Best Tips To Avoid Being Stopped Out In Futures?

[SimpleMeLike]

Hello. Would anyone mind sharing how they avoid being stopped out in futures trading? It's hard finding a balance on safety for a stop loss that isn't close enough to be stopped out while also not setting your stop loss so far out that you're shooting yourself in the foot. I got eaten alive before in futures when I was trading and lost about $15,000 about a year and a half ago. Not giving up, and trying to plug the leaks that I know were pivotal in my losses before. This was one of my leaks that hurt me quite a bit. Thank you for any feedback in advance.

Bugsy,

Good question.

I struggle with this as well. I do not mind being stopped out, what i do not like is getting "faked" stopped out or stop out and price goes in original direction as planned, just I am stuck with the loss.

Choose stops loss by:

1. The amount of money you can lose without get emotional upset or over stressing your self. For me, its $300 per trade, per contract. That is my limit. However, if you watch the /ES lately, my fixed $300 would have gave me big losses. So ideally, not good idea to use fixed stop loss. But i do it anyway.

2. Price action stop loss. Put your stop at recent swing low or high. You can simply look at the chart on the timeframe you trade and just pick a stop loss level/placement where you think "if price get back to this level, it was good i get stopped out cause price turned against me and kept going the other way". If i lose, I want to lose for a good reason. Not because I mess up the stop loss placement.

Here is my logic : I want to be stopped out when price is ready to go the other way. I do not like fake stop out, this does frustrates me. So i am careful on stop loss placement.

Also, you will soon see that profit target and stop loss placement is very important. I practice the two alot.

Also, try trading paper money til you get confidence on proper stop loss placement. save your capital for when you are ready. There is no ego or pride in trading. I trade paper as well. No sense if losing real money, if can't make money on paper.

 

[SimpleMeLike]

The problem was when I used mental stops I had the tendency to let it run on the "hope" it righted its course soon enough. It was stupid. I guess the better question would have been how others formulate their mental stop, though that has been touched on with the references to formulating them based on price action, volume, structure, etc.

Bugsy,

IMO, you should not use mental stop cause most likely, the mental stop will not trigger a hard stop out. You will have practice stop out that fit your style and emotional limit and risk limit. We all would like to use a big stop out to satisfy our internal belief, but the market don't work that way. Review your trades, and determine "if I had used this x stop, I would have made y amount , or man, that was a good stop out".

One person had a quote before, "Pick a stop loss that would not make you made at the world when the market close"

 

[stepan7]

Hello. Would anyone mind sharing how they avoid being stopped out in futures trading? It's hard finding a balance on safety for a stop loss that isn't close enough to be stopped out while also not setting your stop loss so far out that you're shooting yourself in the foot. I got eaten alive before in futures when I was trading and lost about $15,000 about a year and a half ago. Not giving up, and trying to plug the leaks that I know were pivotal in my losses before. This was one of my leaks that hurt me quite a bit. Thank you for any feedback in advance.

1. You have to sit on sim till making money trading futures become your second nature. This is a very hard part.

2. Do not treat sim as a video game. This part even harder then part 1.

As ElectricSavant pointed out - "Good luck". And you will need a lot of it.

St.

 

[TDMA]

Hello. Would anyone mind sharing how they avoid being stopped out in futures trading? It's hard finding a balance on safety for a stop loss that isn't close enough to be stopped out while also not setting your stop loss so far out that you're shooting yourself in the foot. I got eaten alive before in futures when I was trading and lost about $15,000 about a year and a half ago. Not giving up, and trying to plug the leaks that I know were pivotal in my losses before. This was one of my leaks that hurt me quite a bit. Thank you for any feedback in advance.

It is incredibly simple, perfect your entry. How do you do that, as one of the strategists who helped design the methodology says, it's a matryoshka. If you trade a 60mn chart, you need to know what's happening on 240mn, 1dy, 1wk, 1mt but also 1mn 5mn, if you want absolute perfection 1sc, 10sc, 30sc, and if you want 99.99% certainty, assuming the instrument you trade has the liquidity, 100ms charts.

What do I monitor, all of them via widescreen monitors, part of the architecture requirements, I basically never book a loss, worst case is breakeven. If they don't all line up I don't place the trade, meaning I have huge amounts of time available for other things. Now, lining up does not mean all long or all short across all timeframes, but that's where the devil is in the detail.

