Lesson #1 for Futures Traders

A

aeliodon

#1 Always use a stop loss

Even if you don't like to use a stop loss you need to use a catastrophic stop loss.

#2 Always be aware of news/number releases and never have an open position going into any such release.

If you don't believe me just look at market action in ZB on 3/18 and NG on 3/19 - a $7,000 move per contract in seconds.

That's an INSTANT BLOWUP if you use max leverage and you're on the wrong side. Its also INSTANT HOMELESSNESS.
 
Ref point 2 - yes, always have "marketplace situational awareness" before entering a trade. Very good point.

Do I use a catastrophic stop loss, yes - always.

Regular old stop loss? Not unless I will be away from my desk when in a trade.

But on days where you expect news to REALLY move the futures (ie FOMC day) I most likely will not be in the market when the news hits, or if I am trading the news (ala 'rolling the dice') I will do it with a VERY light # of contracts w/o any type of stop loss because you will see those huge swings and get stopped for a loss right before it moves back in your favor -- meaning you loose the chance to get out at less of a loss or even stay in and try for a profit. Plus if I feel the need to average into a position (I rarely do that btw) I can do so more comfortably since even then I'm still trading far less than my usual contract amount.

But in general I generally don't trade the news. For me and my trading style, it's safer that way. And that's fine by me. :)
 
Quote from aeliodon:

#1 Always use a stop loss

Even if you don't like to use a stop loss you need to use a catastrophic stop loss.
More...

I would add:

use a stop loss that has been rigorously back tested with your system, and amplifies and doesnot seriously reduce your profitability. (in other words, don't shoot from the hip or make wild guesses).

stop losses are negative slippage, so try and prefer larger stoplosses that reduce their occurrence.
 
Quote from aeliodon:

#2 Always be aware of news/number releases and never have an open position going into any such release
More...

Lemme guess. You weren't flat going into the Fed rate announcement yesterday.
 
If you don't believe me just look at market action in ZB on 3/18 and NG on 3/19 - a $7,000 move per contract in seconds.

That was some move on ZB, I was watching. A 'mental' stop would have been absolutely crushing both financially and emotionally. I wonder what slippage was though, could have been really bad.
 
Quote from aeliodon:

#1 Always use a stop loss

Even if you don't like to use a stop loss you need to use a catastrophic stop loss.

#2 Always be aware of news/number releases and never have an open position going into any such release.

If you don't believe me just look at market action in ZB on 3/18 and NG on 3/19 - a $7,000 move per contract in seconds.

That's an INSTANT BLOWUP if you use max leverage and you're on the wrong side. Its also INSTANT HOMELESSNESS.
More...

I was long bonds then but if I had been short it would have been a 2-3% hit at most, and I would have not only held on I would have shorted more (assuming I had conviction in the trade).

Learn risk management - these kinda moves happen from time to time and you have to be ready for them. I was short Euros just before the Fed quant easing decision and dropped about 3 big figures before I covered. I reshorted the next day and am still short, overall it was a profitable move and I expect it to go much lower. If a 5% move will wipe you out, you're doing it wrong.
 
Quote from aeliodon:

...#1 Always use a stop loss...
More...

You have absolutely no clue of what you're talking about... but be my guest, find out the hard way.
 
First rule should be to have a business plan. Part of your business plan should be a trading plan. All other rules should emanate from that framework. :)
 
Quote from aeliodon:

#1 Always use a stop loss

Even if you don't like to use a stop loss you need to use a catastrophic stop loss.

#2 Always be aware of news/number releases and never have an open position going into any such release.

If you don't believe me just look at market action in ZB on 3/18 and NG on 3/19 - a $7,000 move per contract in seconds.

That's an INSTANT BLOWUP if you use max leverage and you're on the wrong side. Its also INSTANT HOMELESSNESS.
More...

ummm...

a stop limit would have been jumped.

a stop market would have been a rape that would make Jodie Foster from The Accused feel bad for you.

either way you're fucked. just how fucked depends on how far out of whack the position was relative to your acct and/or net worth.

and, btw... i'm not saying this from a 'know it all' perspective. no, this is from the schmuck who has lost more than 6 figures in a day (ok... 10 minutes) more than once with stops, stop limits and every other form of justification for over-leveraged stupidity. i'm a cautionary tale with >70% of my acct pissed away in the past 7 months.

gotta get back to running my acct into the ground...
 
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