I find it difficult to trade in today's market with proper risk management. I mostly daytrade the Q's, and if I'm lucky, I'll make a trade that gives me a profit of 1%, but that's not often, and there are probably more trades with less gain and some losses, totalling a lousy P/L record.
In order to follow a reward/risk of 3 multiples (risk is 3 times less than likely reward), I need to set the first stop (stop loss) so tight that I often get whipsawed out of my trade. For instance:
Example A: I see a long oportunity that is likely to give me 0.30 points reward (on QQQ @ $30, that's 1%). If rewarded, my profit is 0.28 points including fees for the trade (0.02 fee). With 3 risk multiples, my stop would have to be (0.28 / 3 - 0.02) = 0.07 points below my entry price. This may be doable with a nice entry, but if trading a breakout, there is no room for downside movement.
Example B: I see a long opportunity that is likely to give me 0.15 points reward. The real reward would be 0.13 after fees. Again, with 3 multiples and fees, I would need to place the stop at (0.13 / 3 - 0.02) = 0.02 below entry price. This is not realistic in my opinion.
So, if the moves I try to catch are less than 1%, I find it difficult to take the trade with proper risk management.
Any ideas on how to maintain proper risk managment when daytrading a stock (QQQ) that in average moves very little? I wouldn't like to change trading vehicle, nor turn to swing trading.
How do you manage your risk?
In order to follow a reward/risk of 3 multiples (risk is 3 times less than likely reward), I need to set the first stop (stop loss) so tight that I often get whipsawed out of my trade. For instance:
Example A: I see a long oportunity that is likely to give me 0.30 points reward (on QQQ @ $30, that's 1%). If rewarded, my profit is 0.28 points including fees for the trade (0.02 fee). With 3 risk multiples, my stop would have to be (0.28 / 3 - 0.02) = 0.07 points below my entry price. This may be doable with a nice entry, but if trading a breakout, there is no room for downside movement.
Example B: I see a long opportunity that is likely to give me 0.15 points reward. The real reward would be 0.13 after fees. Again, with 3 multiples and fees, I would need to place the stop at (0.13 / 3 - 0.02) = 0.02 below entry price. This is not realistic in my opinion.
So, if the moves I try to catch are less than 1%, I find it difficult to take the trade with proper risk management.
Any ideas on how to maintain proper risk managment when daytrading a stock (QQQ) that in average moves very little? I wouldn't like to change trading vehicle, nor turn to swing trading.
How do you manage your risk?
