Tell me about stop and reverse strategies
- Thread starter IronFist
- Start date
There are enter and exit trades, enter and hold through (profit giveback or drawdown), and enter and reverse on exit trades. I trade futures, intraday only. I do "a few" reverse on exit trades per day. Most are enter/exit trades.
In my case, the reversing exit is determined when the entry is taken. IOW, a specific strategy that says when x occurs take profits and reverse, there is no "target" per-se. Manage the trade appropriately until. I don't use a stop for a profit taking exit on such a trade. Explaining the strategy would not be of use for you, as it does not involve indicators, but is triggered by the price/volume relationship. In even fewer words... it's one particular piece of the Jack Hershey price/volume teachings... FTT to FTT trading. Applicable to most liquid markets, and for me, used on fast time frames, 5 min or less. Sometimes it's several bars before exiting (or reversing again), sometimes it's only a couple of bars. Sometimes the first bar after entry isn't cooperating the way expected, and exiting and moving on to whatever the next trade is, is appropriate management. That's one the best parts imo about intraday trading... there is another bus coming along in a few minutes, and it doesn't matter which direction it is going.
In my case, the reversing exit is determined when the entry is taken. IOW, a specific strategy that says when x occurs take profits and reverse, there is no "target" per-se. Manage the trade appropriately until. I don't use a stop for a profit taking exit on such a trade. Explaining the strategy would not be of use for you, as it does not involve indicators, but is triggered by the price/volume relationship. In even fewer words... it's one particular piece of the Jack Hershey price/volume teachings... FTT to FTT trading. Applicable to most liquid markets, and for me, used on fast time frames, 5 min or less. Sometimes it's several bars before exiting (or reversing again), sometimes it's only a couple of bars. Sometimes the first bar after entry isn't cooperating the way expected, and exiting and moving on to whatever the next trade is, is appropriate management. That's one the best parts imo about intraday trading... there is another bus coming along in a few minutes, and it doesn't matter which direction it is going.
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reverse strategies are based on assumption that the end to the trend on in one direction (when you got stopped), is the beginning of the trend in another direction
Sometimes it is. Many software packages have SAR tool. It DOES get you on the right side of a big move fairly quickly... at the cost of enduring some whipsawing.
Haven't ever tested it to see if SAR is overall beneficial, but I suspect it is if one can handle the whips.
Parabolic SAR is slow on the entry and slow on the exit. I don't use stop and reverse but if I did, it would likely be for range trading, otherwise you are in the trend top and bottom picking biz...tough way to go. And what may appear to be a top or bottom is more likely to be some form of consolidation correction.
Stop and reverse for me depends on the context i.e. all the bars to the left and the bar dynamics i.e. “how” the past few bars and the present bar were formed. When you look at a chart you are seeing a static picture of bars that is largely devoid of the dynamics of how each one of those bars were formed.
Say I misread the PA got in long on what I thought was a reversal. As it turned out the reversal suffered a reversal LOL. So I get stopped out. I will take a few seconds to study the context again (by seconds i really mean seconds). If the reversal of the reversal appears to be supported by the context and isn’t just chop produced by some bears then I just might use the double up technique and I make back my previous loss by a same distance move and the rest of the move is profit. This is a quick way to recover loss and end up with a profit instead of just taking a stoploss on the initial trade and waiting around for another long entry.
Emotionally, for some traders it is hard to double up and reverse immediately after just going through a stoploss being executed but it can be a profitable technique and put a smile on ones face.
However, one word of caution. Watch out for a reversal of the reversal of the original reversal. ROFLMAO. Seriousley i.e. don’t follow the the direction of the doubled up position too far UNLESS the dynamics of the individual bar formations indicate the move is probally continuing.
Say I misread the PA got in long on what I thought was a reversal. As it turned out the reversal suffered a reversal LOL. So I get stopped out. I will take a few seconds to study the context again (by seconds i really mean seconds). If the reversal of the reversal appears to be supported by the context and isn’t just chop produced by some bears then I just might use the double up technique and I make back my previous loss by a same distance move and the rest of the move is profit. This is a quick way to recover loss and end up with a profit instead of just taking a stoploss on the initial trade and waiting around for another long entry.
Emotionally, for some traders it is hard to double up and reverse immediately after just going through a stoploss being executed but it can be a profitable technique and put a smile on ones face.
However, one word of caution. Watch out for a reversal of the reversal of the original reversal. ROFLMAO. Seriousley i.e. don’t follow the the direction of the doubled up position too far UNLESS the dynamics of the individual bar formations indicate the move is probally continuing.
It may help the trader to acknowledge that the two trades are in fact two trades, and the "doubling up" is a part of the trader's approach and has nothing to do with the price action per se. The players involved in the second entry may in fact be a completely different set. They may be trading a different interval and may not have even seen what appeared to the trader to be the first trading opportunity. Therefore, the trader ought to at least consider thinking about each of these two trades as being two separate trades, the second having nothing to do with the first. The question then becomes one of "If I had not taken any other trade, would I take this one? Does it meet my requirements?" If so, there's no reason not to take it. The loss on the previous trade has no bearing.
And, yes, it is hard, but making those decisions emotionlessly in real time is a very large part of the challenge.