Not a firm believer in a fixed stop. Then goes on to describe his criteria of a fixed stop. Lmfao.
You would be an idiot to not use a fixed stop (of whatever your choosing) most people cannot or shouldnt trade in a discretionary mode.
The importance of the stop
- Thread starter trader1974
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Not a firm believer in a fixed stop. Then goes on to describe his criteria of a fixed stop. Lmfao.
You would be an idiot to not use a fixed stop (of whatever your choosing) most people cannot or shouldnt trade in a discretionary mode.
Yes, and no... yes it’s fixed in a sense but based on a variable so it’s not the same value for all trades and changes based on price action.
for example, if there’s alot of price action and the ATR is 6 points then my stop is 9 points but if on the next trade the ATR is only 3 points then my stop is 4.5 points.
it’s not the same value of every trade....
for example, if there’s alot of price action and the ATR is 6 points then my stop is 9 points but if on the next trade the ATR is only 3 points then my stop is 4.5 points.
it’s not the same value of every trade....
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When volatility increases, so your stop widens, is that correct?
Does that not defeat the purpose?
Increased volatility should not be a reason to then change your stop imo.
Now where I do think volatility should impact stop width would be natural/normal volatility.
Ie, if stock ABC is a large cap with low volatility then you would have a narrow stop.
For stock XYZ which is a small cap with normal high volatility, then a wider stop.
But for any stock which then has a change in volatility, change your stop width don't make sense.
Unless it were a gradual change due to price changing, ie one month it were a $1 stock, following year it was a $100 stock.
Does that not defeat the purpose?
Increased volatility should not be a reason to then change your stop imo.
Now where I do think volatility should impact stop width would be natural/normal volatility.
Ie, if stock ABC is a large cap with low volatility then you would have a narrow stop.
For stock XYZ which is a small cap with normal high volatility, then a wider stop.
But for any stock which then has a change in volatility, change your stop width don't make sense.
Unless it were a gradual change due to price changing, ie one month it were a $1 stock, following year it was a $100 stock.
I agree with you buddy! Putting a stop depends upon one’s trading style, market volatility and trading goals.
Very, very, well said.
Fixed stops have these issues:
Don't take into account, market volatility
Don't take into account, trade entry
Don't take into account, market action before entry
Don't take into account, market action after entry
That being said, having an idea of what a "hard" stop should be, as a percent of daily goal, value at risk etc. is prudent.
Being able to adjust your stop within a range based on the above makes sense, imo. This assumes you have the technical and emotional controls. If you do not, then set and forget is a good stepping stone before going "intermediate".
Play the percentages over the long run, say 20 trading days, imo. Also the notion that it is dependent upon how much you make in trades, *can* assume your target is ALSO fixed. I.e. Stops are just a part of your tactics. Integrate them and test them to make sure they are supportive to the overall picture. It is best to look at a set of trades not single trades. Then look at sets of sets of trades.
Personally, I go for 2x-3x daily profits (in points) as a hard stop, because my overall W/L in days is about 10-15:1, so the math works out. 1/2 daily profit target as a starting point for the order ticket, but I scale in and out. Not Martingale crazy scale, but opportunistic scale.
Lastly, make sure to try your tactics out in a variety of days. You may need to have two or more sets, or a single starting point and adjust. But this is intermediate tactical stuff.
Hope that helps.
PS: For the ES Open 10 points is probably good while it fluctuates but not good for once it decides a direction. So for a 10 point stop, I would be exiting while it fluctuates, not when it decides a direction because it would probably work out to 1:1 over many days.
Don't take into account, market volatility
Don't take into account, trade entry
Don't take into account, market action before entry
Don't take into account, market action after entry
That being said, having an idea of what a "hard" stop should be, as a percent of daily goal, value at risk etc. is prudent.
Being able to adjust your stop within a range based on the above makes sense, imo. This assumes you have the technical and emotional controls. If you do not, then set and forget is a good stepping stone before going "intermediate".
Play the percentages over the long run, say 20 trading days, imo. Also the notion that it is dependent upon how much you make in trades, *can* assume your target is ALSO fixed. I.e. Stops are just a part of your tactics. Integrate them and test them to make sure they are supportive to the overall picture. It is best to look at a set of trades not single trades. Then look at sets of sets of trades.
Personally, I go for 2x-3x daily profits (in points) as a hard stop, because my overall W/L in days is about 10-15:1, so the math works out. 1/2 daily profit target as a starting point for the order ticket, but I scale in and out. Not Martingale crazy scale, but opportunistic scale.
Lastly, make sure to try your tactics out in a variety of days. You may need to have two or more sets, or a single starting point and adjust. But this is intermediate tactical stuff.
Hope that helps.
PS: For the ES Open 10 points is probably good while it fluctuates but not good for once it decides a direction. So for a 10 point stop, I would be exiting while it fluctuates, not when it decides a direction because it would probably work out to 1:1 over many days.
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