Setting stop, Averaging down 1 time, whipsaw

I

innovest_11

hi all

Setting stop has never been easy for me, buy sell buy sell, got whipsawed and lost huge, $1k-$2k per day

Then i discover averaging down. Good, most days ended with breakeven or gains of few hundred to 1k+, then once in a while come a big monster which wipe out all my gains, -7k to -8k

Then i fine tune to averg down 1 time only, losses stop at -$1k+

i tend to cut by midday if things don't work out

Now i wanted to try setting stop, but just afraid that i might get whipsawed left right and left with -1k loss again, any advice?
 
averaging down is ok so long as you have a line in the sand. Before entering a trade, draw your line in the sand. Decide how much coin you want to risk, place limits down to your line in the sand and stops below. Stagger your stops so if it ticks you out you might not be stopped out of your entire position. If it ticks you out of your entire position and then reverses and goes your way, oh well. If you enter good setups set your exit based on sound technicals, and let your winners run, the ones that don't work out should pale in comparison to those that do.
 
Instead of averaging down you could hedge. Where you would normally put a stop, put a line in the sand and short to cover your long. You will probably need two seperate accounts to do this. Then, you can keep taking stabs at the bottom or draw a line in the sand to take profits from your hedge, and see if you can ride your long back up.
 
shorting to cover the long is effectively equivalent to closing the position. However, hedging is still a good suggestion you made. I would only recommend that the hedge is done with shorting options ATM or a split strike risk reversal OTM.

Walt

Quote from joe4422:

Instead of averaging down you could hedge. Where you would normally put a stop, put a line in the sand and short to cover your long. You will probably need two seperate accounts to do this. Then, you can keep taking stabs at the bottom or draw a line in the sand to take profits from your hedge, and see if you can ride your long back up.
More...
 
Quote from joe4422:

Instead of averaging down you could hedge. Where you would normally put a stop, put a line in the sand and short to cover your long. You will probably need two seperate accounts to do this. Then, you can keep taking stabs at the bottom or draw a line in the sand to take profits from your hedge, and see if you can ride your long back up.
More...

Elaborate.

So you're saying you go long the ES at 1,000.

Price falls to 995 (say that's your stop) and now you short one in another account. So for now you've just locked in your -5 point gain regardless of where price goes. However, I've played around with this enough to not be one of those ET'ers who is like "DUH GOING LONG AND SHORT AT THE SAME TIME IS THE SAME AS BEING OUT OF THE MARKET!!!11!1!one!!" I know you can be long and short at the same time and exit both for a profit.

Alright.

So, in your example, what is next? You have to average down on one of them in order to eventually make a profit, so you have two choices:

- long ES @ 1000
- now price is at 995:
--- short 2 ES (price goes down, you eventually win, price goes back up, you start losing money)
--- or
--- add one more long and short 1 (price goes back up, you win equivalent to one contract, price goes down, you keep adding more longs, hopefully eventually price retraces a bit, you close the longs for a profit AND close the shorts for a profit)
--- or
--- ???

There are many ways this could play out. How are you thinking?

If you short in one direction while averging down going long in the other direction, you can extend the amount of drawdown you can endure because you're making a profit on the short side, but it's not enough to cover the loss if price goes too far.
 
Quote from 1a2b3cppp:

So, in your example, what is next? You have to average down on one of them in order to eventually make a profit, so you have two choices:

- long ES @ 1000
- now price is at 995:
--- short 2 ES (price goes down, you eventually win, price goes back up, you start losing money)
--- or
--- add one more long and short 1 (price goes back up, you win equivalent to one contract, price goes down, you keep adding more longs, hopefully eventually price retraces a bit, you close the longs for a profit AND close the shorts for a profit)
--- or
--- ???
More...
I apologize in advance for sounding like a jerk but this is a typical noobian fantasy. Don't even fall for this utter crap.
  • First of all, when you got in long at 1000 and the price drops to 995, that's a loss of 5, not a gain! If you now short at 995, well, you just locked in that loss.
  • Second, even if you shorted ES at 995, you would need to be a pretty good timer in order to capitalize on this "hedging" strategy. Otherwise, you could end up losing more than you initially thought. Let's suppose ES kept falling, and falling, and falling. It's now at 988 and you're seriously thinking about covering your short from 995--only if you weren't plagued by a nagging doubt in the back of your mind. IS THIS REALLY THE BOTTOM? If it isn't, then the long position you're currently holding will lose more money.
How I see it is that this is not a feasible solution for no other reason than the fact that you're NOT a great timer. If you were, you wouldn't have gotten here in the first place!
 
OP,

I would respectfully suggest you become friends with stops – otherwise your PnL will be whipsawed into oblivion


One observation (fwiw) … Your approach seems very spastic - not well thought out, or planned


Just a dumbass trader’s thoughts Sir

RN


Quote from innovest_11:

hi all

Setting stop has never been easy for me, buy sell buy sell, got whipsawed and lost huge, $1k-$2k per day

Then i discover averaging down. Good, most days ended with breakeven or gains of few hundred to 1k+, then once in a while come a big monster which wipe out all my gains, -7k to -8k

Then i fine tune to averg down 1 time only, losses stop at -$1k+

i tend to cut by midday if things don't work out

Now i wanted to try setting stop, but just afraid that i might get whipsawed left right and left with -1k loss again, any advice?
More...
 
The reason I say whipsawed by setting stop loss is:
for example 1,
I bought Aapl at 199.1, stop at 198.9, thinking breakout, then it retrace, I got stopped
out, then it advance further up, I will be winning without stop
example 2:
if I bought aapl at 199.1, stop at 198.9, then got stop out, then it fall straight down to 198, and continue falling, setting stop will save me only losing -$60, if I don't have stop and avg down, I'm losing -$330 already an if fall further, can lose up to -$700 inclusing the 1 time avg down

so currently stop loss will save me from big losses but stop out from winners too, and also buy sell buy sell many times many small losses also become -300 or -400, worse is seeing it rebounce after stop loss

but without stop loss, i'm open to loss of -600 to -1k plus, but I have some big winner if big uptrend, worse is sometime -2k losses, don't want to take, I keep it overnight and next day bcome -7k losses!

Any advice from traders welcome
 
Innovest-11

Work on creating better set ups based on price and S&R - of the stock you’re trading – also create tighter / more precise stops…

eta - Please note stock is singular not plural – find one and stick to it for now

The stops – if/ when hit – are such that you know the trade, and the reason you entered are invalidated

Also be absolutely certain of the time frame you are trading – stick to it – and base entries, exits, stops off that

And it appears you could use some screen time - just sitting patiently and watching Sir

RN
 
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