Sam,
Good Thread,
" 01-25-11 05:50 PM
Pic. 2:
Trade 2:
LONG:
Entry: $47.94
Exit: $48.75
-$0.81
A really good trade that I got shaken out of. This is a constant problem I am having (long tails) and need help/solution with this issue. I tend to get frozen out of the remainder of the trade and due to lose stops have some profits lost "
I swing trade, you day trade, we have similar issues. Universal issues for traders in all time frames I suspect. I recently opened my stops and the market ate my lunch. And my stops. I just said, well, I'll open things up and I'll succeed , and that wasn't the right week to do that.! I deserved what I got for complaceny.
Just some thoughts for your consideration- As i work through ways to improve my own trading ,, putting out some ideas out here that may not have any merit for your methods. That acknowledged, I will ramble on:
Have you considered trailing staggered stops on your position? On this trade, price tailed down and took you out on what was certainly looking bearish at the moment the bar was forming.. Have you considered waiting for the bar to complete before acting on it? Note that the long tail of the bar never touched the fast ema (8).
"This is a constant problem I am having (long tails) and need help/solution with this issue."
You always have to have a level where you say I won't take anymore if it's going wrong- If a trade starts to head that way, maybe clear 1/2 the position if it's at your entry point, and then give the remainder a little room- You've reduced your risk by 50%, and then should reenter the trade once it goes higher with the remainder?
On the chart you posted, with the long tail that took you out- The long tail never touched the 8 ema line. You sold at the time because that bar was red at that moment, and was taking what was likely a profitable trade into a losing trade - The bar was not completed and was not confirmed. It was definitely below the prior at the time, but had not even touched the fast ema you were using.. Nothing wrong with limiting a potential loss if the trade appears to be going South IMO.
Consider:
Most of those price bars stayed well away from the 8 ema as they strongly uptrended. Would adding a faster ema in addition to the ones you use- perhaps a faster or simple ma- be of any benefit?
Price will periodically return to the fast ema as normal expansion, contraction- and even in your fast time frame, that seems logical- A faster ema -or simple MA in addition to those you use, would give you a way to perhaps trail price from a distance, and not start to react until price makes a closing bar that closes below the faster ema. At that time, A portion of the position can be raised to the low of the bar that violates the fast ma:, the remaining positon also raised -perhaps to the next ema level- Price gets 1 opportunity to close a sell bar BELOW the fast ema. If the bar does not close below, the trend is still likely up.
A faster ma would perhaps give you that edge, and also keep you in a trade longer with a portion of the position if it is warranted.
You got whipsawed on a volatile bar- But you also defensively protected a potential greater downside at the moment you were watching price go down. I think that's not a bad thing to do- If you had split the positon - 1/2 at entry cost and 1/2 at a stop, you perhaps could have kept 1/2 the positon in play as price moved up and then reentered the other 1/2 albeit higher. Have you considered trailing a moving stop based on historical volatility? Don't know if that pertains to your time frame? Say 1.5x historical price movement?
My sense of things is that I make 2 mistakes-
It's not that my stops are necessarily "too tight" - It's that I fail to follow through and make the re-entry that is called for when price moves higher.
And, that I still want to "lock-in profits" quicker than I should- Like stops, I should layer my profits when I have them, hoping for the larger gain.
It would appear that a good number of your trades "nail" the move, with an exit on any weakness. I may be wrong here, but I believe one of your exits was on the first small red bar well above the fast ema, and that nailed it- As a swing trader, I'll look to take a partial profit under a pullback above the fast ema, because price is often extended.
But I also realize, that as long as the trend is up, until price closes below the fast ema, the opportunity remains to the upside. Therefore, I usually move my stop to the low of the first bar that closes beneath the fast ema .
We have different time frames, but also similar issues to deal with. Good Luck going forward! SD
