20%, but my exit process is typically based upon catalysts and change in views.
What TF and markets you trade if I may ask..
Thanks
Primarily equities...about 20% in derivs on rates, fx, and equity indices. Timeframe is usually 7-21 days, though it really depends on the catalyst.
The problem with breakeven is that it's usually a random price point for most trades and/or the stop is moved to breakeven too soon. There's something to be said about not letting a winner turn into a loser, though.
If I scalp for 6 ticks on ES - I'll auto-BE @ + 5 ticks. The ES generally moves in segments of far more than 6 ticks all day long, so there's no way I'll let a + 5 tick trade turn into a loser just to get that final tick. I may override my ATM here and lock in 1 tick if I perceive momentum to be waning. If stopped out - I'll just take another signal later.
If I scalp for 12 ticks on ES - I'll lock in 1 tick @ + 8 ticks.
This is automated in two different strategies and I don't really need to do anything after my entry order is submitted. If I think 6 ticks are on the table - I'll employ that ATM. If I think 12 ticks are on the table - I'll employ that ATM.
If there's a larger move in play I'll try to capture a good part of that, too, usually trailing a stop behind price wherever I perceive it to be safe to do so.
The one rule or principle I try to adhere to is to never let a winner turn into a loss. When you're trying to capture a larger swing that's not always easy to decide as a trade may wobble a bit initially and in no way be a winner just because it moved a bit in your favour. If you move your stop to breakeven at that point you're usually stopped out prematurely and price may go to your target without you.
No easy answers in this game, but some things become clearer with more experience.
If I scalp for 6 ticks on ES - I'll auto-BE @ + 5 ticks. The ES generally moves in segments of far more than 6 ticks all day long, so there's no way I'll let a + 5 tick trade turn into a loser just to get that final tick. I may override my ATM here and lock in 1 tick if I perceive momentum to be waning. If stopped out - I'll just take another signal later.
If I scalp for 12 ticks on ES - I'll lock in 1 tick @ + 8 ticks.
This is automated in two different strategies and I don't really need to do anything after my entry order is submitted. If I think 6 ticks are on the table - I'll employ that ATM. If I think 12 ticks are on the table - I'll employ that ATM.
If there's a larger move in play I'll try to capture a good part of that, too, usually trailing a stop behind price wherever I perceive it to be safe to do so.
The one rule or principle I try to adhere to is to never let a winner turn into a loss. When you're trying to capture a larger swing that's not always easy to decide as a trade may wobble a bit initially and in no way be a winner just because it moved a bit in your favour. If you move your stop to breakeven at that point you're usually stopped out prematurely and price may go to your target without you.
No easy answers in this game, but some things become clearer with more experience.
2-3 bars depending how deep signal develops in Swing, and if am at a loss after 2-3 bars, new target is "Breakeven = 1 tick"
My targets is either 5.00 points on ORB or 2.00 points rest of trades, trailing stops do occur but within 2 point range.
Recent backtesting shows I make less by going for more than 2.00 points, but I am averaging 60-110 trades per day as I have recently added new signals trading ES. Often times I will have handful of signals all on same bar. I keep tabs on intraday drawdowns, recently developed a stop and reverse signal that is promising.
My targets is either 5.00 points on ORB or 2.00 points rest of trades, trailing stops do occur but within 2 point range.
Recent backtesting shows I make less by going for more than 2.00 points, but I am averaging 60-110 trades per day as I have recently added new signals trading ES. Often times I will have handful of signals all on same bar. I keep tabs on intraday drawdowns, recently developed a stop and reverse signal that is promising.
Didn't the "Turtles" of the 80's do the same thing based on ATR(9)?
Do the above rules apply across all boards? futures, currencies, stocks, options, etc?
The underlying component is that I examine trends and variations in the standard deviation of the security in order to get a sense as to "what happens if I'm wrong". Not sure if something like ATR(9) captures things because 9 periods is very small.
A good example:
If I'm trading earnings on company A, and have seen that std of 1-day chg is 5% and implied move is 8%, I'll know that I'll probably lose between that amount if I'm wrong on the day after earnings. I also find that PEAD persists for the next 30-days with average drawdown of -30%. The std of the quarter might be 15%, which tells me the variance I can expect in price.
Where do I set the stop limit? Early on, probably close to 15% and at earnings, somewhere around 5-6%.
Say I put the position on with a 15% stop loss. Two weeks later, a few companies down the value chain are experiencing weak sales. I take that to imply greater risk to my thesis (weaker sales down the chain, would impact new orders up the chain), revise my financial estimates, and trim the position. The stock moved down around 1%. Subsequently, the stock moves down with its peers -5% over the next few days.
A week after that, a peer company reports -- it beat street estimates but cut guidance, citing slowing growth and is down 6% overnight. My stock is down 4%. At this point, after reviewing my estimates and trimming my forecast, I now also expect the company to cut guidance and decide to sell out completely. I'm down on the trade by about 10%.
In real life, I'm usually paired against a peer that I expect will underperform, which dampens the volatility and usually results in a positive gain even if I'm wrong on the stock. If I held the stock through earnings and it "missed & lowered", I'd be forced to sell out of everything in the afterhours (assuming AMC release) and may go short depending on my view of the industry (perhaps at an inflection point that is turning solidly negative). "Stop losses" aren't too helpful in day-to-day risk or position management, but are there to set some type of normal limit to losses.