+1 Great post and so true. I love making money from those who I watch getting stopped out all day...so fun! Keep on using tight stops guys...please!
Are stops a complete joke ?
- Thread starter zanek
- Start date
+1 Great post and so true. I love making money from those who I watch getting stopped out all day...so fun! Keep on using tight stops guys...please!
When I analyze my losing trades most of them are the result of cheating and getting in before price actually confirms strength or weakness. That extra profit you think you're going to get is taken away more often than not.
If you're looking to enter with a trend at a pullback to a trend line, using limit orders as price is moving against you makes sense, but the safer way to trade (though far more difficult for the inexperienced) is to buy a demonstration of strength and sell a demonstration of weakness in the direction of the trend.
The way to buy weakness and sell strength is through a failed breakout, which is what BAC did the day after you bought it. If price breaks a level in the direction of the trend and the break is very shallow and price reverses, that's a great entry signal.
Get rid of the urge to be super smart and early to the trade, and you'll become a really profitable dumbass trader
Experience forces me to agree with what Prometheus and Scat have said and to disagree with emg's remarks. And I will add this: Experience will teach you to recognize the areas where the majority of stops reside for the particular time scale you are trading on. And the ATR on your time scale is helpful in avoiding the situation you have described, where the market takes you out and then promptly reverses. Regardless, to be profitable over time, you must consider the position of your target and stop relative to your entry. Being patient and waiting for an advantageous entry is perhaps two-thirds of the battle.
As a simple rule to keep beginning traders out of trouble, try to find an entry point such that your stop is not likely to be hit and yet your stop is no further from your entry than your target, i.e., no worse than a 1:1 risk to reward ratio. (And for Swing trading you really want to have a more favorable ratio.) Avoid trying to anticipate by not entering until the market has developed some momentum in the direction favorable to your trade. You can not, however, arbitrarily pick a target. Your target has to be based on reasonable criteria. There are many good threads on ET that will teach by specific examples. Trading this way can be very boring as you will find few good entries. You will make fewer trades, but you will be profitable. Again, this advice is for beginning traders. (personally I like the Nodoji posts on ET as she writes clearly with many good examples, and I usually agree with her analysis of trades. Though I think she mostly trades intraday, a swing trader can profit by reading her posts. There are many other good traders who post occasionally on ET, and even more that are not so good and give what I consider to be bad advice. You'll have to sort them out for yourself.)
As a simple rule to keep beginning traders out of trouble, try to find an entry point such that your stop is not likely to be hit and yet your stop is no further from your entry than your target, i.e., no worse than a 1:1 risk to reward ratio. (And for Swing trading you really want to have a more favorable ratio.) Avoid trying to anticipate by not entering until the market has developed some momentum in the direction favorable to your trade. You can not, however, arbitrarily pick a target. Your target has to be based on reasonable criteria. There are many good threads on ET that will teach by specific examples. Trading this way can be very boring as you will find few good entries. You will make fewer trades, but you will be profitable. Again, this advice is for beginning traders. (personally I like the Nodoji posts on ET as she writes clearly with many good examples, and I usually agree with her analysis of trades. Though I think she mostly trades intraday, a swing trader can profit by reading her posts. There are many other good traders who post occasionally on ET, and even more that are not so good and give what I consider to be bad advice. You'll have to sort them out for yourself.)
Quote from daniel_tysen:
+1 Great post and so true. I love making money from those who I watch getting stopped out all day...so fun! Keep on using tight stops guys...please!
I love making money getting "stopped in" all day. Getting stopped in means you're much less likely to get stopped out!
Well I don't have a phenomenal reading of the markets but I have tested the specific strategies I trade over thousands of trades as well as reviewed my real time results. Stops hurt the results so I don't use them. In fact I am likely to be one of the buyers taking people out of the trade when they are selling into weakness, which is what stops do. Unlike Nodoji I don't wait for confirmation, but there is more than one way to trade successfully. And there are other methods of risk control and exits that don't completely fail on gaps due to significant news. For one, smaller position size. And what's a self professed newbie doing w/ a $100K position?
hey Nodoji
how do you do this? How do define "market shows strenth" in an uptrend for example? Like a candlestick-pattern?
Here's an example from today's ES (I figure everyone's familiar with either ES or SPY) using a 5-min chart, but the concept can be applied to any time frame (daily chart for a short term swing trader, weekly for a longer term swing trader, etc.) This example refers to the March 2011 contract.
After the market opens ES trends down after failing to re-visit the overnight high (1-tick failed breakout). Support is eventually established, and a higher low is put in @ 10:40am ET. Price then closes back above the 20-bar moving average at 11:00am ET. This a bullish short term signal in a very bullish longer-term market trend.
Draw a trend line across the pivot low and the first higher low. When price pulls back to that line, it should hold up as support. I want to get long around there, but I want confirmation that the buyers are interested there (showing me strength). So I place a buy stop above the previous resistance pivot (11:30am ET bar high of 1230.25).
If buyers bid it up off the trend line through previous resistance, that's a show of strength and I want to join them and see if the next resistance level (1231.00) can be broken. I'm taken into the long position during the 11:55am bar @ a price of 1130.50 and the next resistance level is broken right through, allowing me to comfortably target a break of the triple top high for at least 4 points profit to my 1.75 point protective stop.
you do know that the market maker knows your stop and remove all bids to get to your stop price....in this market..only the market maker is on the bid and ask. these computers not only know your stop they know your position and mental stops too. in illiquid markets all stops get stopped out.
one of the reason large traders only daytrade..as overnight positions leaves the market markers room for manipulation the day on the open...trade lightly. afterhours is completely dead and a lunch is dead too ..deadzone is really dead..it seems only the first 3 hours or morning session is feasible to daytrade.
one of the reason large traders only daytrade..as overnight positions leaves the market markers room for manipulation the day on the open...trade lightly. afterhours is completely dead and a lunch is dead too ..deadzone is really dead..it seems only the first 3 hours or morning session is feasible to daytrade.
ES index futures was catered to traders who don't have the funds to daytrade stocks...it's all daytrading..
index futures for daytrading only.
index futures for daytrading only.
what example? maybe i missed your "annotation" would you be so kind..