Stops

[FredBloggs]

Quote from tortoise:

I'm thinking, as of Monday morning, that I will no longer use them.

Permit me to amend that. As of Monday morning, I will only place "catastrophic" stops 10 points from my entry, in the event I lose all contact with my broker, etc.

Reason: After an analysis of the trades I have made on the ES over the past six months I have found, in nearly every stopped-out case, that my losing position would have been profitable, on a same-day basis, but for the fact that it had been taken out by a stop. On those rare occassions when I was simply flat-silly-on- the-wrong-side-of-everything, I would have exited that trade anyway, usually within a tick or two of the stop. Only in one case did the market move so quickly against me that the stop got me out at a better price than I would have reasonably gotten myself out of in the first place (in that case, a possible two points savings). But this "savings" was more than compensated for by the death-by-one-thousand cuts effect of small losses incurred by the use of stops.

I mean, all kinds of stops. Tight stops (4 ticks). Loose stops (12 ticks). Trailing stops (that turn big winners into small winners). ATR-based stops. Stops strategically place around support/resistance. In short, any kind of stop that's bait for a stop run. In other words, any kind of stop.

I realize that this flies in the face of everything I've been told and have read. So, clearly, I'm an idiot. But the facts don't lie and, after an examination of the facts, this is the only conclusion I can reach.

Thoughts, anyone?

good for you.

you are thinking for your self and doing your own work and formulating your own ideas rather than believing all the stuff out there that the 80-90% take as gospel in their fruitless mission to get rich quick with no work.

id go for it. paper trade it first until you are happy you have reached a proper conclusion.

 

[tortoise]

Quote from volente_00:

As far as using no stops, I tried that when I first started trading YM and is was not very pretty due to emotional decisions which usually turn out to be bad ones. People do not like stops because they think if they get stopped out it means they were wrong, but what those same people have yet to realize that in order to make money in trading you first have to learn how to lose gracefully, and that is what a stop does for you.


"On those rare occassions when I was simply flat-silly-on- the-wrong-side-of-everything, I would have exited that trade anyway, usually within a tick or two of the stop."



Why do you think you would have exited ?

I think on these days you would have gotten the dear in the headlight look and did some serious damage to your account.

Wise words, borne of experience no doubt. I have nothing but respect for them.

My problem with, say, a two-point stop, or a six-tick stop, or stop based on this, or the other, is that (as I see it anyway) a stop placed with the expectation that it will "permit the trade to work" is placed with the predictive assumption that markets will permit the trade to work under the ground rules of the stop. Now I just reread this last sentance and I'm thinking "What the hell am I talking about?" I mean, one could say, "Ok, so you're not saying markets are predictable, so then on what basis are you placing a trade at all?" But here's the thing...

Markets exist to facilitate trade and to frustrate traders, right? Consequently, one seeks to differentiate him or herself from the majority (i.e., risktaker's 95%), correct?

Ok, well, here's how I get from a-to-b: Virtually all traders use hard stops. Very few traders employ my entry/exit methodology -- certainly not exactly as I do, since it is my own, and is, therefore, unique to me and my own peculiar way of thinking as is my thumbprint and my eyeglass prescription. My entry/exit methodology is consistently profitable, my stops are not. Why would I continue to use that which is commonplace and unprofitable, and which appears to be a detriment to the performance of what is unique and profitable?

Please understand, this is not meant to be argumentative. I'm not entirely sold on this logic myself. It's just something that's come to me -- like all my very best, and very worst, ideas.

Now, as to the "dear in the headlights" syndrome. I hear you, and I respect that observation as well. Fortunately, icewater runs through my veins.

 

[FredBloggs]

Quote from risktaker:

The trouble isn't so much stops or no stops. It's more like the majority of index futures are a zero-sum game and a guaranteed loss for 95% of jokers who trade them. Why bother? Would you play some other kind of game where you knew the chances of you losing would be 95%? I doubt it.

Find something else to trade where stops *can* be effective.

Too many undercapitalized "traders" keep trying to milk the E-mini gambling machine and in most cases get their ass handed to them.

with all due respect, i think this shows a complete lack of understanding about the very basics of trading.

firstly, despite what you may have read, futures are NOT a zero sum game.

secondly, reasons for losing are rarely due to trading some overcrowded bird house/'wrong instrument' (what ever that may mean). in fact, they can never be because of this.

the reasons are inward, not outward.

peace.

