Setting stops

[HolyGrail]

Quote from MajorUrsa:

What's the point of not using stops and having alerts set? What are you gonna do when the alert comes (if you're still in time to do aynthing usefull)?




If your plan involves closing positions when certain price-levels are reached you might as well use a stop. I don't see the difference.

Ursa..

When traders place a good till cancelled stop you give the market maker or specialist a great deal of power. If he has a huge buy order and there are many stops close to the general area where the stock is trading he will take out the stops every time. The more potential volume is at a stop level the more likely it will be hit. That's his job, to make a market and trade as many shares as he possibly can. It makes a great deal of difference.

The only time I set hard stops is when I am going on vacation and I know I won't be around or if the stop is a long way from the current price.

 

[Surdo]

Quote from MajorUrsa:
What's the point of not using stops and having alerts set? What are you gonna do when the alert comes (if you're still in time to do aynthing usefull)?

That is what markets are for!
If we all agreed, we would all be on the same side of the market.

Good trading!

 

[cashmoney69]

I bought aapl yesterday at 67.90. I did not set a stop. This is a long term play so not any real rush.


I bought 50 shares.. at a total of 3,395.00. I want to go small at first. I'll willing to risk 5.00 a share, this takes me to $ 250.00 potential loss down to the price of 62.90.

But risk 5 points just to make 1 or 2 points which is my target ?..that doesn't make a lot of sense.

a 250.00 dollar loss would be 7.3 % of the 3,395.00 it cost me.

--

but here is what I'm thinking..

1. The wide stops will allow the stock to pullback on me with out my stops being hit.

2. A stock can do 1 point easier than 5, so maybe this is not so bad?

--

Money management is so confusing!

 

[HolyGrail]

If you don't have a risk-reward ratio of greater than 2:1 it simply is not worth taking the risk. There are too many stocks out there with better ratios.

 

[CaptainObvious]

Quote from cashmoney69:

I bought aapl yesterday at 67.90. I did not set a stop. This is a long term play so not any real rush.


I bought 50 shares.. at a total of 3,395.00. I want to go small at first. I'll willing to risk 5.00 a share, this takes me to $ 250.00 potential loss down to the price of 62.90.

But risk 5 points just to make 1 or 2 points which is my target ?..that doesn't make a lot of sense.

a 250.00 dollar loss would be 7.3 % of the 3,395.00 it cost me.

--

but here is what I'm thinking..

1. The wide stops will allow the stock to pullback on me with out my stops being hit.

2. A stock can do 1 point easier than 5, so maybe this is not so bad?

--

Money management is so confusing!

You're winners must be larger than the losers. It's just that straight-forward. Take your example above. 5 point loser for a 2 point winner. Lets say you do this every trade. Lets say you're right 60% of the time, a respectable average. 6 winners X 2 pts = 12 pts. 4 losers X 5 pts. = 20 pts. You're down 8 pts and you were right 60% of the time. Add commissions for further pain. Throw in some slippage for the final kick in the nuts. Reverse the numbers. 5 pt. gain and 2 pt. loss. You're right 40% of the time. 4X5 = 20 pts. 6 X 2 = 12pts. You're up 8 pts. with a lower win %.

 

[HolyGrail]

Your target on apple should be closer to 70.00 as that is the next point of major resistance.

 

[coolweb]

Quote from cashmoney69:

I bought aapl yesterday at 67.90. I did not set a stop. This is a long term play so not any real rush.


I bought 50 shares.. at a total of 3,395.00. I want to go small at first. I'll willing to risk 5.00 a share, this takes me to $ 250.00 potential loss down to the price of 62.90.

But risk 5 points just to make 1 or 2 points which is my target ?..that doesn't make a lot of sense.

a 250.00 dollar loss would be 7.3 % of the 3,395.00 it cost me.

--

but here is what I'm thinking..

1. The wide stops will allow the stock to pullback on me with out my stops being hit.

2. A stock can do 1 point easier than 5, so maybe this is not so bad?

--

Money management is so confusing!

Rule #1 You are a trader, you do not try to excuse yourself from trading by calling it a long term investment.

Long term investment = you have no idea what you are doing.
Get ready to lose money on AAPL

50 shares won't buy you an ice cream cone. Small capital is not suitable for long term investments.

 

[cashmoney69]

Quote from HolyGrail:

Your target on apple should be closer to 70.00 as that is the next point of major resistance.

How did you get that number?.. fibs?..pivots?...

 

[HolyGrail]

Neither, it's just the next recent high before the downtrend.

 

[Trader_Herry]

Quote from HolyGrail:

If you don't have a risk-reward ratio of greater than 2:1 it simply is not worth taking the risk. There are too many stocks out there with better ratios.

There are one may need to look at:
1) risk/profit ratio
2) probability

1) The higher the ratio, the more likely I will take the trade

2) The more likely the trade will succeed, the more likely I will take the trade.

Now the point is my decision is governed by this 2 main factors.
On one hand, the risk/profit ratio can be lower than 2:1 if the probability is high. On the other, even if probability is low, I will still take the trade if risk/profit ratio is high.