Making my use of stops more methodical and effective

I

improvingstops

Hi, I'm a futures trader-I have some money longer term in stocks, but just spare a little for futures. Intra-day trading.

I am trading reasonably well, getting many profits, but am hopeless with stops and get the regular large loss that limits my success. I'm trying to eliminate this pattern of holding on to bad trades, then when I get consistency will scale up to 10-20 contracts a time.

I am looking for help to work through my methodology when placing trades, and using stops. If indeed I have developed a bad psychological approach as a result of these losses, then I still can fix it easily by the correct actions each time.

Here's a graph showing my last two weeks.

Any help would be appreciated.

Thanks.
 
Quote from improvingstops:

Hi, I'm a futures trader-I have some money longer term in stocks, but just spare a little for futures. Intra-day trading.

I am trading reasonably well, getting many profits, but am hopeless with stops and get the regular large loss that limits my success. I'm trying to eliminate this pattern of holding on to bad trades, then when I get consistency will scale up to 10-20 contracts a time.

I am looking for help to work through my methodology when placing trades, and using stops. If indeed I have developed a bad psychological approach as a result of these losses, then I still can fix it easily by the correct actions each time.

Here's a graph showing my last two weeks.

Any help would be appreciated.

Thanks.
More...

You

1) put a large batch of the (past) trades into a spreadsheet, showing each one's worst intratrade drawdown (also called Maximum Adverse Excursion or MAE).

2) try to equalize the value of all trades somewhat (like, a trade with 3 contracts of emini should be divided by 1/3 if being compared to a 1 contract trade). This can be tricky, but it helps

3) Sort on MAE column. Then, try different dollar amount stops to see roughly where you can cut them all off, and still keep profit high.
 
Quote from TraderZones:

You

1) put a large batch of the (past) trades into a spreadsheet, showing each one's worst intratrade drawdown (also called Maximum Adverse Excursion or MAE).

2) try to equalize the value of all trades somewhat (like, a trade with 3 contracts of emini should be divided by 1/3 if being compared to a 1 contract trade). This can be tricky, but it helps

3) Sort on MAE column. Then, try different dollar amount stops to see roughly where you can cut them all off, and still keep profit high.
More...

Thanks. I'll get into it more on the weekend, but that's roughly what I did on the chart I linked. I made two columns of over 300 trades, the real value, and the one where every large loss was cut at 120$.

This works for me since I am trading 1 contract on almost all the trades, and almost all the losses are due to buying another one when facing a loss, then cancelling the stop.

Basically, I need to fix this habit. Saying I shouldn't do that isn't enough. I'm goig to try using 12 tick stop on all trades and no averaging in next week. But, I'd like to make the routine methodical, solid.

I have already improved my focus on each trade-and making many nice profits, but every now and then I slip up, and my immediate response is to try to average and recover, or wait. Both are deadly
 
Quote from improvingstops:

Hi, I'm a futures trader-I have some money longer term in stocks, but just spare a little for futures. Intra-day trading.

I am trading reasonably well, getting many profits, but am hopeless with stops and get the regular large loss that limits my success. I'm trying to eliminate this pattern of holding on to bad trades, then when I get consistency will scale up to 10-20 contracts a time.

I am looking for help to work through my methodology when placing trades, and using stops. If indeed I have developed a bad psychological approach as a result of these losses, then I still can fix it easily by the correct actions each time.

Here's a graph showing my last two weeks.

Any help would be appreciated.

Thanks.
More...

If your problem is simply discipline then use some gray box software to automate your stops. I use something that automatically sets my stop the second I get my position. It will trail and punch out based on whatever criteria I select when building my rules....can include volume, level size, % of level that gets printed, etc. Do you use TT?
 
Quote from Scrody:

If your problem is simply discipline then use some gray box software to automate your stops. I use something that automatically sets my stop the second I get my position. It will trail and punch out based on whatever criteria I select when building my rules....can include volume, level size, % of level that gets printed, etc. Do you use TT?
More...

