Stop Losses are killing me

[VEGASDESERT]

This is where I got stopped out yesterday in the last hour in S&P. Was looking for a pullback, fading of the resistance, but all of the sudden big volume buying came in and stopped me out, not even a small pullback happened. Not very experienced, is that a decent trade that just got stopped out? Or was something wrong with the trade? To me it seemed like a prime trade that I thought highly likely would succeed. That got me to thinking maybe I need to focus also more on momentum, 1 minute charts, things like that.

mark the chart with your entry and exit.

 

[Turveyd]

So Shorted, Uptrend into the close and it broke out?? I see fast move elsewhere, could of been news, thems the breaks. That's why you have a SL to cap your losses.


Here is the 1 Min chart, if you'd of gotton lucky enough to be long, low my range when it popped then nice profit.

But 1 Min also drives you crazy, I've made 10+ M1 trades today thinking up $200 and damn break even

 

[Sequoia1321]

Resistance was at about 3080. Shorted about 3078, SL about 3085. I was concerned that it was last hour of trading so I reduced my position size a little. Maybe that was part of the problem, too volatile of a time for that strategy. But at the same time, I was very high volume on that move compared to the 1st hour of trading, so I guess it was an unusual event.

 

[Turveyd]

Resistance was at about 3080. Shorted about 3078, SL about 3085.

You shorted an uptrend, it just plays with your head because it reversed the spike and sold into the close and got near, but went higher later.

Imagine, without a SL and it kept going 20pts, only lost 7pts, shake it off and try to join the trend, not that that doesn't reverse and be a pain ofcourse.

 

[trdes]

The FED and/or big players or whatever you want to call it are heavily involved and moving around a lot of money. It's absolutely nothing for them to move ES 5-9 points to clear out stops on either side.

You just picked an extremely difficult trade with the deck stacked against you. Shorting EOD in environments like this is particularly difficult. It's more about supply and time issues, doesn't take much for pops like that to happen EOD. If people are still short and it starts moving up they will cover, if nothing else for not wanting to hold overnight / margin requirements.

 

[Sequoia1321]

The FED and/or big players or whatever you want to call it are heavily involved and moving around a lot of money. It's absolutely nothing for them to move ES 5-9 points to clear out stops on either side.

You just picked an extremely difficult trade with the deck stacked against you. Shorting EOD in environments like this is particularly difficult. It's more about supply and time issues, doesn't take much for pops like that to happen EOD. If people are still short and it starts moving up they will cover, if nothing else for not wanting to hold overnight / margin requirements.

That makes sense.

 

[bone]

You shorted an uptrend

Yep.

 

[Sequoia1321]

The alternative to using SLs is to have a small enough position that losing 100% doesn't materially impact your capital (if long, if short it's not really viable without hedging or a 100% stop on something like an index unlikely to ever gap more than that). In that case, you will stay in the market whenever your signal/bias tells you to without being worried about stopping out. With that scheme, it may be necessary to hold more than one asset to have any sort of meaningful return, which in turn means return correlations need to be considered as simultaneous drawdowns add together. Of course, this is not something "new" (in fact portfolio optimization is a very old and well studied topic) but it can be helpful to consider there is more than stoplosses w.r.t. to risk management.

How can hedging help you not have a stop loss?

 

[Snuskpelle]

How can hedging help you not have a stop loss?

My (completely shallow) understanding is, with options, you can buy a put to protect you against price drops above a certain magnitude, or similarly buy a call to cap loss on a short position. Being long options don't get you stopped out (margin issues aside). Of course, buying this insurance costs money so it might make a strategy unprofitable when trying to hedge it, but if that's the case there may still be a hidden tail risk in the unhedged strategy (typically, a gap blowing past your stop) you're not accounting for...

 

[trdes]

How can hedging help you not have a stop loss?

There's the standard buying options for protection.

The other way I've seen it done is to trade like 1 NQ long 8 micro mini's short and you can add/remove the micro mini's as your chart progresses / signals come in. You could also use equities to do an even smaller version of it.

I am sure some people will say "why not just be net long 2 micro minis in the markets than" which is somewhat of a valid point pertaining to some people / styles of trading, but there is an art / skill to hedging that some people can do, I've seen it done like that effectively where you keep squeezing in your long and your short, sometimes you can even get both sides profitable.

Don't personally trade like that though.