Which is why no one ever does it, because the pattern analysis is so complex if your life is not as serene as a shaolin monk you will get nowhere. And so today I'm writing this in a Swiss ski resort taking it easy, brand new apartment complex, fantastic sleep in the mountain air, no debt or liabilities to worry about, and will do some dev work this evening to prep CQG.

 

[yiehom]

I hope you are not day trading !?

he catastrophic stop would be my best option; then using mental stops for escapes thereafter based on the price action

 

[Bugsy]

It is incredibly simple, perfect your entry. How do you do that, as one of the strategists who helped design the methodology says, it's a matryoshka. If you trade a 60mn chart, you need to know what's happening on 240mn, 1dy, 1wk, 1mt but also 1mn 5mn, if you want absolute perfection 1sc, 10sc, 30sc, and if you want 99.99% certainty, assuming the instrument you trade has the liquidity, 100ms charts.

What do I monitor, all of them via widescreen monitors, part of the architecture requirements, I basically never book a loss, worst case is breakeven. If they don't all line up I don't place the trade, meaning I have huge amounts of time available for other things. Now, lining up does not mean all long or all short across all timeframes, but that's where the devil is in the detail.

Which is why no one ever does it, because the pattern analysis is so complex if your life is not as serene as a shaolin monk you will get nowhere. And so today I'm writing this in a Swiss ski resort taking it easy, brand new apartment complex, fantastic sleep in the mountain air, no debt or liabilities to worry about, and will do some dev work this evening to prep CQG.

View attachment 184404

Here's one aspect I always struggle with. They say that using the longer term time frame of any chart is more reliable for signals than the lesser time frame, but the lesser time frames are what create the signals on the longer time frame. So where's the breakeven point on which one becomes more essential to basing your entry on? Thanks.

 

[Xela]

where's the breakeven point on which one becomes more essential to basing your entry on?

It varies. Greatly.

It's a much bigger and more complicated question than it looks.

The "key concept" around which it revolves (to the extent that there is a single "key concept", anyway) is that the relationship between signal-reliability and time-frame is a non-linear one - and there are genuine, objective, reliable, mathematical reasons for that being so.

It's further complicated by the reality that issues of practicality ("what suits you") are also often pretty significant.

(My own overall perspective, developed over the years, is that in general the decrease in reliability from using faster time-frames has, for me, been more than compensated for by an increase in trading frequency. I know that some people claim to have found the opposite, and without wanting to offend anyone, frankly I attribute that to their different understandings of and experiences of the practicalities of risk management from my own.)

 

[lcranston]

"Trading the auction market profitably requires more than a knowledge of how to draw a trend channel or box. One must also achieve some understanding of the participants. One of the more extreme examples is the scalper vs he who focuses on weekly charts. If the trader wants to hold something for more than a few minutes, much less a few hours or days, he must understand that focusing on a tick chart is a waste of time and effort in that those who are also focusing on that chart or T&S display have no interest in hours and days. The trader who hasn’t thought out his goals thoroughly is therefore out of synch with the market from the getgo. This is not a recipe for success.

"There is also the matter of Who’s Got The Money to consider. Scalpers are undeniably busy, but they don’t move markets. They’re not the ones who are attempting to support price as it falls. They are not the ones with the power to engineer sustained breakouts. They are not the ones who are creating those trend channels. If one then wants to trade with the flow of bigtime money, which is arguably a more efficient and profitable method of trading than swinging at shadows, then he needs to understand what bigtime money is looking at, e.g., daily and weekly charts (if not monthly). If he can also acquire an understanding of what bigtime money is most likely to do with it, he’ll be in a far more secure position that just about every trader out there.

"One must remember that the more obvious the movement, however it is displayed, the more people there are who will see it. Therefore, if one trades EOD using daily bars, he's going to have an awful lot of company. Everybody sees that. Everybody. But if he's trading ticks, not so much. Therefore, he's more likely to take quick profits because the trading crowd he hangs around with is generally not in this for the long haul. This is NOT to suggest that each and every trade should – much less must – be taken off a long-interval chart: daily, weekly, whatever. The point is to be aware of what all the various players are focusing on and use that awareness to one’s advantage. Whether one is trading off a 5m chart, or a 15m, or an hourly, it pays to know what everyone else is looking at and enter at those points and levels where the larger group or groups is/are mostly likely to join in and propel the trader into profit. Trading in a vacuum is not only inefficient but generally unprofitable.

