How To Cut Losses?what Parameters To Use?

Quote from dsq:

"I suggest you keep the risk under 2-3% of your account at all times"

thats for long term trades not daytrading...i am talking about 20-40 cents on dow30 stocks.NO spreads on the bid ask either...

actually i guess my madness is ok...but i am not happy with my bottom line for all the work i do....since july1st 2007 i made about 1000 trades and netted after commissions 7000$My winning trades are 90%+ because i am taking profits with as little 2 cents but mostly around 10-20 cents...however this is countered when i take a loss of 30-40 cents on a single trade that negates 10 winning trades.Half of my trades immediately go in the direction i had anticipated and half of them either dip a few cents in red before going in my favor...Some just vacillate and i get out....And my losers are usually ones that just fall apart fast and i am down 30-40 cents(loss).

Basically i am doing a lot of work and risking 30-50k every trade tomake 20-150$I rarely make over 150 on a single trade....
When i position traded in the early/mid 90s i rarely made under 3k and upwards of 10k and would avg around 4500k.... and i did maybe 12-15 trades all year!!!


I trade in 1000 shares and 500 when im a little unsure.... and just 100-400 when market is wacky and i just want to dip my toes.
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We trade similar. First of all, I always trade the open. That can be bread and butter profit. I suggest you look at trading the open. I always trade 1000 share lots. Sometimes two positions at a time, sometimes I will double up on one position. I only have ten stocks on my board. All but one comes from the Dow 30. KO, T, and GE are all on my board but it has been a while since I traded them. I generally focus on two stocks and in a given week it is not uncommon for me to have traded the same two stocks over and over again. I, too look to short strength and buy weakness and since I trade the same stocks all the time I am looking to short intraday highs and long intraday lows. So I am trying to find the trading range in a given day. I do not use stops. My stop is a cumulative loss for the day which is roughly 2 times what I expect to make for the day. This varies somewhat because I sometimes adjust my daily targets down if I am having a good week or a good month, because I believe in the concept of defending your profits. I have stopped out twice in 2007. Your question deals with handling losses. <p><cite>Half of my trades immediately go in the direction i had anticipated and half of them either dip a few cents in red before going in my favor...Some just vacillate and i get out</cite><p>I would say that is roughly what I experience. But when a stock goes against me 10 or more cents and comes back to me I take one penny profit which means with my broker costs I make about 3 dollars. I believe that trade could yield me a 100 or more in profit but chances are I will be sitting on the trade for a long time and have to settle for less, that is if it doesn't go back in the loss column. In this type of trading, TIME ON TRADE, is very important, and flat is not a good thing. If you sit on a trade for a long time, I think there is only a 50-50 chance of it breaking your way. 50-50 is not what I am looking for when I trade. <p><cite>And my losers are usually ones that just fall apart fast and i am down 30-40 cents(loss).</cite> <p>I usually avoid these moves. Because I usually make money on the open, I do not have to make as much during the day with the types of trades we are talking about. It has been months since I traded past 1 pm est. Here is an example of what I am talking about. Last Friday, I made all my money shorting my two favorite stocks both on the open and after that, I was out of the market in an hour. Although my time on trade was never more than five minutes on any of six trades. So I made my money shorting stocks that ended up big winners on the day in a 3 digit Dow move to the upside, had I kept those postions or kept shorting I would have lost BIG TIME. Because of the news out of Pakistan, I shorted strength today and again I was out of the market in less than an hour. Had I kept those positions or kept shorting I would have won BIG TIME on the 3 digit Dow move to the downside. My point is this, I am a profitable trader because I look to make the same kind of trades day after day on the same stocks, simply using the natural rhythms of the market. I do not need to be on the right side of 3 digit Dow moves to make nice living trading equities, in fact I do not even need to use that much of the trading day. If I consistently traded later in the day, I am sure that I would be more likely to experience a stock moving against me 30 or 40 cents.<p>My last bit of advice is about stock selection. That is the most important thing, selecting a stock which behaves in a manner which is consistent and which you can make work for you. I do rotate from time to time, but if I am locked in on a couple of stocks as I have been for since early October, I keep riding the same horses day after day. For the type of trading that I do, I have NEVER been able to make GE work for me. I got off of T in late summer. KO is the best of those three. VZ is a better trade in my opinion than T. For the type of trading you are looking to do, I think there are better choices within Dow 30. As I said I only trade one stock outside the Dow 30 but it has been my best stock and has made me over 50 per cent of my living over the last three and one half years.
 
Quote from dsq:

Since cutting losses is the most important technique in successful daytrading,what parameters do daytraders here use to exit losing stock,futures trades.

For ex:do you get out when a stock goes 10,20 or 40 cents against you?
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Losses you should be taken when you feel you are wrong in a given time frame. If your time frame is 1 day, you need to get out now, if your time frame is one month, you can afford to wait and see few days. Technical analysis plays an important role when to get out. There are times when I can wait out stocks for months and I still dont take a loss.

Always keep your losses in the same proportion to your profits. For example if you average $400 profit per trade you losses shouldn't be more than $400 per trade. If your losses are greater than that than you need to review your trading skills and know why its happening.
 
