ES Journal Archive (2006 - 2008)

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Well, that`s all right, I said stopsize depends on the exact definition of strategy/entrypoint. So a stop working for one person with very good skills in filltering out false signals by experience and good skills in getting a good fill, may not work for the other trading more or less the same but takes to early false signals or entering to late by chasing the market, and additional, where this person takes profit later to define the realized risk/reward.... the point was, there is no "one stopsize" fits all. The same stopsize can be very fine for the experienced trader with high skillevel, but too small for another getting stopped out to often from profitabel positions. It`s just illusion to say in general small stops are a good idea, it`s only a good idea if you can be very sure about the quality of your entrysignal and entryprice and if you have stats about this. If you are in the guessing phase where to entry you are probably not in the situation to answer where your best stop would be and the probability is in the higher % you take too small stops. Of course are mechanical strategies not too good in entering very skillful and for sure the experienced trader has some advance and can use smaller stops as my TS....but I know it`s working that way for me. If you have no stats you don`t know if this small stops are the way to ruin or to heaven.....

And again it depends on strategy, i can not see any negatives in using larger stops when it`s part of the tested strat, I have to look on the equity over some years and drawdown and something like this, why should a larger stop be any negative if working fine? I`m not targeting the smallest possible
stopsize for guinessbook, I want a steady nice equity with low drawdown.

So if 2 points are fine for Spike, welldone, but to be useful for others they have to trade the exact entries and profittaking as he....any advice using 2 points in general is useless...

In the mech strat field it`s common sense that smaller stops are reducing netprofit, easy to see after testing 100`s of strats over time..
 
stopsize is NOT variable

Man...in 2000 we had days with 80 -100 points ES and most of the time ~30-50points, you are talking about using 2 points stop in this environment?

And in 1996 we had days with 2 points daily range, using 2 points stop?

Not sounding very logic to me not to adjust to marketvolatility....
 
Spike did say 2 points was the stopsize for him not reducing his netprofit too much(but reduced...), so far I remember....

So assume Spike to be a very skillful trader using a finetuned system with very good entries....and exits...

If anybody is more in the novicetrader area I expect him to lose money with a 2 point stop over time or reducing his/her netprofit significantly, cause bad trademanagement/profittaking and bad entries.

But I don`t want to screw up emotions more, just wanted to enable some brainstorming about overlooked items...
 
mechtrader,

What spike said was correct, You just don't know where to place the stops.

In my "Stock swing traders" journal,
You will notice all my stops are 0.3% -> 0.5%
I use to trade YM with a 3 tick stop,
I don't trade YM anymore because its as trendy as a converse hightop.

If you enter at the right point and the right place,
Your stop will be honored.

If you enter randomly and then place 0.3% stop in who knows where.
You'll be stopped 100% in the next 5 minutes because of chop.



As you get more skilled in recognizing price action, you can trade with tighter and tigher stops.
The less skilled you are, the bigger your stops have to be.


I don't know what you mean by 4x ATR , thats nuts,
Thats only when you start trading in a long time frame scale,

All entries can be configured with a 1% or less stop.

Always trade in the "MOMENT OF TRUTH"
 
coolweb,

ATR = averagetruerange, all my stops and targets are based on it.

Averagetruerange(10) = average size of bars the last 10 bars, gives you a definition of marketmovement/volatility.
With a fixed point or fixed % stop/target you are not adapting to marketvolatility.

In 2000-2001 i.e. the NQ100 had a lot of 8-10% days, in average ~7-8% range/day, so a 1% stop or whatever had a different meaning as nowadays with average dayranges of ~ 1 %, the same with most stocks....

so you would have used a 7 times smaller stop in 2000 as nowadays, fixed points or percents are not very useful...

in the Chart you see the average daily range in Percent made in the QQQQ i.e.
 

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even in shorter times you see a lot of fluctuation, so you would have better used larger stops ~ april 2005 and smaller in the summer, you see it in the %range and the ATR(10), there`s a different of 50% in average bar size a few weeks later.

Of course also usable with intraday data
 

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Quote from mechtrader41:

stopsize is NOT variable

Man...in 2000 we had days with 80 -100 points ES and most of the time ~30-50points, you are talking about using 2 points stop in this environment?

And in 1996 we had days with 2 points daily range, using 2 points stop?

Not sounding very logic to me not to adjust to marketvolatility....
More...

In the period from 1987 till today we had the following data for the difference between the high and the low of the day in the SP500X ( the SP500 is the index and move the same ways as the ES). I'm talking about the hours Chicago was open, so not 24 hours trading.

days with a move between 0 and 10 points: 2995 days
days with a move between 10 and 20 points: 1182 days
days with a move between 20 and 30 points: 424 days
days with a move between 30 and 40 points: 126 days
days with a move between 40 and 50 points: 38 days
days with a move between 50 and 80 points: 18 days

The biggest move we had in this period was 76.19 points. We NEVER had 80-100 points.
So in total 96.19% of the days had a move that was inferior to 30 points.
 
That`s splitting hairs talking about a few points more or less, that was a period of very high vola and indexlevel reducing 2 points to a meaningless nothing...

On 4/04/2000 the low of SPX was 1416.41, the high was 1526.45, makes 110 points

On 4/14/2000 the low of SPX was 1339.4, the high was 1440.51, makes 100.6 points

And the averagetruerange(20) peaked up to a 39 points level

That are index data from yahoo finance...

Even if ranging only in a 20-30 points/average(seen 2002) a 2 point stop has a different meaning as in a 9-10 point environment like today...

And if we go back to even lower Volatility like in the mid 90`s, 2 points may be a little bit to large again...

So what is wrong in my arguments?
 
If S&P goes back to more frequent high volatility times, 2 point stops will be there to make sure you don't fall into the trap of being on the wrong side. Personally, SOMETIMES, I would widen the range of the stop, adjusting the position size beforehand and keeping risk down to 2% maximum. 2 point stop systems do work, that is not an advice for novice traders, that is just a confirmation of a fact. Some of the trading systems are not meant to be automated, I believe that's what you are about, auto trading, are you not? I don't see how my system can be automated, it is also based on average 2 point stops and it works so far. There should not be any arguments here as neither you or other members discuss ONE particular strategy.
 
Michael, you can contribute to B1S2's new strategy, we haven't seen it in action yet, he hasn't mentioned what stops he will be using. Hope to hear from you on Monday.
 
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