Liquidating everything at a high water mark

[danoXP]

Quote from powerfade:

...I just placed my first metals trade a few weeks back (long YG G8 at 809 and stopped out on that dip around 11:00 a.m. Dec 31).

In fact that trade is one of the ones that prompted this thread. On Dec 30 I was looking at a nice run from 809 to 846. I knew the market was going to retrace eventually and I was agonizing over where to put my stop.

IMO, you put your stop too tight - within the daily ATR (average true range) of the contract's previous day's closing price. You will have too high a frequency of STOPs.

... I put the damn stop at 3 points below the Dec 27th noon hour peak and of course I got stopped out almost exactly at the bottom of the retracement. That is giving back $450 of a $1200 profit that I'm seeing in the position. Christ's sake, am I supposed to put my stops looser than that? 33+% of unrealized profit? ...

Looking at the attached5 min intraday chart (Dec 31 is the 2nd Monday), the previous day's close was ~843, the ATR is ~15, 843-15=828, at a minimum, I would keep any daily stops outside this range. As you can see ... yours was well with this range. Some traders use 2 x ATR.

Still agonizing over this trade. Problem is when I get stopped out it is hard to turn around and get right back in...

But that is exactly what you say Schwartz is apparently talking about and exactly what AAAintheBeltway is talking about above. You get stopped out at the exact point where, if you were out of the market and in a different state psychologically, you may be considering getting in!

Yes, Pit Bull (Schwartz) used a 10 day ema, only traded one side (with the trend), and essentially entered towards the bottom of the range Previous Close - ATR, and exited towards the top of the range PreviousClose + ATR (on an uptrend). BTW, i don't think this style would be as effective (as i said in last post) with GC0802. A trend approach may apply to Metals at this point in time (see Curtis Faith new book "Way of the Turtle").

So just selling and buying immediately, huh? Interesting. I might actually have put my stop a bit lower for the new position had I done that, because the chart would have dictated it.

Pit Bull's style is may apply best to equities currently - not metals (as i said before).

And Pit Bull's style is not for the casual trader (lunch at desk, planned bathroom breaks).

danoxp
(btw, not a "Vet")

 

[powerfade]

Quote from danoXP:
Looking at the attached5 min intraday chart (Dec 31 is the 2nd Monday), the previous day's close was ~843, the ATR is ~15, 843-15=828, at a minimum, I would keep any daily stops outside this range. As you can see ... yours was well with this range. Some traders use 2 x ATR.

That helps, thanks. A stop outside the ATR makes perfect sense. Why I didn't think of it at the time I don't know. Actually... I do know. I was doing the calculations in my head and playing the money and not the position.

I just got the Natenberg book from Amazon last night and I am also realizing that I could have used an option strategy to mitigate the loss of unrealized profit which was inevitable after the big upswing that I caught. Whether or not there exist options on the mini-gold, I'm not sure, but I could have done some sort of hedging trade as opposed to just getting stopped out.

 

[Mathemagician]

Quote from powerfade:
I just need a way to reconcile the calculations I did which showed that if I had simply liquidated twice after sudden pops in my equity, I would be up now compared to what I realized by holding everything in order to 'let my winners run'. [/B]

If you flip a coin and get heads twice, do you conclude that the coin is biased?

M

 

[Cutten]

Is hitting your high water mark having a casual effect on your trading performance? Highly unlikely. There the most likely scenario is that your observation is just random noise. Sometimes you hit a new high and then get a pullback; other times it keeps going higher. Why do you think 2 observations give you enough data to work on?

IMO your positioning should be based on your market assessment and your risk tolerance, not on day to day equity fluctuations. A market does not rise of fall just because you recently made some money.