No Free Lunch
- Thread starter monee
- Start date
the worst place to put your stops are near s/r levels. why? because these are 'war zones'. its where buyers and sellers do battle. it gets messy and thus there are no clear signals around these areas.
maybe i didn't understand your statement correctly, but if you are truly doing this, i would take another look.
cheers
-funky
Yes this is well known, now it is not YOUR stop in particular but an area where there are a bunch of stops but it is no secret where they are: at previous high or low 
.
.in Larry William's book "long-term secrets to short-term trading," he defines how he determines short term, intermediate, and long term sup/res... I use a similar procedure.
yes these ranges are war zones, and that is why I look for a type of breakout. Stop would be placed at the opposite side. Do you still disagree with this stop loss method? What kind of stop loss method would you use? This system does make consistent profits...
Andy
If this exchange is going to go on, I suggest that the participants be specific about what kind of stop (e.g., loss-limit vs profit-protecting or profit-taking) and what kind of instrument. I, for one, have found the issue of stop placement to be very different with futures than it was for stocks. And whether one daytrades, swing trades, or position trades is also a factor.
To wait until your stop gets hit in order to know that the trade is not working out is a costly way to hear what the market is telling you. Think of stops in terms of damage control in the event of surprises and gaps. Wide stops that only get tagged under worst case scenarios. So they can be far away from the noise and obvious stop points. Then, there are other things that tell you the trade isn't working out that don't cost as much to find out as the stop you were using did. You get to know what those things are. When you see them happening, take your cue and exit. Sometimes you'll lock in a bit of profit, sometimes you'll escape without much loss. Either way, it's better than waiting until every last cent of your stop is hit.
Traders don't use mechanical stops....if you cannot watch your "children" all day long, do not put their safety in the hands of others...period!!
We teach our people to use mental stops, that way they don't lose all their money to the multitudes who know where the stops are going to be triggered.
You have to get past the idea that stops can help you. Here is a simple example from my first day of training.
Stock ABC. Bid 40.10 Offer 40.20
Many buy orders between 40 and 39. Many sell orders between 40.20 and 41 (ala NYSE Open Book, etc.).
You just bought stock at 40.10. and put a 1% "stop loss" order in at 39.70 or so.
Big seller comes in, negotiates a sale of 100,000 shares of stock with the Specialist. The trade goes off at 39.40....all the buyers between 40.10 and 39.41 buy stock with excellent "price improvement) (we do this all day long via enveloping, but that's another topic).
Of course, your stop was triggered and you just paid dearly for using it. If you were to have a "mental stop" in place, you would have seen the stock quickly move back up to 40 or so (since this was a simple "block trade" abberation), and all the people "watching" the stock, probably dove in to buy it at the levels you were forced to sell it.
This may sound confusing to some, but this is the first hour or two of our training.....free for you all.
Before anyone attempts to start with the "what ifs"....let me help. 1. Yes the stock can continue down 2. Yes, you might lose more money. 3. Yes, it might rain today. In other words, anything "can" happen...we just look to the likely event that the stock (with all else being equal) will rise back to it's level of 2 minutes ago.... heck, the buyers who received price improvement themselves will likely buy more "at their limit" helping get the price back up.
Just basic stuff.....hope some of you can profit from it...
Don
We teach our people to use mental stops, that way they don't lose all their money to the multitudes who know where the stops are going to be triggered.
You have to get past the idea that stops can help you. Here is a simple example from my first day of training.
Stock ABC. Bid 40.10 Offer 40.20
Many buy orders between 40 and 39. Many sell orders between 40.20 and 41 (ala NYSE Open Book, etc.).
You just bought stock at 40.10. and put a 1% "stop loss" order in at 39.70 or so.
Big seller comes in, negotiates a sale of 100,000 shares of stock with the Specialist. The trade goes off at 39.40....all the buyers between 40.10 and 39.41 buy stock with excellent "price improvement) (we do this all day long via enveloping, but that's another topic).
Of course, your stop was triggered and you just paid dearly for using it. If you were to have a "mental stop" in place, you would have seen the stock quickly move back up to 40 or so (since this was a simple "block trade" abberation), and all the people "watching" the stock, probably dove in to buy it at the levels you were forced to sell it.
This may sound confusing to some, but this is the first hour or two of our training.....free for you all.
Before anyone attempts to start with the "what ifs"....let me help. 1. Yes the stock can continue down 2. Yes, you might lose more money. 3. Yes, it might rain today. In other words, anything "can" happen...we just look to the likely event that the stock (with all else being equal) will rise back to it's level of 2 minutes ago.... heck, the buyers who received price improvement themselves will likely buy more "at their limit" helping get the price back up.
Just basic stuff.....hope some of you can profit from it...
Don
this is great advice. i think i read something in one of the market wizard books....one of the traders talked about how he attributed alot of their success due to the fact that he never exited on panic or greed. always waited a bit later to exit/enter where price was usually much better.
when you observe the markets a bit more, you will develop a better sense of what don is talking about. it just takes experience to trust it. when you let a stop take you out, usually it means the market is playing you, not the other way around like it should be.
when you observe the markets a bit more, you will develop a better sense of what don is talking about. it just takes experience to trust it. when you let a stop take you out, usually it means the market is playing you, not the other way around like it should be.