I was hit by another big loss, and in analyzing why, I ended up making a single adjustment to how I evaluate the above mentioned relationship. However, this modification would not have changed the outcome, whereas a dynamic stop triggered as described in the quote would have (had it been automated or had I been awake at the time and monitoring my positions). So the "scalping with a hard stop loss" question has been answered for me personally, and I will therefore probably return my focus to whether I might be able to automate my approach via a MetaTrader 4 expert advisor (EA).
I just finished modifying my charts in accordance with what I learned from EURAUD and, for the time being at least, feel relatively pleased with the results—no radical changes, just subtle refinements that I believe will indeed equip me to interpret charts and forecast price action with a greater degree of accuracy/validity going forward.
I am curious what you (and anyone else) think about concept of "defending your position?" When I used to swing trade and would be caught long SPY on gap down, for example, instead of puking at the open, I would try scalping my way out by shorting IWM. So in effect I was hedged against larger losses yet gave my loosing overnight position a chance to come back. Of course eventually I said to myself ... Buddy, if you can't take the heat, why don't you just scalp/daytrade in the first place!?
When "swing" trading you naturally have wider profit targets and stop-loss levels than you would have trading at much higher frequencies (scalping). The only trader that I've seen that has truly been able to "defend" a position in the literal sense of the word would be a commercial or monster speculator - and that is always a temporary state of affairs. Brian Hunter took a $6.6B loss and destroyed the HF Amaranth unsuccessfully defending a Natural Gas Spread (the infamous March-April "Widow Maker") - he ran out of bullets.
I have evolved into a swing trader. I hold inter and intra market spread positions for days, weeks, months - it is entirely dependent upon the modeled trading range and volatility of the particular spread in question. I might hold a Gasoline Crack Spread for 3 days. I might hold a Eurodollar Butterfly for six months. When I enter such a trade, I also set GTC stop limit orders for both my position stop-loss level and my profit target level. I don't "defend" anything quite frankly.
One of three things are going to happen: 1. My model reverses - in which case the circumstances for entering the trade are no longer valid and I puke, 2. I hit my stop-loss level and I puke, or 3. I hit my profit target. In my mindset (and what I teach clients, BTW) - I'm not "defending" anything. So whether a market gaps wider at an open isn't relevant to me. I cannot obsess about market conditions beyond my control. I am taking on the best risk versus reward scenarios I can model and then I manage the position given the market trading range parameters I modeled when I first entered the market. From my experience, trailing stops and "dynamic" position management leaves too much money on the table. I've tried it, I've run the metrics, and for our trading model and spread markets dynamic position management is less than optimal.
Just my own two cents - YMMV, I wish everyone good fortune !
That's uncannily like some of my setups look like, all my years, never seen anyone else use Envelopes literally!
I'm not totally mad, well there are 2 of me I guess, so maybe.
Quite honestly, that's not a bad plan at all. It's quantifiable and you know your out at the time of your trade entry - I'd wager that's better than can be said for most independent retail traders.
Back when I called my system Ms. Mae’s Trading Strategy (Multiple Simple Moving Average Envelope Strategy) I searched the Web and YouTube for over a year to see if I could find it being explained by someone who had already developed/perfected the approach, figuring the fact it worked so well meant surely someone else smarter than I had already perfected it.
Alas, I could not find a single sole who credited themselves with having authored, or indeed, who simply described themselves as using the same (or nearly the same) methodology. You've maintained it a well kept secret, seeing as how I began slowly working my way to the "finalize" version I posted yesterday way back in November of 2015.
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Nobody else seems to get Envelopes provide direction and a range to filter out chop.
I’ve had it built up as big as yours to handle everything, butbi generally trade off the wrong thing at the wrong time, so less decisions help me.
I use...
Envelope 11sma 0.01 and 0.04 mainly, enter with direction in the 0.01 or play the range.
Use a BB 22sma 1.8dev, only play the 11s outer range with 22sma direction, then the BB outter becomes my SL level,which stops me holding 11 direction changes against me until bust lol
Common guys, seriously?