Stops

"The leverage is phenomenal. But you HAVE to use tight stops and tight risk control on an intraday basis, or they can rip yer head off. Personally, I keep 10k in my futurea ccount. That is more than enough to generate a nice income trading futures (2-5 cars is a comfortable contract size),and one can filter off profits every week into more conventional investments and retain capital."





I am glad someone else on here gets it besides me.
 
A friend of mine told me to forget about money! Know your price action!

Entry, exits and stops......they are all tied into PA.

Volume works, but volume is delayed and works in different ways depending on Timeframe, Direction and obviously amount.

STOPS?

Stops should not be just some kind of after thought, they are as important as the initial trade set up on any Timeframe. Stops are the underlying point of your experience and knowledge of the markets. To differentiate a stop in it's importance is to show your naivity of the markets and PA. In theory, stops should not be needed. We are all human.
 
Quote from tortoise:

Sorry, I didn't see it. Yes, I consider myself a "noob" es trader. I have been trading the es consistently for about six months. As I mentioned in the opening post, I have experimented with stops of all kinds, so it's difficult for me to categorize "which" stop I've used. There's nothing exceptional about my trading style -- support & resistance, time & sales.

My experience with the es, such as it is, leaves me scratching my head a bit over the naysaying. But, I'll be the first to admit, six months is nothing, and I remain, daily, watchful for the moment when Father Statistics decides to bite me on the ass.
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So since you have used so many diffferent stops, how can you baseline that they do not work ? Part of having a trading plan is having fixed rules that you do not break. If you do not have a rule about stops in it then your plan is incomplete. It does not have to be a point rule, but a point rules seems to work better for me in index futures. Like I said before, try trading real money without a stop like you want and if it works for you then go for it because everyone's advice to you is worthless until you experiment with it and either learn the hard way or it works for you and you make it big.
 
"The fact is, however, that most of my losses came because I pulled the plug before my stop was hit, and in most of those cases, had I not pulled the plug, the stop would have been hit anyway, and THOSE cases were, more often than not, sure-fire big-time losers that never would have recovered -- or would have recovered only after entry signals in the other direction, in which case I would have closed the trade anyway.

Now, given this information, do you still believe I am suggesting that I cannot handle the feeling of being wrong? "






I would say you need to work on your trading plan if you are exiting before your stop is hit and not giving you trade room to work.






"would agree if we were talking sugar, or some other rolling/trending vehicle. But the chop-socky es? My point is not that stops have protected me from my own inability to admit the errors of my ways, but that they have set me up as target practice, with everyone else, for the stop runs that do not obviate the underlying validity of the pre-existing signal. Implicit in this statement is the contention that I am able to distinguish between a adverse conditions that support the pre-existing signal, and those which invalidate it, with significantly better than even-odds -- a contention which, admittedly, has not been proven."




I would say you need to use a platform such as strategy runner that keeps stops on their servers and not at the cme.







"The market is always right"


One day you will get it and understand what it truly means.
 
Tortoise:

I've read this thread and your comments with interest. It seems that you and I have something in common. I use a "fail-safe" type of stop as well.

But first things first. Been a while since I mentioned my background here on Elite. I started trading the index futures at the very beginning back in the early 1980's. First with the Value Line futures (they were the first one), and later the S&P futures when they began. So I guess that gives me something between 20-25 years of trading experience in index futures. Today I almost exclusively trade the ES....definitely my favorite.

I trade with what I describe as a "fail-safe stop". In other words, it's the maximum I'm willing to lose on a trade. I used to have that set at 10 points as I described in some posts from a couple of years ago. Since then, I'd say the volatility of the ES has declined, and therefore, the 10 points is probably too big these days.

Now, before I go on, let me just say that what works for me, may not be right for someone else. I know there are alot of newer traders here, and so I would hate to be responsible for encouraging someone to trade in a manner that is not suitable. I had to find my own way, just as all of you will.

I use a wide stop because I want to give my trade room to develop. In other words, for a lot of the trades that I make, the fact that it moves a couple of points against me may be all part of the development of that trade. I view a couple of points as random noise.

