Stop Losses are killing me

[virtusa]

This is a great day for you. This is a positive ! You’ve had to endure some negativity but hopefully you’ve checked yourself and stopped and re-evaluated.

What have you learned?

1. Successful trading systems require a tremendous amount of research, background preparation, and paper testing.

2. Position management makes or breaks traders. The great fallacy that I see are traders that spend 99% of their efforts on trade entry and treat trade management as an afterthought.

There are two big lies in trading:

1. That there is a holy grail, and

2. That optimal trade entry negates the need for position management.

The only “sure” things in trading are illegal.

I don’t agree. Where you enter and where you exit makes or breaks traders. Position management is only a tool to control/limit the risk. Whether you make a profit or a loss depends on the difference between the entry price and the exit price. Position management has no impact on that. The size you trade does never affect the profit per contract/share.

The fact that position management exists, proofs the importance of a good entry. If the entry would be perfect you wouldn’t need position management as you would never make a loss. Reality however, is that always having perfect entries is impossible. And to fix that problem you need position management.

Example:

Buy ABC at $10. Sell at $20. Profit is $10. No matter what the position management is, it will always be $10.

Buy ABC at $10. Sell at $5. Loss is $5. No matter what the position management is, it will always be $5.

So the entry and the exit define the result of the trade. Not the position management.
Position management can only influence the impact of the trade on your account. It can define the size, leverage, stops…

It is very important to focus on very good entries. It is not a fallacy at all.
Theoretically the best entry is: go long at the lowest point, or go short at the highest point.
So if you find the best entry you also have the best exit. As the exit is the entry for the trade in the other direction.

 

[tomas262]

I have never ever used a stop-loss when doing spreads ... I have never ever traded without a stop-loss when daytrading / scalping. You need to think about each part of your trading deeply before actually using it

 

[KCalhoun]

I don’t agree. Where you enter and where you exit makes or breaks traders. Position management is only a tool to control/limit the risk. Whether you make a profit or a loss depends on the difference between the entry price and the exit price. Position management has no impact on that. The size you trade does never affect the profit per contract/share.

The fact that position management exists, proofs the importance of a good entry. If the entry would be perfect you wouldn’t need position management as you would never make a loss. Reality however, is that always having perfect entries is impossible. And to fix that problem you need position management.

Example:

Buy ABC at $10. Sell at $20. Profit is $10. No matter what the position management is, it will always be $10.

Buy ABC at $10. Sell at $5. Loss is $5. No matter what the position management is, it will always be $5.

So the entry and the exit define the result of the trade. Not the position management.
Position management can only influence the impact of the trade on your account. It can define the size, leverage, stops…

It is very important to focus on very good entries. It is not a fallacy at all.
Theoretically the best entry is: go long at the lowest point, or go short at the highest point.
So if you find the best entry you also have the best exit. As the exit is the entry for the trade in the other direction.

For many years I thought the same, that entries were critical. They are, but exits and trade management are significantly more important.

Look at these 2 trades I did Thursday. The entry pattern on the first was better than the second. Yet the first stopped out and the second was a winner. It's the exits that made the difference.

I had 2 trades in TZA, a small stop (buy 20.7 sell20.2) and a big win (buy20.41 sell21.4).

 

[virtusa]

For many years I thought the same, that entries were critical. They are, but exits and trade management are significantly more important.

Look at these 2 trades I did Thursday. The entry pattern on the first was better than the second. Yet the first stopped out and the second was a winner. It's the exits that made the difference.

I had 2 trades in TZA, a small stop (buy 20.7 sell20.2) and a big win (buy20.41 sell21.4).

View attachment 232321

I compare two hypothetical accounts to show how it works:

• · One with GOOD ENTRYS
• · One with BAD ENTRYS

I take the same account size for both. $12,000.

The GOOD ENTRY has more winning trades and higher profits than the BAD ENTRY. Logical as the GOOD ENTRY has better entries.

The GOOD ENTRY has less losing trades and smaller losses than the BAD ENTRY. Logical as the GOOD ENTRY has better entries.

I take as max loss per trade 5% of the account in both cases. So the risk in $ is equal for both. In the ES it means 12 points loss, which equals 5% loss. ($12,000 * 0.05 /50)

Because the GOOD ENTRY has better entries he can use a smaller stop. 3 points ES instead of 6 points ES. So the GOOD ENTRY can trade 4 contracts with a 3 points stop, while the BAD ENTRY can only trade 2 contracts with a 6 points stop. The risk and account size in $ is equal for both scenario’s.

The final result is that the GOOD ENTRY makes a profit of 23.25 points or $1,162.50. The BAD ENTRY only makes 6.18 points or $309. The GOOD ENTRY made 3.75 times more profit with the same account and the same risk.

It is very clear that the ENTRY is very important and determines the profit. As the exit is the entry for the next trade, entry and exit are both the most important factor. But the exit can be reduced to the entry of the next trade, so finally the entry is the most important.

And of course you need a good trade management. But when the entries are good the importance of the trade management loses importance. The worse the trade the more important the trade management. Again a reason to try to have very good entries.

 

[Trader Curt]

How can I acquire my professionally trained judgement

Just from years of practice, what else? I also do not trade anything I don't believe in, I've been trading the same market (only 1 market) for the last 3 years and have done exceptionally well.

When you see people trading markets that they don't have a clue what it's about because they want to become rich and their chart indicator is telling them that it's a good buy, those are the people who get hammered.

I cannot say anything else, or else I will have to charge you for my services. But heed what I have told you and think about things, start putting the pieces together of why the market moves the way it does. Don't be one of these traders that think "Oh my indicator is telling me to buy right now, so I should buy immediately!" Factor in everything including the news and make judgements off of everything. Listen to everything I have told you and you will succeed.

Good luck my young padawan...

 

[notagain]

MNQ 30 pt target and 30 pt stop, 1/6th of daily ATR for trending market.
46 tick range charts, 100 weighted MA
Need a strategy to fit with each market condition.
Trendlines and channels work with RSI indicator.

 

[KCalhoun]

Good discussion.... in working to help many traders over 20 years I've found:

• The best traders use tightest stops
• Great traders obsess over rockstar entries And smart trade management
• Bad traders are clueless about managing risk and where to take profits

 

[Thor]

Entry is 90% of the trade.
Don't even waste a minute on anything else.

 

[deaddog]

I compare two hypothetical accounts to show how it works:

• · One with GOOD ENTRYS
• · One with BAD ENTRYS

"In theory, theory and practice are the same. In practice, they are not." Yogi Berra

If I follow my plan all trades have a good entry. Some of them have a bad outcome!

 

[deaddog]

If I follow my plan all trades have a good entry. Some of them have a bad outcome!

In theory all trades work as planned. My plan calls for a loss or a gain.