How do you determine the ideal placement of a stop loss to effectively balance risk management and profit potential in your trading strategy?
efficient stop loss
- Thread starter eleanorK80
- Start date
First where the market says "you are wrong", you go on high alert, then when it confirms it, you take it. Or when the PL/Time potential is low, you bail out when the "alert goes on". Both work well.
Second, where your P/L stands. But since the market is oblivious to the (small potatoes) trade PL, this is all subservient to what the market says.
All this being said, there are "baked in" requirements for the strategy being used. E.g. some call for small losses for small-medium gains. Other call for larger loss to get many medium, large gains. etc. etc. This is where you are looking at 100's of trades, and not a few dozen.
Second, where your P/L stands. But since the market is oblivious to the (small potatoes) trade PL, this is all subservient to what the market says.
All this being said, there are "baked in" requirements for the strategy being used. E.g. some call for small losses for small-medium gains. Other call for larger loss to get many medium, large gains. etc. etc. This is where you are looking at 100's of trades, and not a few dozen.
Good Evening eleanorK80,
All you can do is do your best
Full Disclaimer : I am currently a Losing Trader so far of about -$4,800 on the fiscal year of 2023. Let's see how the next 2 months go. My comments are not worth a penny with a hole in it because I am losing trader right now
You should place your stop loss at the price you are "wrong".
I'll give you an example.
Say XYZ stock is trading at $57.50 and has earnings tomorrow. You think the stock will trade to $65 but know that there is a bear thesis that will drive the stock down to $50.
At $57.50 you're roughly at the midpoint, or fair value, of the two embedded scenarios. You know that the stock will fluctuate around 57.50 until earnings, but that if the bear thesis plays out the stock will immediately drop to $50.
In this scenario, I would recommend placing a stop at $50, and prepare to manually update your order once earnings is released. If earnings is released and the bear thesis hits, attempts to exit as quickly as possible before you hit your stop (not very likely but worth trying).
Good traders makes money when they're right and lose money when they're wrong. Manage your size effectively so that you can survive sequential losses and you should be good (simple rule, aim to rotate across 10-15 ideas, with a max weight of 5-8% on any given trade).
I'll give you an example.
Say XYZ stock is trading at $57.50 and has earnings tomorrow. You think the stock will trade to $65 but know that there is a bear thesis that will drive the stock down to $50.
At $57.50 you're roughly at the midpoint, or fair value, of the two embedded scenarios. You know that the stock will fluctuate around 57.50 until earnings, but that if the bear thesis plays out the stock will immediately drop to $50.
In this scenario, I would recommend placing a stop at $50, and prepare to manually update your order once earnings is released. If earnings is released and the bear thesis hits, attempts to exit as quickly as possible before you hit your stop (not very likely but worth trying).
Good traders makes money when they're right and lose money when they're wrong. Manage your size effectively so that you can survive sequential losses and you should be good (simple rule, aim to rotate across 10-15 ideas, with a max weight of 5-8% on any given trade).
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MORE measures = better.
it varies, metals dealer is open late about 5%-20% of the time late monday\therefore i seldom if ever go monday morning, unless i'm going to the bank, close by him.
sWing trade use better[bigger] stops/profits than a short term trade.
I like super selective entries, barchart.com has qqq an 88% buy\spy56% buy; so i would not buy spy..... or do it small if at all.
MaKe sure to give some , like Robinhood Foundation or like Bill + melinda gates Foundation;
i dont use foundations in my giving but you get the point
Good question. Part of the skill set of a buy side analyst is to uncover critical factors (major embedded scenarios) and catalysts (informational events). There’s usually at least one tradeable event for most stocks every month or so, and most analysts will cover 50-80 stocks.
No, I highlighted the two words - know and will - for a reason.
Because nobody knows what will happen.