So doesn't using "tight stops" necessitate

[austinp]

<i>"The only reason traders use stops is to avoid the big one. What they don't realize is it's not the big one that will kill you -- it's the 1000 little ones. Avoiding the big one can be solved with extreme patience."</i>

Dead wrong. It is most definitely the big one(s) that kill most traders. Way before anyone will ever wipe out from 1,000 small losses, they will hit one big burner and go bust... often right inside day one itself.

Trading with larger stops than profit objectives and/or without stops at all is for fools, period. Of course that could always be proven wrong with real-time results in the P&L thread. Simple enough.

 

[FanOfFridays]

Quote from ProfitTakgFool:

Think about this for a minute.....if you put a trade on and it stops out but eventually goes in the direction you anticipated what is the problem? Simple answer: Lack of patience.

Oh my God... not again : )

I well remember our long discussion about this, PTF.

You shoudl perhaps explain to the OP that you aggressively average down into 'losing' trades with multiple entries as the trade goes against you, until you see a turnaround. Your use of stops is going to be totally different than his if he employs different techniques.

 

[lindq]

Quote from ProfitTakgFool:

Avoiding the big one can be solved with extreme patience.

The Famous Last Words of many failed traders.

 

[IronFist]

Quote from traderNik:

Oh my God... not again : )

I well remember our long discussion about this, PTF.

You shoudl perhaps explain to the OP that you aggressively average down into 'losing' trades with multiple entries as the trade goes against you, until you see a turnaround. Your use of stops is going to be totally different than his if he employs different techniques.

I know all about how PTF trades. I think it's awesome.

But that's why in my first post I said "this is for trend following systems. Obviously counter trend will be different, especially if you average down."

 

[EMini-Player]

Quote from ProfitTakgFool:

I have done extensive research on the use of stops, both tight and wide and the only time they enhanced performance was when they were left out about 20 points, which essentially is no stop. Keep in mind, this was on a scaling system and it wasn't tested on today's volatility so the stop may have to be increased to 30 points.

The only reason traders use stops is to avoid <b>the big one.</b> What they don't realize is it's not the big one that will kill you -- it's the 1000 little ones. Avoiding the big one can be solved with extreme patience.

Any details/stats on this? Would love to hear more on this subject.

Thanks!

 

[IronFist]

Re: not using stops.

I've had situations when I entered and price went 20+ ticks against me before it went in my favor (for a profit). That was in a demo account. I don't have the balls to hold onto 20 tick losses with real money.

So obviously if it's going 20 ticks against me before going in my favor, my entry sucks.

But obviously if it DOES go in my favor, I picked the right direction.

 

[Compulsive]

Quote from IronFist:

Ah. Kinda hard if you're only trading 1 contract

I haven't done the math to see how much gain you need over time to make 2-1 profitable over fixed lots. Every initial loss will be significantly more, and you will need significantly longer runs to balance them out.

In other words, if you're trading fixed lots, a 10 tick loss and a 10 tick win balance each other out.

If you're trading 2-1, a 10 tick loss and a 10 tick win end up with you still being negative.

The only advantage I can see for 2-1 would be for replacing hard TARGET PROFITS. That way occasionally instead of getting x profits, you would get >x profits on your one remaining contract as price went up and away in your favor.



Any statisticians want to correct me here?

I would bet here on ET and any other forum that most traders will see some type of profits, almost immediately...more than they care to admit...and profits of $100 or so....what percentage, probably 80% of the time..The problem is that they will see those profits EVAPORATE in front of them and of course they trade ended up as a loss....

Be true to yourself, how many times have you seeing $60-80-100 in profits and the market takes it back and then your stop loss gets hit and now you are seeing a -$250 loss or so, depending on your stop.

 

[Schaefer]

Ironfist, it's good to see you slowly evolve as a day trader

Your stops are directly related to the time frame you're using for your trading style.

A 13 tick stop is plenty for my trading set ups, for my trading time frame. If you're constantly getting stopped out regardless of whether you're right, or wrong.....then your stops may be too small for your trading time frame. You can adjust either one to fix the problem.

The solution is to balance out all three, the trading time frame, stops, and your personal risk tolerance (size of your account, etc.).

Also, know that volatility changes with time of day, news, etc., and stops should be adjusted accordingly as well.

Good luck

Schaefer

 

[austinp]

<i>"Your stops are directly related to the time frame you're using for your trading style..."</i>

effective stops are also directly related to how good your trade entry technique is. The better you are at determining entries, the smaller your effective stops will be.

If your entry method is substandard, wider stops won't solve that problem.

 

[trackstar]

Quote from austinp:

<i>"Your stops are directly related to the time frame you're using for your trading style..."</i>

effective stops are also directly related to how good your trade entry technique is. The better you are at determining entries, the smaller your effective stops will be.

If your entry method is substandard, wider stops won't solve that problem.

Yup. Although I think exits are even more important than entries.

One phase that still hold a lot of water with me is "enter when your stop would have been triggered"