Setting stop losses
- Thread starter nxt7
- Start date
It's better to set SL first. Then entry.
Rather than Entry then to set abritrary SL.
Usually based on a dollar amount kind of stuff.
I'd advise to loosen the SL if too tight.
Because Losses can add up quickly,
Even if your idea turns profitable.
Eliminate the false negatives.
To be taken out on winners.
Size's more important than price.
But often we prefer to add contracts,
Rather than to increase,widen, the SL.
After it depends ...
What's your Expenctency ?
With a tighter or a wider stop loss ?
I'd personally go for less leverage,
But a wider stop loss. For less False Negatives.
Which is to lose money on a trade that's actually not bad.
To let room for noise from Algos and scalpers to be harmless.
Some take volatility into consideration,
They say tight / loose SL when non volatile / volatile.
Depends ... It's conditional on volatility, entry, expectations.
But not on a dollar amount or other arbitrary, abstracted, parameters.
But always have a predefined exit point.
And STICK TO YOUR PLAN.
PS: One Key Word here is OPTIONALITY
With wide SL you still have the choice to get out tight.
Where on tight ones, you're taken out, even if still convinced.
Plus with wide SL. It can gives you an opportunity to break even.
Rather than Entry then to set abritrary SL.
Usually based on a dollar amount kind of stuff.
I'd advise to loosen the SL if too tight.
Because Losses can add up quickly,
Even if your idea turns profitable.
Eliminate the false negatives.
To be taken out on winners.
Size's more important than price.
But often we prefer to add contracts,
Rather than to increase,widen, the SL.
After it depends ...
What's your Expenctency ?
With a tighter or a wider stop loss ?
I'd personally go for less leverage,
But a wider stop loss. For less False Negatives.
Which is to lose money on a trade that's actually not bad.
To let room for noise from Algos and scalpers to be harmless.
Some take volatility into consideration,
They say tight / loose SL when non volatile / volatile.
Depends ... It's conditional on volatility, entry, expectations.
But not on a dollar amount or other arbitrary, abstracted, parameters.
But always have a predefined exit point.
And STICK TO YOUR PLAN.
PS: One Key Word here is OPTIONALITY
With wide SL you still have the choice to get out tight.
Where on tight ones, you're taken out, even if still convinced.
Plus with wide SL. It can gives you an opportunity to break even.
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You have to make this call. There's alot of variables in trading that you have to make that judgement for. 
Trading is part art, part science -- i kind of say this alot, but it's true
Trading is part art, part science -- i kind of say this alot, but it's true
Okay, let me get this straight. You're going to set a stop loss before your entry? So your stop is in place, the instrument, or the market, tanks under you and you are now filled short at your stop?
Brilliant strategy.
Not.
Brilliant interpretation.
I am sure if you'd apply it,
You would become a profitable trader.
Does it makes a good trader to fade a bad one ?
Set ... Define... Sorry for my bad english.
But one needs a bit of common sense.
Even if I agree...
There are strange specimens out there.
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I can't believe am reading this, you never have tested this out I imagine, cause the number of times where price spikes and you are in opposite position only to see price spike other way to never come back? I only use dollar amounts and they always way beyond pivots, and if risk is too much I use secondary signal to get in. I never use stops day trading, I don't advise cause I trade like this is a business and not some hobby as many do, so they not rigid enough have mental stops. First thing I do is place a quarter of my contracts at a target before entry.
Also, let's say to have longer term system, never ever place stop before open, just like today crude oil open gapped down 1.60, now if you were long, you wait five minutes and put stops below the lows and often times that will save you and many times price doesn't ever back down there. This little tidbit took me several years to learn and thousands of dollars.
I am long from the lows in Energies, and using MACD, RSI, and BB for long term, when I am expecting by my systems that due for short term (or complete failure to make new lows) retracement, I hedge my open long profits. If people can't see double top....And people don't know how to use RSI-compare the closes and not extremes.
I personally prefer to use options to define my risk. With options you can limit risk without getting stopped out. Here is some more info: http://theperfectpassiveincome.com/index.php/2016/04/04/a-better-way-to-limit-risk/
stop is not about how much trader wants or can lose (properly chosen time frames serve that purpose)
stop is about exiting the position when the trend is over (or never was there)
therefore the answer to your question lye in your definition of the trend
I don't use stops anymore. It involves trading really small and not making significant amounts of money, but the returns are quite consistent.