That said, I always have a reason for making any particular trade. Once that reason is no longer there, I'm gone. Now here's something that I would pass along. I rarely make trades typically solely because of the price action of the ES along. For instance, if the ES happens to rally a few points, I'm probably not going to be buying it with a 2 point stop. I'm much more apt to be buying when the ES looks like crap, but at a time when I believe the trend is higher. So that in that process I freely admit that it might move against me a couple of points, but as the trade develops, and starts to work in my direction, I don't want to lose the position, because I may believe it is going to trade much higher. 2 points in the scheme of that trade is just "breathing" in my mind.

Now, in that process if I happen to notice something occur that should not be occuring (let's say an important stock or sector violates an important area on the daily chart for instance), I'm going to sell my ES, regardless of where it is. So again, when something changes I change my viewpoint.

I'm not generally what I would call a "scalper". Rather I'll hold a position as long as I think it will work for me. That means I'm willing to hold overnight provided things look right to me. During the day, I'll add to a position that's working, or sell off a part if it meet my objectives. In other words, I'm constantly adjusting my position through buying and selling.

A few of you have noted that the ES is "choppy". And of course, that is true much of the time. The way I see "choppy" is that it generates opportunity. To me this is an advantage, not a disadvantage. But I'm not trailing a stop behind my position.

Typically, I'm going to be a buyer on weakness, a seller on strength. But understand too that if I'm buying to establish a new position, it's because I think the overall direction of the market is up.

One other thing: I don't leverage myself as much as some traders. The most leverage that I'm going to use might be $20-25K per contract. To me, at my age, I think being more leveraged would entail more risk than I choose, while still using the style of trading I use. And many times I don't use that much leverage. It all depends on my view of the market, and my confidence in that view. I will add too that I trade with a larger account, so that a 10 point loss for instance in the scheme of thing is not much for my account. But again, that isn't to say that I hold waiting for my stop to get triggered when I'm wrong. I get out when I think something as changed about my assumptions, at whatever level that may be. I can't remember the last time I took a 10 point loss.

OldTrader
 
Quote from volente_00:

I would say you need to work on your trading plan if you are exiting before your stop is hit and not giving you trade room to work.

Spot on. In fact, that's just what this is about - I am refining a trading plan (a work in progress) that developed over a period of about two years, on the heels of six years live position trading with index options spreads and about ten years active stock trading. I have found that intraday trading on the ES runs by a different set of "rules" -- metaphorically -- and this has been an adjustment: My previous experience is of little relevance here. On the ES, I've used real money over the past six months after six months of on-and-off simul-trading. I'm not displeased with the analytical foundation of my approach, but trade management is my Achilles heel, no question about it.



I would say you need to use a platform such as strategy runner that keeps stops on their servers and not at the cme.

I'm not sure I understand what you mean. I'm not contending that my 2-contract stop order is a tempting target, in and of itself. I'm saying that the nature of the ES involves, on a granular level. a fair amount Brownian motion, that does not impact the bigger picture. I'm looking to weed out the smaller for the larger. I don't see how my choice of trading platform affects this.



One day you will get it and understand what it truly means.

Oy.
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Quote from OldTrader:

Tortoise:

I've read this thread and your comments with interest. It seems that you and I have something in common. I use a "fail-safe" type of stop as well.

But first things first. Been a while since I mentioned my background here on Elite. I started trading the index futures at the very beginning back in the early 1980's. First with the Value Line futures (they were the first one), and later the S&P futures when they began. So I guess that gives me something between 20-25 years of trading experience in index futures. Today I almost exclusively trade the ES....definitely my favorite.

I trade with what I describe as a "fail-safe stop". In other words, it's the maximum I'm willing to lose on a trade. I used to have that set at 10 points as I described in some posts from a couple of years ago. Since then, I'd say the volatility of the ES has declined, and therefore, the 10 points is probably too big these days.

Now, before I go on, let me just say that what works for me, may not be right for someone else. I know there are alot of newer traders here, and so I would hate to be responsible for encouraging someone to trade in a manner that is not suitable. I had to find my own way, just as all of you will.

I use a wide stop because I want to give my trade room to develop. In other words, for a lot of the trades that I make, the fact that it moves a couple of points against me may be all part of the development of that trade. I view a couple of points as random noise.

That said, I always have a reason for making any particular trade. Once that reason is no longer there, I'm gone. Now here's something that I would pass along. I rarely make trades typically solely because of the price action of the ES along. For instance, if the ES happens to rally a few points, I'm probably not going to be buying it with a 2 point stop. I'm much more apt to be buying when the ES looks like crap, but at a time when I believe the trend is higher. So that in that process I freely admit that it might move against me a couple of points, but as the trade develops, and starts to work in my direction, I don't want to lose the position, because I may believe it is going to trade much higher. 2 points in the scheme of that trade is just "breathing" in my mind.

