So doesn't using "tight stops" necessitate

For those who seek diversification through trading multiple systems, you may find (as I have) that systems with "tight stops" have a surprisingly (and pleasantly) lack of correlation to systems with "loose stops". If you've got a system with "loose stops", adding another system with "tight stops" to the mix, may yield a stunning bonanza. Try it and see.

You might even call it predictable. Common sense tells you that (systems with loose stops) and (systems with tight stops) are going to give quite different outcomes in these areas:
  • Percentage of winning trades
  • Distribution of trade outcomes (in R-multiples), especially, mean of the distribution (i.e. "average trade" in R's)
  • Holding time ratio (Duration of average winning trade) / (Duration of average losing trade)
If your account is big enough for multiple systems, it's definitely a great zone to explore.
 
I have the same problem. I guess it depends on your pocketbook & what you can tolerate as a lose. I find I get stopped out & the trade reverses & turns into a winner. In 3 out of 5 losing trades, if I let them run they would have been winners. I guess thats swing or position trading. Being a newbie I grab whatever profit I can[ min $100]. It takes time to develope confidence that a pullback is not a reversal.
 
Please advise how you use stops & time frames. Lets say I use a 3 min. chart. What amount of points do I use to place a stop. I studied with a guy that counted back 20 candles & used the longest ones range [subtracting open from close] & using that figure added to opening entry. Seems to leave a lot of money if your stopped out.
 
Quote from hollanders:

It takes time to develope confidence that a pullback is not a reversal.
More...

Interesting comment, because if your reason for putting on the trade is still valid, then a pullback is likely just that, the exhalation in the respiration that naturally accompanies a trend. I watched an on-line demo of Oliver Velez trading live and he was adding to a long position all the way down on a pullback, then taking profits as it moved back in the direction of the overall trend. It's an interesting approach, which I use myself on shorts, but have never done on longs.
 
This may be a stupid question but can someone please explain how to determine volitility stops. For example if I'm trading ES off of a 5 min chart, would I simply apply ATR to the chart and have the stop a function of the last ATR reading?
 
For me, my stop is simply a function of what I believe the market "should" be doing at the moment based on my observation.

If I get in and the trade goes against me more than a few ticks I know that my analysis was WRONG (and this happens all the time), so I simply exit (or should exit).
 
Quote from IronFist:

... (almost) picking tops or bottoms?

Every time I use "tight stops" I get stopped out regardless of if I had the right direction or not.

I'm defining "tight stops" to be 3.25 points on the NQ (13 ticks).
More...

Simple answer is place your target to where you would normally put your stop and collect 3.25pts on every trade.

Nice to see you are trading real money now.

Cheers
 
Quote from IndexSwing:

This may be a stupid question but can someone please explain how to determine volitility stops. For example if I'm trading ES off of a 5 min chart, would I simply apply ATR to the chart and have the stop a function of the last ATR reading?
More...

I would use a MA of the ATR...for example pick a 10 or 20 period (whatever you want) MA of the ATR. Right now, a 5min chart in the ES 10 period MA of ATR is about 7 points. This is where u need to determine based on your system to do use 1/2 ATR or 1ATR for stop.
 
personally my stops are 5-7 ticks. if i get in a position its because the ticks are going in my favor.. if i see the micro trend start going in the other direction. i get the hell out. i loosin my stops only if i caught a nice break and im already positive and am trying to ride out one of those nice trends.
 
Lets take this example in the chart for instance. Todays 5 min chart at the end of the day for the ES.

U see the bearish engulfing bar. that tells me the odds are in my favor that we are going to head down. Not really sure what the odds were, but in this example, I'm going to say 70% it was going down based upon that setup.

I took a short @78 almost right after the bearish 5 min bar closed. Am I sure its going to go right down ? No, but I know its more than likely it won't make it 3/4 of the way up the previous 5 min bar so I go short, w/ a 4 point stop.

price chopped around for 5 mins before absolutely tanking. If any of u knew that was going to retest 980 for 5 mins before tanking, I'd love to here it.

But with 4-8 tick stops, u'd have been stopped out, and kicking yourself that u missed this move.

Thats my 2 cents.


EDIT: I forgot to edit out my screen shot of the second moniter and the charts. Just look at the 5 min chart, sorry
 

Attachments

You must log in or register to reply here.
Back
Top