Blowing Stops

do you guys get get this feeling? Every single freakin' time that you set your trailing stop , the price "magically" goes to the price to stop you out, THEN nicely move in the original direction of your trade?!

WTF?! It's like they know where your stop is. they are going to stop me there then proceed to go. I mean I still make nice profits. But would have been nicer if I wasn't stopped out then. So, today, I decided not to do that. I just sit through the noise and it worked. But it's still scary, because it could me a reversal and a few times I did get reversed.

So, how does one solve this problem??

Hmm...

this sucks.

trader99
 
Quote from trader99:

do you guys get get this feeling? Every single freakin' time that you set your trailing stop , the price "magically" goes to the price to stop you out, THEN nicely move in the original direction of your trade?!

WTF?! It's like they know where your stop is. they are going to stop me there then proceed to go. I mean I still make nice profits. But would have been nicer if I wasn't stopped out then. So, today, I decided not to do that. I just sit through the noise and it worked. But it's still scary, because it could me a reversal and a few times I did get reversed.

So, how does one solve this problem??

Hmm...

this sucks.


that's the whole point of my problem. the temptation is always there to not use trailing stops. but we usually don't have the kind of volatility witnessed yesterday. most of the time, trailing stops will give you higher average daily returns, yesterday they would have cut into them greatly. i use trailing stops, but my profit objectives are based upon average bar length not a set profit objective. i tend to get stopped out of 50% of larger swings but i take 50% consistently too. no easy solution. but what i have discovered is you have to do what you feel comfortable with. some traders can handle large drawdowns, i am trying to prevent them with tighter stops, THAT is your choice.

so no, no easy solution
trader99
More...
:( :(
 
Quote from trader99:

do you guys get get this feeling? Every single freakin' time that you set your trailing stop , the price "magically" goes to the price to stop you out, THEN nicely move in the original direction of your trade?!

WTF?! It's like they know where your stop is. they are going to stop me there then proceed to go. I mean I still make nice profits. But would have been nicer if I wasn't stopped out then. So, today, I decided not to do that. I just sit through the noise and it worked. But it's still scary, because it could me a reversal and a few times I did get reversed.

So, how does one solve this problem??

Hmm...

this sucks.

trader99
More...

There isn't any true solution... However, some stops are less likely to get gunned.

Suggestion...
1. See chart for support or resistance, as applicable, for your trade
2. Acknowledge (a) that there will likely be a cluster of stop orders at or just beyond S/R, (b) those are the "overshoot of S/R that cleans out the stops", and (c) YOUR stop needs to be beyond that.

Example: On the S&P, yesterday's low was about 860. Some traders will have stops from 859.75 to maybe 858. YOUR stop should be 856 or 857.

If you played a looser stop, you'd see support at 849. Your stop would need to be 845 or 846.

That won't always work, of course, but should cut down on getting stopped out just before reversal.
 
I have thought about it for a while, because I have the same problem, and essentially the possible causes are these 3:


1. You blow stops after a series of successes because the more you are right the less you think you can be wrong in the future, so your confidence makes you think, when the market goes against you, "I am right this time as well". I think this problem of over-confidence applies to me.


The remaining two possible causes, but I don't think they apply to my case are:

2. The more money you have made the more you're likely to blow your stops because money and success makes you uncomfortable, since it would change your lifestyle dramatically and you'd rather break even so your life goes on as usual. This case is described by Ed Seykota here:
http://www.turtletrader.com/seykota-excerpt.html


3. You blow your stops because in the past this behaviour has been rewarded by a trade that began negative (below your stop) and ended positive.
 
Quote from trader99:

do you guys get get this feeling? Every single freakin' time that you set your trailing stop , the price "magically" goes to the price to stop you out, THEN nicely move in the original direction of your trade?!

WTF?! It's like they know where your stop is. they are going to stop me there then proceed to go. I mean I still make nice profits. But would have been nicer if I wasn't stopped out then. So, today, I decided not to do that. I just sit through the noise and it worked. But it's still scary, because it could me a reversal and a few times I did get reversed.

So, how does one solve this problem??

trader99
More...

Try mental stops. However, this strategy requires great discipline.

:p :p :p
:D :D :D
 
Quote from trader99:

do you guys get get this feeling? Every single freakin' time that you set your trailing stop , the price "magically" goes to the price to stop you out, THEN nicely move in the original direction of your trade?!

So, how does one solve this problem??

Hmm...

this sucks.

trader99
More...

use a stop farther beyond the resistance/support level that you normally use. On listed stocks, the SPecialist WILL ON PURPOSE trigger the stops (many are in the same region) and make $$ when he swings the market back... It sucks, but if you know this, you can almost see him doing it and can trade accordingly...

I would trade smaller shares to allow for a larger price swings. This way you can stomach the specialist doing this..
 
Quote from trader99:

do you guys get get this feeling? Every single freakin' time that you set your trailing stop , the price "magically" goes to the price to stop you out, THEN nicely move in the original direction of your trade?!

WTF?! It's like they know where your stop is. they are going to stop me there then proceed to go. I mean I still make nice profits. But would have been nicer if I wasn't stopped out then. So, today, I decided not to do that. I just sit through the noise and it worked. But it's still scary, because it could me a reversal and a few times I did get reversed.

So, how does one solve this problem??

Hmm...

this sucks.

trader99
More...

I don't know what kind of Trailing Stops you apply but you might consider some other type of trailing stop which can be based on range or etc.... This might widen your stops so you'd have to decrease your position size.

Anyways....It's hard to give you an answer since every stategy has different stops that work. Some strategy performs bad if you use trailing stops and some works well.


Good Luck! :)


Dragn
 
This is exactly why I don't like trailing stops. One simple answer has been given already: make sure you are not putting them at obvious areas of S and R. All the guru books say use these points of "natural" S and R for stops. Go ahead, if you want to get gunned down. Stop running is a major part of every market. Some markets, like the meats, seem to do nothing but stop running during the day.

Another way to avoid this problem is to take profits on reversal bars or at S adn R or obvious magnetized levels. This hurts if price blows on through but it avoids giving a lot of decent trades back.
 
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