Quote from macattack:
Do you guys ever take something like a 20-cent loss?
Not usually, though I have had very large blowups because I was stubborn. My default stop that my ATM enters when a trade is executed is 12 ticks. So usually they're 12 ticks or less. Today the long at 1:43 that BCE took at .89 (i think), I intended to get the order in to long at .95, as a break above the prior consolidation high, as well as through the 1m EMA. Had I been filled there a logical stop to me is .88, as it's below a prior swing low, and below the broken supply line that it broke when it went above .95. If it goes there and goes back to .88, I'm just flat out wrong. A safer stop would certainly be in the .78 area, but if it comes down there, after a fake up, it's certainly going to get me just for fun, and either reverse up and piss me off, or break down and piss me off because I was way wrong. In other words, a stop at .78 will likely be hit, unless it goes up now. That was my thinking. As it turns out I bought on a limit after it popped above the round number, and in this case I put my stop at .93, below the prior high of the consolidation, and when it went up I moved my stop to .98, and finally to .02.
Stop placement is an issue for me, BUT it's really more like trade selection and timing are the issues, because my best trades have needed a 10 tick or smaller stop loss. I've had people try to tell me to use a larger stop loss (like 20 ticks) and not put so much pressure on the timing of the trade, but really if I'm constantly getting in too early or late such that I need a 20 tick stop loss, then IMO I'm just getting lucky if the trade happens to work out.
Some people say you can't time the market. Well, I'd say that's what being a good day trader really is all about, IMHO of course, not that I am a good trader yet. I think a good trader rarely has to take trade after trade with lots of heat on every trade, only to come out the winner on many of them. If I take a breakout trade and it goes against me immediately 8 to 10 ticks, comes near my 20 tick stop several times, and then after 15 minutes it finally goes my way, I don't really consider that a good trade. If I were buying and thinking "long", then I should have just bought lower with no confirmation, rather than buying near the top, and then getting lucky by having it eventually go my way. Once it goes against me in this case, IMO my edge is negated, and I might as well flip a coin to determine whether to stay in or not.
I would love to hear others' thoughts on this, whether my logic is in any way sound, or if I'm just being self-delusional.
) and the weakness in the second push (2:14pm) was enough for me to take it off. Perhaps as I mature as a trader I will just move my stop (.82 was where I moved it after the breakdown), and let it work a bit longer. If I'm ever to be a real trend-following trader, then I've got to learn to sit through a retracement, but I'm not sure if that's my destiny or not. If I'm up 100 ticks, I'm not so sure I'm willing to sit through a 50 tick retracement.
In regard to the stop loss question I do use really tight stops and would just as soon reenter if my original entry doesn't work out. To me the problem with taking a 20 tick loss is these stop losses really eat into your profits. Then you have to have a 21 tick win (1 tick to cover the commission) to get back to break even. Whereas if you take a 5 point loss you don't need such a win to break even.