INTRADAY TRADING: Small stop chop versus big stop drawdowns

[illiquid]

Quote from candletrader:

The two schools of thought, whatever the timeframe, are:
1) to use small stops and potentially be chopped around until you get a clear winner... somewhat psychologically damaging, some would argue... OR
2) to use large stops to give the thing room to wiggle into a clear winner... but suffer potentially large drawdowns on a string of losers... somewhat psychologically damaging, some would argue...

I guess I'm 3) Use small stops while not getting chopped around while going for outsized moves.

Whichever school you choose, the size of the stop doesn't really matter if psychological damage is the actual issue.

 

[Dantheman]

i think the biggest point to remember is that your stop should not have anything to do with money management.

your stop is there for a variety of reasons (trade no good, fast move against you, etc)

but if it's placed at a point because you don't want to feel any more 'pain'.... and not because it is a reasonable point at which your observations have told you 'at this point the trade has failed utterly'...then one is missing the point of the stop.

actually i think most of the posters that have posted get this already.

what you risk per trade is how you should control your 'pain' level...not through stop placement.



i guess my point is, get as much arbitrary rules and actions out of one's system as possible. (you could substitute random for arbitrary i suppose).

 

[nononsense]

Quote from FredBloggs:

stop placement should be based around volatility, liquidity, typical spread, and the general character of the market. but perhaps most importantly - personal comfort, which as it happens is pretty abstract from the market.

objectives are another issue.

the guys who say they only risk a few ticks may be fine in es or ged, but they will get killed doing this in bp.

of course, these good meaning people are talking from their own valid personal experience - which unfortunately has little to do with yours. is your stop placement actually based around your own self-image?

so, heres to the start of another 60 page thread as we go round and round the houses discussing various shades of grey.

then grob will come along with his words of wisdom, and people will tell him he is a bull shitter. the thread will then go off on a tangent of abuse, only to re-emerge on page 36 by which time the subject will be break out trading or something off the wall.

yours

col. kurtz
(prophet extrodinaire)

Not bad at all Fred - makes most sense.
You could call a 'stop' kind of a 'blind exit'.
You're much better off with 'seeing exits'. Requires less chatting and more thinking.

nononsense
prophete
ordinaire du roy

 

[candletrader]

Thank you all for contributing... keep it flowing

 

[Thunderdog]

Quote from nononsense:

You could call a 'stop' kind of a 'blind exit'.
You're much better off with 'seeing exits'. Requires less chatting and more thinking.

Interesting point. However, if you choose to use "seeing" stops, as you refer to them, then you had better be one of those really centered people totally in touch with himself and the markets. Because if you are not, then you run the risk of "seeing" what you want to see when you are in a trade rather than what may actually be happening. Being in a trade can have that effect on mortals. That is why a predefined stop can serve as an anchor when the waters start to roil. And I would not refer to it as "blind." "Visually impaired," perhaps, because it did undergo a fair amount of testing. But I would rather be "visually impaired" than run the risk of hallucinating during a trade. This is not to say that I would not get out sooner than the stop if I felt it was warranted. However, getting out later is almost always regrettable. But, hey, if it works for you, more power to you.