 

[madmunny]

"My entry/exit methodology is consistently profitable, my stops are not."


what the hell kind of statement is that.....lol....i think your ideas on not doing the norm or what everyone else is doing is great and that is how the rich get rish.....but saying your stops are not profitable so i shouldnt use them is kind of silly dont ya think....it wasnt your stop that was not profitable...it was the trade you entered before you needed that stop that was unprofitable.....successful traders of anything know....keep your losses tight and let your winners run...........and nowwhere does let your losers run fit into any form of profitable equation...and by pulling your stops or convincing yourself your stops are non-profitable is account suicide.

 

[tortoise]

Quote from madmunny:

instead of answer to your question of wether or not to use stops i have a differetn question for you.......how do you decide when to enter a trade...i understand that you place stops at your pain thresh-hold levels so how and when you decide to use stops is obvious.......but take the S&P e-minis for example, with no leading indicators what do you base your entry points on?

And Tortoise as for your comment that if you hadnt used stops the vast majority of your losing trades would have been winners by the end of the day if your stopout haddnt been triggered.....this is trader suicide because many times you would most probably be 10 ticks offside holding this loser hoping it comes back to take a 1 tick winner, this strategy just is not viable for successful longterm trading....and also your believe that if those times when you are dead wrong from the start and your loser is never going to be a winner and that you would punch out for a reasonable loss soon after your stop out was triggered is most probably you lieing to yourself...the truth is youd be punching out for at least double your loss of where your stop had been if not triple..............you might think youd punch out of that loser but your previous statement that all of your losing trades would turn into winners by then end of the day would cause you to hold all your losers to the point where a monkey would be able to realize that your trade is never going to be a winner.

So please dont stop using your stops cause they are probably the only thing stopping you from losing massive amounts of money instead of the tiny bit that you seem to be losing already.

These are just my humble opinions.....and really...what the hell do i know.....i realized a long time ago im one of those suckers who cant make a dime trading futures so i stick to stocks where i can make a really good livin!........but it cost me many thousands to realize the futures are smarter than me!

madmummy, sir (ma'am?) -- You are the voice inside my head!

The only reason I would consider this path is because I am under the impression (illusion? delusion?) that I will not be holding a position that has moved nine points against me, as, by that time, I will have received a clear entry signal in the opposite direction, which would tell me to close the trade and -- assuming I'm not too disgusted with myself and, therefore, uncertain whether emotions were getting the better of me, in which case I'd put the trading mouse away -- take the opposite position.

Also, a game I play that helps me keep perspective. I view all my trades as one giant position that I scale in and out of. Even though I'm flat by the end of the day, it's all part of one grand continuum. Consequently, I do not get overly (well, overly overly) wrapped up with any one trade.

That's what I'm telling myself, anyway. Ok, then, see you in the poorhouse!

 

[tortoise]

Quote from madmunny:

"My entry/exit methodology is consistently profitable, my stops are not."


what the hell kind of statement is that.....lol....i think your ideas on not doing the norm or what everyone else is doing is great and that is how the rich get rish.....but saying your stops are not profitable so i shouldnt use them is kind of silly dont ya think....it wasnt your stop that was not profitable...it was the trade you entered before you needed that stop that was unprofitable.....successful traders of anything know....keep your losses tight and let your winners run...........and nowwhere does let your losers run fit into any form of profitable equation...and by pulling your stops or convincing yourself your stops are non-profitable is account suicide.

You're right, the statement is not just sillly, it's asinine. Please understand that when I wrote it I had a two-year-old on my lap.

Still...

 

[Bitstream]

Quote from volente_00:

My goal is 2 pts using a 2 pt stop.

The only difference between futures and stocks is the amount of discipline you must have. Unless you use huge leverage from a prop firm in stocks or have access to at least 100k and use 4x leverage retail intraday you will not trade for living in stocks. Say you can average 20% on stocks, how much capital will you need to make 6 figures ? Take 100 noobs trying to trade for a living with 10k in stocks and after a year you will have 0 left trading. Take 100 noobs trying to trade ES with 10k and I bet there will be between 1-5 surviving after a year.

I tell u only that I am sure NOBODY here with little experience is trading futs for a living and maybe no more than 2 or 5 experience traders on this board are doing that: if someone claims he can live off futs trading gains should be able to back it; extraordinary claims require extraordinary proof. Newbs that start out shouldn't be even thinking about making a living but should only aim at surviving the first 1-2 yrs of onslaught and stocks are the correct vehicle to learn without blowing up every 2-3months. The leverage therefore shouldn't be a problem at all and once an edge is found it is only a question of compounding.

Also doubt your survival stats are correct.