Now, in that process if I happen to notice something occur that should not be occuring (let's say an important stock or sector violates an important area on the daily chart for instance), I'm going to sell my ES, regardless of where it is. So again, when something changes I change my viewpoint.

I'm not generally what I would call a "scalper". Rather I'll hold a position as long as I think it will work for me. That means I'm willing to hold overnight provided things look right to me. During the day, I'll add to a position that's working, or sell off a part if it meet my objectives. In other words, I'm constantly adjusting my position through buying and selling.

A few of you have noted that the ES is "choppy". And of course, that is true much of the time. The way I see "choppy" is that it generates opportunity. To me this is an advantage, not a disadvantage. But I'm not trailing a stop behind my position.

Typically, I'm going to be a buyer on weakness, a seller on strength. But understand too that if I'm buying to establish a new position, it's because I think the overall direction of the market is up.

One other thing: I don't leverage myself as much as some traders. The most leverage that I'm going to use might be $20-25K per contract. To me, at my age, I think being more leveraged would entail more risk than I choose, while still using the style of trading I use. And many times I don't use that much leverage. It all depends on my view of the market, and my confidence in that view. I will add too that I trade with a larger account, so that a 10 point loss for instance in the scheme of thing is not much for my account. But again, that isn't to say that I hold waiting for my stop to get triggered when I'm wrong. I get out when I think something as changed about my assumptions, at whatever level that may be. I can't remember the last time I took a 10 point loss.

OldTrader
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Great stuff OldTrader. Thanks for taking the time to put these thoughts down. I agree with everything you wrote.

A lot of food for thought here from everyone: Thanks to all. I have more thinking to do -- indeed, my thinking as evolved considerably since I started this thread, in no small part because of this exercise. For now, however, I think I'll stop talking, and go off and do a little more quiet thinking.

One last point: I find it interesting -- telling, perhaps? -- that for all the verbage my post provoked, no one thought to ask me the most obvious question of all, the question one must ask (I would think) before one can offer constructive criticism or advice on this subject.

Any thoughts, from anyone, as to what that question might be?

Tortoise signing off.
 
my rule is that i never widen a stop, and i always set a stop @ entry. i have several setups i use, but the widest stop i ever use on a YM trade is 14 pts. 90% of my trades use a 10 pt stop. on a few setups i use only a 7 pt stop. for reference, a 8 pt YM stop is roughly equivalent to a 1 pt ES stop.

that works for me.

i will on occasion, exit before my stop is hit. but that is only based again on very specific rules. but i never WIDEN a stop. ever. period. the next trade is only a commission away. i don't try to salvage a bad trade.

as for targets, i am a bit more flexible. for example, at one of my setups if trading 3 cars, I scale out at 7 pt target, 11 pt target, then i have specific rules as to when i scale out the last.

i never add to a winning position on a futures trade. ever

and i never double down. ever

those are a few of the things that have worked for me, but of course they are consistent with my setups, my trading style, and my risk tolerance.

i'll say it again. i don;t think there is any TRADING VEHICLE (futures aren't investments for me, with the exception of some gold futures i've held for 2 yrs) that offers a better potential for return on capital.
 
Quote from coolweb:

what risktaker said

is 100% on the money.


Trend, Understand that and you will understand.


Futures is not a trading vehicle, it is close to a scalpnig vehicle.
If you try to trade something that will flip back on you 5 minutes later, that wouldn't work well would it? How big of a stop do you need? Does it work with the R/R if you use a bigger stop?


Only very experienced traders can PROFIT from futures,

You can use it as a learning tool, but do not expect to PROFIT LARGE From it unless youa re very experneiced.


Almost 95% of the rich people in the financial world made their money from STOCKS.

Not from futures. They use futures to HEDGE.

Why? Money is in the sitting.


If some people can make ---consistent---- money from the futures, its either because they are SCALPING or they just have exceptional EDGE/Stats/skills.
I do not. And so do most other traders as well.
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lol

this is hilarious!!
 
What would happen if you used the parameters for your stops as your targets....put that together with your catastrophic mental stop.

just curious...


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?
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