Technical stop loss placement

[Mr.Richter]

Hi folks,

I'm keen on getting some feedback. I've just made this trade here, and just a while ago, my stop-loss order was been hit.

It looks like a bullish consolidation, the price is above all MAs (except the 200's SMA). Until today, it seemed like the bullish pennant was completely valid and now this ...

Questions:

1. If you trade these continuation patterns, do you place your SL under the complete pattern? If I had done this, my trade would have still been active by now. The problem is that I would have to half my position size in this example because I've got to nearly double the stop-loss distance if I place the SL below the pennant.

2. I could have also drawn a rectangle in this chart. Then I would still be on the sideline but wouldn't have lost anything yet. I'm just thinking about going in every moment of doubt for the most conservative option instead of choosing the pattern, which allows me to do a trade immediately. Might this be the right direction?

 

[deaddog]

Hi folks,

I'm keen on getting some feedback. I've just made this trade here, and just a while ago, my stop-loss order was been hit.

It looks like a bullish consolidation, the price is above all MAs (except the 200's SMA). Until today, it seemed like the bullish pennant was completely valid and now this ...

Questions:

1. If you trade these continuation patterns, do you place your SL under the complete pattern? If I had done this, my trade would have still been active by now. The problem is that I would have to half my position size in this example because I've got to nearly double the stop-loss distance if I place the SL below the pennant.

2. I could have also drawn a rectangle in this chart. Then I would still be on the sideline but wouldn't have lost anything yet. I'm just thinking about going in every moment of doubt for the most conservative option instead of choosing the pattern, which allows me to do a trade immediately. Might this be the right direction?

It's one trade. Your stop got hit as per plan. Let's see what happens after 100 trades. If you followed your plan it's a good trade with a bad outcome!!

 

[easymon1]

Here's a no brainer I like that you might test out and see how she works in your hands with your setups.
Identify the trigger candle.
Identify the one before it.
Place stop below the lower of the two plus a distance below that determined by experience / stats.

 

[schizo]

Until today, it seemed like the bullish pennant was completely valid

I ain't sure this is bullish pennant. For instance, that long wick clearly sticks outside your line. It looks more like a rectangle (see below), and IT DID NOT BREAK OUT YET.

Had this really been a pennant or a triangle, I think your stop placement is correct. It should be placed just below the low of the prior bar or candle. But, in this case, we were still trading inside the rectangle, hence the pullback.

 

[Mr.Richter]

But, in this case, we were still trading inside the rectangle, hence the pullback.

Thanks. Yes, I already doubted if this is a pennant or not. But as for the rectangle:

The problem that I've got with this rectangle is that the upper side of this rectangle was exactly confirmed by two highs. That's IMO a bit sparse. Instead, if I draw the declining line of a pennant, I get confirmation several times (but one high is an outlier).

 

[Bad_Badness]

It's one trade. Your stop got hit as per plan. Let's see what happens after 100 trades. If you followed your plan it's a good trade with a bad outcome!!

Exactly this. You can try all sorts of variations, but you will not know which to use until you can see how it works out over time, i.e. many trades.

Variations include:
Stop at boundary + XYZ amount to avoid a "shakeout".
Sell XYZ percent at the boundary as a loss mitigation.
Reverse at boundary.
Only place a stop AFTER the boundary violation holds for a set amount of time or volume.

All of these this will affect your Target visa vi, your over all P/L. visa vi your strategy tolerances.

People use algos to back test these things on a per instruments basis.

Hope that helps.

PS: You can draw all the shapes until the cows come home, but that will not give you the answer because the "TA" you are doing is just a framework. They can be right or wrong. Don't conflate TA and trade management. It is best to keep the separate, and yet co dependent.

 

[schizo]

The problem that I've got with this rectangle is that the upper side of this rectangle was exactly confirmed by two highs.

Not sure I completely understand what you mean, but ideally you should wait until the candle CLOSES ABOVE the rectangle, as you can see here (I flipped your rectangle upside down).

 

[Mr.Richter]

Yes, I know. I meant only that the upper side got established by two highs. I question in general the validity of a line connecting 2 single points (as long as there are no points in between it's IMO not very reliable). But maybe for horizontal lines it's different ...

 

[countryBoy641]

Sorry my friend,
Either you are dipping into the sauce (the good stuff - 12 years old)
or you just haven't done that much with TA.
Probably the latter.

This stock is NOT "ready for prime time".
Get the kids out of the room.
The UL fan boys will disagree with me, so what.

 

[deaddog]

Sorry my friend,
Either you are dipping into the sauce (the good stuff - 12 years old)
or you just haven't done that much with TA.
Probably the latter.

This stock is NOT "ready for prime time".
Get the kids out of the room.
The UL fan boys will disagree with me, so what.

View attachment 304088

Do you find much value in using a chart with a 35 year time frame?