Re-entry or wait? That is the question!!

[bmwhendrix]

I am sure my journey in trading is similar to many of my fellow ET'rs. Over the years I have slowly addressed certain facets of trading and gnawed at them until I was at peace with something that worked for me, that I could fully embrace.

One aspect that I still struggle with is whether or not to re-enter a trade if my initial stop gets hit, then it seems to be going back in the direction I was playing.

We all know the felling of being stopped just before a big run, and in the back of my mind that scenario keeps trying to force its way into my actions. I contrast that with the old adage "that the best trades are good from the beginning". I have not done a statistical study of what percentage of trades do reverse after a stop and whould have been good for re-entry, vs those in which if I had re-entered would have stopped me twice.

I am tending in my trading to not do any re-entries of a specific setup.

The reason is based partly on the above, and partly on knowing myself. If I get stopped , then ok. The market just told me that it is thinking larger than the risks I am willing to take.
If price hesitates and seems to be going back in my original direction and I hit it again, I am knowingly entering into a trade that has already removed it'self from those that are "good from the beginning" so to some degree that trade has already become a higher risk trade.

If I get stopped a second time, my revenge response starts to wake up, and I find that it knocks me off center, makes me more likely to stretch my rules a bit, and often often will lead to a third loss, which I can accept when I play by my rules, but feel very frustrated with myself when I can track it back to a re-entry.

I would like to hear other views on this, as I sometimes have a hard time getting out of my box.

BMW

 

[nutmeg]

I contrast that with the old adage "that the best trades are good from the beginning".
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We find consolation in old adages....pfffttttt.......zzzzzzzzzz....yawn

 

[Petsamo]

I don't do stop losses. I have a buy low sell high philosophy.

When I came across a chat room that has a buy high sell low philosophy, that's when I discovered the value in stop losses. That bunch calls the philosophy buy high sell higher. They're buying at areas most people are selling, and selling where most are buying.
Oddly enough, both strategies are working.

 

[Arthur Deco]

This is not a question for speculation. If your setup is unambiguous, then you can code and test it, find the sadistically optimal stop loss, and test re-entry after failure. Hower, my experience is that it is like premature ejaculation. Re-entry is usually inadvisable.

 

[bmwhendrix]

AD, Thanks for the response.

I have been down that road and have found that I do not have the ability to program "price action" or much else to my satisfaction. And of course finding an optimal stop by backtesting is like optimizing anything else as the market morphs between it's fractals. However, we arrive at it I think you sum it up well as being inadvisable.

Thanks,

 

[Redneck]

BMW,

I’m going to give you two different answers – based on totally different approaches – pick the answer you prefer

My only assumption; this is in reference to day trading – swing trading/ investing should have slightly different approaches

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Approach 1


I think you should reenter – never know when it’s going to work

I feel reentering is a good idea – sometimes


Possibly reentering is a good idea – depends on the news/ correlation of another instrument/ market/ how I’m feeling/ pattern you see developing…..

Reenter every third Tuesday – following a full moon (no jab at traders who trade lunar phases intended – just trying to make a point)

No you should not re-enter - you should sit and wait for more confirmation (issue here is price information costs - too much information as well as too little)

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Approach 2

How often does price hit your stops – then turn around in your original direction (an exact number based on your journal notes – is the only right answer here)

How well can you read price – And I’m NOT talking about some pattern… I talking about reading price (the forming of individual bars within the context of all previous bars)… like we would read a story from a dime novel…..

How often do you keep the bigger picture in mind when you enter/ trade

What are you basing your stop price on – a certain % of loss…. Or an invalidation of the reason you entered

You ever watch a clock while you trade – certain things occur around (not at – but around) the same times every day

Yes you should re-enter if the reason for entering initially is valid…, and/or PA says to (just remember price is fickle and can / does change its mind)


But then the question is; Are you mentally flexable enough to re-enter.... while being mentally stong enough to take another loss with out second thought

Could you reverse the trade just as easy - if the context required, or possibly re-enter a third/ fourth time in the same direction...


Trading requires weak opinions, and flexible actions...

And an ability to read the battle field..., Otherwise we're making decisions and taking actions in a vacuume

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Now - Pick your approach – and your answer





Btw Nutmeg’s response is also correct – but it is lacking a few specifics and nuances you probably don’t appreciate quite yet (no insult intended whatsoever - simply making an observation)


RN