http://www.trading-naked.com/library/jesse_livermore.pdf
Read pages 100-102, Livermore provides a good commentary on the value of stop losses.
Read pages 100-102, Livermore provides a good commentary on the value of stop losses.
Stop Losses are for Losers
- Thread starter chewbacca
- Start date
if u trade the trend then the trend has a built in trail stop.......so don't exit because of some arbitrage x tick loss or x amount loss........exit because the trend has reversed and you want to enter the new trend or you want to sideline and wait for an opportunity to enter the new trend on a pullback.....this is my last post on the thread.
The trend isn't that obvious. You're half right and half wrong.
You need stops depending upon how you're trading. If you want emotion in your game that's fine.
But the majority of people are happy with out it.
To each his own, but telling people they don't need stops is crazy.
Hi,
Can someone help me make heads or tails what this poster wrote?As Surf applauded it,I would assume he has some insight..
The trader takes individual positions of 1-2% of capital...not risk.I got that.Since its so small,hes willing to let it go to zero,as opposed to a hard stop.He then states going to zero is an acceptable loss,which would imply that he probably has no more than 10 -20 positions as I assume he wouldnt want to incur a drawdon in excess of 15-30%.
All fine and well,but if you are only investing 30% of youir capital at any one time,how the hell do you make a decent return on your capital???
If you are playing so small that you can afford to let it all go to zero,then I doubt one can make any money..Am I missing something???
BTW,this thread is right up there with Scaling is Inferior.
Can someone help me make heads or tails what this poster wrote?As Surf applauded it,I would assume he has some insight..
The trader takes individual positions of 1-2% of capital...not risk.I got that.Since its so small,hes willing to let it go to zero,as opposed to a hard stop.He then states going to zero is an acceptable loss,which would imply that he probably has no more than 10 -20 positions as I assume he wouldnt want to incur a drawdon in excess of 15-30%.
All fine and well,but if you are only investing 30% of youir capital at any one time,how the hell do you make a decent return on your capital???
If you are playing so small that you can afford to let it all go to zero,then I doubt one can make any money..Am I missing something???
BTW,this thread is right up there with Scaling is Inferior.
IMO proper distinction should be made between discussing stop-losses as hard orders sent to exchange which are automatically executed and limiting losses in general.
Because from prior discussion it is unclear if those who critique stops simply don't want to "show their hand before showdown" or advocate not using any risk limiting technique at all....
I mean, simply holding a losing stock to zero looks to be one of the dumbest things any trader can do.
Only holding a losing short to infinity is dumber.
Such a "technique" would make risk/reward incredibly bad, position sizes incredibly small, holding time incredibly long (without any need for it) and I doubt any serious money can be made this way at all.
From the other side, one can use no hard stops (and have say far OTM put bought cheaply just for the black swan case), but still limit risk, by exiting if confirmed trend change or other market signal takes place.
He/she may not use stops to simply not get noised out.
This second case is IMO absolutely reasonable strategy...
So, what is discussed here, first or second?
P. S. As for me, I always use hard stops and automatically out as soon as my predefined point of pattern failure is reached. Keeping risk/reward good is way more important than having less losing trades, because 80% winners with 1:1 r/r makes almost twice less money than 50% winners with 1:3 risk/reward...
But I'm just curious those who advocate no stops here are closer to first of my cases given or second...
Because from prior discussion it is unclear if those who critique stops simply don't want to "show their hand before showdown" or advocate not using any risk limiting technique at all....
I mean, simply holding a losing stock to zero looks to be one of the dumbest things any trader can do.
Only holding a losing short to infinity is dumber.
Such a "technique" would make risk/reward incredibly bad, position sizes incredibly small, holding time incredibly long (without any need for it) and I doubt any serious money can be made this way at all.
From the other side, one can use no hard stops (and have say far OTM put bought cheaply just for the black swan case), but still limit risk, by exiting if confirmed trend change or other market signal takes place.
He/she may not use stops to simply not get noised out.
This second case is IMO absolutely reasonable strategy...
So, what is discussed here, first or second?
P. S. As for me, I always use hard stops and automatically out as soon as my predefined point of pattern failure is reached. Keeping risk/reward good is way more important than having less losing trades, because 80% winners with 1:1 r/r makes almost twice less money than 50% winners with 1:3 risk/reward...
But I'm just curious those who advocate no stops here are closer to first of my cases given or second...
CFerret,
It seems it's more appropriate to continue our previous discussion here .
Now correct me if wrong, this is what you are saying:
A simple single, first crossing of a Support / Resistance line proves the failure of the same?
Please note, there are infinite number of shades of grey, let's stay as close to the B&W as possible. Hence just answer the question above because that is what a Stop Loss is! "...A simple single, first crossing of a Support / Resistance line..."
It seems it's more appropriate to continue our previous discussion here
.Now correct me if wrong, this is what you are saying:
A simple single, first crossing of a Support / Resistance line proves the failure of the same?
Please note, there are infinite number of shades of grey, let's stay as close to the B&W as possible. Hence just answer the question above because that is what a Stop Loss is! "...A simple single, first crossing of a Support / Resistance line..."
Quote from TradStSOX:
CFerret,
It seems it's more appropriate to continue our previous discussion here
Now correct me if wrong, this is what you are saying:
A simple single, first crossing of a Support / Resistance line proves the failure of the same?
Please note, there are infinite number of shades of grey, let's stay as close to the B&W as possible. Hence just answer the question above because that is what a Stop Loss is! "...A simple single, first crossing of a Support / Resistance line..."
Agree, this is better place to discuss risk management issues than journal.
Will try to be as clear as possible - in many cases YES, simple cross of S/R level by a certain amount is the failure of a pattern AT THAT TIME.
I try to not predict, but simply REACT to what happens NOW, not what I think would happen in future. When it happens, then I'll react accordingly on the next stage of PA development.
And I am always out if my plan assumes violation of S/R is the failure and I should be out. Or even reverse position in some cases.
If then it happens so that price goes back and it is a fakeout, nothing stops me from re-entering again if it looks like a valid setup.
I simply don't see more effective way to manage risk of outright positions.
Net long option positions is the other way than stop-loss orders, but they're not suitable for me as I am a short term player.
For other traders though, simple S/R violation may be not enough and they wait for stronger confirmation, like forming a new confirmed trend for example.