I just want to quickly reply now-thanks for your post. i use ninja without the subscription.
 
Quote from improvingstops:

Thanks. I'll get into it more on the weekend, but that's roughly what I did on the chart I linked. I made two columns of over 300 trades, the real value, and the one where every large loss was cut at 120$.
More...

I wasn't saying to cut if at $120, I said to try different size stops and see where you get best effect. For example, cut off at $50, $75, $100, etc (whatever scale you decide to use). But test from very small to pretty large. You will probably see your results peak at one+ points. You might even want to use 2 diff stop sizes, as market volatility/behavior change constantly.

Doesn't guarantee this will work in real life, but it is an effective diagnosis tool. And do NOT forget, stops often have negative slippage that will cost you $$ you don't see when testing. So a larger stop is more profitable than a smaller stop (fewer stopouts), if both yield similar profits.

Someone once said, that a stop that gets you out of the 20% largest losses is a good rule of thumb, but I never tested that.

You MAY also want to look at how different targets work (use big ones though). in the same way You MAY find it reduces your time in market and possibly even increases your income - depends on your trading method. Plus if hit, it is POSITIVE slippage.
 
Quote from TraderZones:

I wasn't saying to cut if at $120, I said to try different size stops and see where you get best effect. For example, cut off at $50, $75, $100, etc (whatever scale you decide to use). But test from very small to pretty large. You will probably see your results peak at one+ points. You might even want to use 2 diff stop sizes, as market volatility/behavior change constantly.

Doesn't guarantee this will work in real life, but it is an effective diagnosis tool. And do NOT forget, stops often have negative slippage that will cost you $$ you don't see when testing. So a larger stop is more profitable than a smaller stop (fewer stopouts), if both yield similar profits.

Someone once said, that a stop that gets you out of the 20% largest losses is a good rule of thumb, but I never tested that.

You MAY also want to look at how different targets work (use big ones though). in the same way You MAY find it reduces your time in market and possibly even increases your income - depends on your trading method. Plus if hit, it is POSITIVE slippage.
More...

I haven't been recording MAE, so will make a column for that in my spreadsheet for each trade, then check the results over the next two weeks. I'll add further columns to the spreadsheet to show the loss of different size stops. I'll spend a while each day graphing out the previous day's trades, too.

I'll go with a 17 tick stop this coming week. That should get my worst trades, and give me plenty of room so I don't have to worry about being slightly wrong on entry. I made more than 30% this week on this account, but am looking for much much more.

I will check my worst trades (the ones which lost over 250$) this weekend to see where I should have placed a stop. I'll print out the top 5 mistakes for the wall to remind myself of the consequences of being ill-disciplined. However, I still need to design a methodolical approach to the trades that ensures I cut fast.

I tend to win, or lose badly. I seldom lose small. I'm used to getting profits so it's vital to find that same decisiveness to take a loss. When I get out of synch with the market I can begin to hold and hope. Often my profits will be in runs (of my last 20 trades Friday-wanted to finish the week well, made profit on 18), then so will my losses-a few small losses as I lose focus, then a big one.

Making larger profits would be nice, I am definitely missing up to 10 good profits of 25 ticks per day by focusing on frequent smaller profits. Once I can get my stops solved, I'll move onto working out allowing more profits to run.

I saw this file on another thread, so will post it here too:
THe phantom's Gift
Up to page 9, so far. Just preamble. I like the quote "The truth is that the BEST LOSER is the long-term winner." Very applicable to my trading lately.
 
to traderzones, and others who could help:

I've seen you mention Profit Factor, Sharpe, Max Drawdown

When I am recording my trades on a spreadsheet, what stats should I record?

I'm going to make it more comprehensive and useful

-size of move that I entered
-my ticks gained/lost, also $
-account performance-30 minutes, day, week, month, including trade by trade and collated amounts
--# contracts and commission
-MAE loss per contract, tick/$, and totals for position

-time in trade
-time before market proved me right
-time before market proved me wrong
-time I should have held to get full move
 
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