TICKETWATCHER,
We do have similar styles....i have not figured out how to play opens as i am usually uncomftable without the daily range being established first but i do play opens as much as possible and they do provide the best dollar movement of the day on dow stocks....I once bot MO when it opened down 50 cents only to watch it drop another 2 pts.I was holding 1000 shares and had doubled into the drop.I couldnt beleive my eyes i just said ok this is in gods hands aint nuthin i can do!Anyway it snapped back and i got out breakeven with a heart murmur and it rallied another 1pt from there-this happened off the open in less than 25 minutes!

I cant figure out ge either...
I have narrowed imy trading down to T mostly.I trade T almost exclusively now.For me KO and VZ are not as good proxies for the dow like T is.By that i mean T almost without exception moves in the direction of the dow(it wont counter it) and never sputters.Anyway that is what works for me very consistently.

I started daytrading GE,ko,mo,vz and T and it all comes down to T for me....I have traded it 20 times in a day....T is for me!But i do tradethe others when they look good.I still like to trade KO when i see it do one of its unexplained mini meltups and short it....That thing will drop like a rock.To each his own.I also have been trading intc and msft in the last few months.MSFT is a pretty good at moving with the index.However it is tech and tech is tech....tech can be a wreck!
I have all 30 dow stocks on my main screen with my faves at the top.My other screens are tech,financial,retail/oil which i check periodically throughout the day.

Also what i am trying to do now is to hold back on little trades and wait for a big intraday selloff or melt up to play.Such a move usually happens once a day in T (nice 30-70 cent move)...and in many other dow stocks as well.

Is there any special techniques you do to trade opens?...I do not understand why i will sometimes see T open down 60 cents....then i overthink it and before you know it ,T has bounced 50cents....That is some nice money i am missing out on.I would like to know how to trade opens.Is it just pure gut?Anything to watch for aside from big move in sp futures before the open?
 
"Always keep your losses in the same proportion to your profits. For example if you average $400 profit per trade you losses shouldn't be more than $400 per trade. If your losses are greater than that than you need to review your trading skills and know why its happening."

this is a great answer.So simple yet i have never heard it!!!This concept also has me thinking to start moving away from many small trades and wait for bigger price movement opportunities.

" but chances are I will be sitting on the trade for a long time and have to settle for less, that is if it doesn't go back in the loss column. In this type of trading, TIME ON TRADE, is very important, and flat is not a good thing. If you sit on a trade for a long time, I think there is only a 50-50 chance of it breaking your way. 50-50 is not what I am looking for when I trade. "

Bingo,this is exactly my thought processes when i am on a trade that is going sideways....I start telling myself about the time and how my chances are dwindling with each passing moment....I havent heard much about 'TIME ON TRADE' but it is a concept that i confront on many trades!!!
 
Quote from dsq:

"Always keep your losses in the same proportion to your profits. For example if you average $400 profit per trade you losses shouldn't be more than $400 per trade. If your losses are greater than that than you need to review your trading skills and know why its happening."

this is a great answer.So simple yet i have never heard it!!!This concept also has me thinking to start moving away from many small trades and wait for bigger price movement opportunities.

" but chances are I will be sitting on the trade for a long time and have to settle for less, that is if it doesn't go back in the loss column. In this type of trading, TIME ON TRADE, is very important, and flat is not a good thing. If you sit on a trade for a long time, I think there is only a 50-50 chance of it breaking your way. 50-50 is not what I am looking for when I trade. "

Bingo,this is exactly my thought processes when i am on a trade that is going sideways....I start telling myself about the time and how my chances are dwindling with each passing moment....I havent heard much about 'TIME ON TRADE' but it is a concept that i confront on many trades!!!
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THe Sharpe ratio.......This will tell you where to put your stop.
The example above 400gain =400 risk is a ratio of 1 to 1
When you do you testing where does your ratio work best....some programs work better at 2 to 1 some work better 1 to 2
 
I would say for beginners that your first priority is preserving your capital and sticking to your 3-5 percent loss or tighter. I also feel that once you become an experience trader you are afforded the ability to do more things with risk reward because you have more insight.
 
Quote from dsq:

TICKETWATCHER,
I still like to trade KO when i see it do one of its unexplained mini meltups and short it....That thing will drop like a rock.To each his own.
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<p>KO will not track the Dow so much, it is a DEFENSIVE stock, chances are it may be green when most are red or may be the last stock to dive in triple digit dow loss. KO may a good short when the rest of the market gets fluffy. Trying to track the Dow is now very difficult with the financials so volatile and stocks like MCD and HPQ having been on terrors this year. You make money most days trading stocks not the market. There are some days when the moves are so powerful that you can trade the market but mostly the money is made trading specific stocks.
 
Is there any special techniques you do to trade opens?...I do not understand why i will sometimes see T open down 60 cents....then i overthink it and before you know it ,T has bounced 50cents....That is some nice money i am missing out on.I would like to know how to trade opens.Is it just pure gut?Anything to watch for aside from big move in sp futures before the open? [/B][/QUOTE]<p>Don Bright has responded on this thread. In the Journal Forum, he has an opening orders thread. He and the others on that thread are extremely knowledgable traders. You need to monitor that thread and go back through its archives. Trading the open can be tricky business. I would say try to formulate a strategy and paper trade it. I made some good money trading T off the open, but I got off the stock when its upward trend seemed to be broken.
 
Sorry to intrude into a daytrade heaven but I've noticed that one of the posters mentioned that he/she made more money swing/position trading. Why in the world you'd switched then to the day trading?:confused:
 
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