 

[tortoise]

Quote from Bitstream:

and what are u aiming for with 2 handles stp, 1 full handle?
futs are the worse instrument to trade, I cant get me head around noobers that decide they are the best vehicle: this is a pathetic excuse to avoid the painful job of sorting tickers and studying their trading history and don't give me the crap about undercapitalized accounts...on stocks even with 100shares and three trades a week u have a better chance to be profitable in the long run, without suffering devastating drawdowns. hard to take in the advice given previously? if u listen u might avoid going boom consecutive times before realizing there's much better stuff out there.

Bitstream -- I'm a big fan of your posts: I've lurked on ET for a long time, and have benefited from the wisdom you and others have shared with the rest of us. So, thank you for that. Really.

But I'm puzzled by the bitterness I perceive, not only in this message, but in risktaker's first responses to my query -- and of course, the vitriol spiked throughout ET. Earlier in this thread, someone took me to task -- legitimately -- for my snotty response to risktaker's snottiness, but the subtext of my response does, I think, bear some consideration in the context of trading -- of how we assess the evidence, and the actions we take as a result.

And so, I rephrase my response to risktaker -- and, please understand, I mean this without animus, or even annoyance. Just puzzlement.

You say futures are the worst instrument to trade. I disagree, although that's a conversation worth having. You say I have a hard time taking advice from others. On what basis do you make this statement? You suggest that I don't listen well. Again, any corroborating evidence here? Finally, although you don't directly accuse me of being "undercapitalized," you do suggest (by your use of the pronoun "u") that I have gone, or am about to go, "boom" not once, but a number of times.

Now, you'll just need to take my word on this: None of these apparent assumptions on your part have any basis in fact.

Here's my existential question: How many traders out there jump to these sorts of unfounded conclusions about the markets? Is this the reason why there are so many losers?

 

[volente_00]

Quote from tortoise:

Wise words, borne of experience no doubt. I have nothing but respect for them.

My problem with, say, a two-point stop, or a six-tick stop, or stop based on this, or the other, is that (as I see it anyway) a stop placed with the expectation that it will "permit the trade to work" is placed with the predictive assumption that markets will permit the trade to work under the ground rules of the stop. Now I just reread this last sentance and I'm thinking "What the hell am I talking about?" I mean, one could say, "Ok, so you're not saying markets are predictable, so then on what basis are you placing a trade at all?" But here's the thing...

Markets exist to facilitate trade and to frustrate traders, right? Consequently, one seeks to differentiate him or herself from the majority (i.e., risktaker's 95%), correct?

Ok, well, here's how I get from a-to-b: Virtually all traders use hard stops. Very few traders employ my entry/exit methodology -- certainly not exactly as I do, since it is my own, and is, therefore, unique to me and my own peculiar way of thinking as is my thumbprint and my eyeglass prescription. My entry/exit methodology is consistently profitable, my stops are not. Why would I continue to use that which is commonplace and unprofitable, and which appears to be a detriment to the performance of what is unique and profitable?

Please understand, this is not meant to be argumentative. I'm not entirely sold on this logic myself. It's just something that's come to me -- like all my very best, and very worst, ideas.

Now, as to the "dear in the headlights" syndrome. I hear you, and I respect that observation as well. Fortunately, icewater runs through my veins.

All a STOP does is tell you when you were WRONG with zero emotional bias. The market is always right. By not using any stop at all you are basically admitting that you can not handle the feeling of being wrong. This tells me you need to work on the emotional aspect of trading before tinkering with other factors. I suggest you read this book.

http://search.barnesandnoble.com/booksearch/isbnInquiry.asp?z=y&isbn=0132157578&itm=1




As far as doing it, try it and see how it works for you. But please at least enter some kind such as 10 ticks away or so, because although I was not trading ES at the time, I have heard stories of those who were when it jumped 30+ points in under a minute when the surprise rate hikes went on.




"Virtually all traders use hard stops. Very few traders employ my entry/exit methodology -- certainly not exactly as I do, since it is my own, and is, therefore, unique to me and my own peculiar way of thinking as is my thumbprint and my eyeglass prescription. "



Could it be that those who do not use hard stops are out of capital to trade ?

 

[volente_00]

Quote from madmunny:

"My entry/exit methodology is consistently profitable, my stops are not."


what the hell kind of statement is that.....lol....i think your ideas on not doing the norm or what everyone else is doing is great and that is how the rich get rish.....but saying your stops are not profitable so i shouldnt use them is kind of silly dont ya think....it wasnt your stop that was not profitable...it was the trade you entered before you needed that stop that was unprofitable.....successful traders of anything know....keep your losses tight and let your winners run...........and nowwhere does let your losers run fit into any form of profitable equation...and by pulling your stops or convincing yourself your stops are non-profitable is account suicide.

Tortoise u never mentioned how much of a stop you are using ?


Also it could be that you are just making poor entries.