"That not every group of traders is looking at the same thing is most easily understood by noting the level of trading activity: the fewer participants, the less activity; the more participants, the more activity (for the purpose of getting through this, we won’t quibble about the differences between transaction volume – number of transactions – and share volume – number of shares changing hands; in terms of price movement, it really doesn’t matter). In other words, if everybody is looking at the same thing, such as a major parabolic move, then everybody is trading and there’s tons of activity. But if the money players aren’t paying attention, aren’t interested (as they wouldn’t be in itty-bitty movements on a tick chart or T&S display), then there’s much less activity. When the little players notice the big moves that are initiated and sustained by the big players, they join in (if they’re smart; the stupid ones will short the upmoves and buy the downmoves in the fond belief that they’re smarter than they really are, thus adding fuel to the moves they’re taking the opposite sides of)."

Reposted with permission.

 

[stepan7]

"Trading the auction market profitably requires more than a knowledge of how to draw a trend channel or box. One must also achieve some understanding of the participants. One of the more extreme examples is the scalper vs he who focuses on weekly charts. If the trader wants to hold something for more than a few minutes, much less a few hours or days, he must understand that focusing on a tick chart is a waste of time and effort in that those who are also focusing on that chart or T&S display have no interest in hours and days. The trader who hasn’t thought out his goals thoroughly is therefore out of synch with the market from the getgo. This is not a recipe for success.

"There is also the matter of Who’s Got The Money to consider. Scalpers are undeniably busy, but they don’t move markets. They’re not the ones who are attempting to support price as it falls. They are not the ones with the power to engineer sustained breakouts. They are not the ones who are creating those trend channels. If one then wants to trade with the flow of bigtime money, which is arguably a more efficient and profitable method of trading than swinging at shadows, then he needs to understand what bigtime money is looking at, e.g., daily and weekly charts (if not monthly). If he can also acquire an understanding of what bigtime money is most likely to do with it, he’ll be in a far more secure position that just about every trader out there.

"One must remember that the more obvious the movement, however it is displayed, the more people there are who will see it. Therefore, if one trades EOD using daily bars, he's going to have an awful lot of company. Everybody sees that. Everybody. But if he's trading ticks, not so much. Therefore, he's more likely to take quick profits because the trading crowd he hangs around with is generally not in this for the long haul. This is NOT to suggest that each and every trade should – much less must – be taken off a long-interval chart: daily, weekly, whatever. The point is to be aware of what all the various players are focusing on and use that awareness to one’s advantage. Whether one is trading off a 5m chart, or a 15m, or an hourly, it pays to know what everyone else is looking at and enter at those points and levels where the larger group or groups is/are mostly likely to join in and propel the trader into profit. Trading in a vacuum is not only inefficient but generally unprofitable.

"That not every group of traders is looking at the same thing is most easily understood by noting the level of trading activity: the fewer participants, the less activity; the more participants, the more activity (for the purpose of getting through this, we won’t quibble about the differences between transaction volume – number of transactions – and share volume – number of shares changing hands; in terms of price movement, it really doesn’t matter). In other words, if everybody is looking at the same thing, such as a major parabolic move, then everybody is trading and there’s tons of activity. But if the money players aren’t paying attention, aren’t interested (as they wouldn’t be in itty-bitty movements on a tick chart or T&S display), then there’s much less activity. When the little players notice the big moves that are initiated and sustained by the big players, they join in (if they’re smart; the stupid ones will short the upmoves and buy the downmoves in the fond belief that they’re smarter than they really are, thus adding fuel to the moves they’re taking the opposite sides of)."

Reposted with permission.

double barrel ?

 

[comagnum]

Many traders are trying to trade futures with ridiculously small accounts, they try to over compensate for being insanely over leveraged by using ridiculously small stops. HFTs are very well versed in pain levels, where the clustered stops are, the common entry/exit signals non innovative traders use & where they can spike the volatility to capitulate the above mentioned weak hands from their positions, their business is booming.

There used be a lot more traders making large profits, you know crossing that 7 digit zone or getting close to it. Most of them eventually gave it back but at least a lot more traders had been way up at some point. Seems like that has become a rarity in this era. So what changed?

The SEC PDT rule ($25k) is probably the catalyst. The bar to trade futures was lowered at the same time. Than we had HFTs around 2005 that took over the bid-ask spread, yet many newbies want to compete in that 1-2 tick area - good luck with that. What changed is the least capitalized & the least experienced started competing directly against the opposite.