Where do you put your stops in at?

K

koonsdawg

I have been trading stocks for five years now. Nothing serious just buy and hold. Well I got sick of that and wanted to make more than 10% in a year on my money. So in the past 6 months I have been learning how to trade more aggresively. I have found what I think to be a pretty good strategy of trading. So here is my question: Where do you put your stops in at? I mean do you always put them in at like a X% loss. When I started trading for reals I would put in a stop order at a 2% loss right after I placed my short order. What I found was that I would almost always hit my stop and take a 2% loss. So I figured I would raise my stop to a 3%, that helped a little. But I was still hitting my stops more than I would hit my target profit. I started to notice that if I wouldnt have had a stop and just held on for an hour or so I would have made 2-3% on my trade instead of loosing. So I stopped putting stop orders. And I started to do the opposite, immediatlely after placing a short order I would place a limit buy to cover order at 2%. This was working awesome, I was taking my profits at 2% everytime. This worked good for about a month and I was consistently making 3-4% a day. Well all it took was two bad trades and I was back where I started a month ago. So I would like to get some advice on how I can manage my risks better? The stocks I trade are verry volatile. So putting in a stop at 3% is way to close for comfort. What would you guys recommed? thanks in advance for your help.
-Brandon
I hope all that made sense, if not let me know and I can clarify.
 
Ah ... the secret magic number for stops is ... Well, there isn't one.

Stops can be a surprisingly deep topic that you can talk about for hours with no agreement.

It's a like a loose thread on a sweater - one tug and you might unravel your personal beliefs on how markets work.
 
Quote from koonsdawg:

I have been trading stocks for five years now. Nothing serious just buy and hold. Well I got sick of that and wanted to make more than 10% in a year on my money. So in the past 6 months I have been learning how to trade more aggresively. I have found what I think to be a pretty good strategy of trading. So here is my question: Where do you put your stops in at? I mean do you always put them in at like a X% loss. When I started trading for reals I would put in a stop order at a 2% loss right after I placed my short order. What I found was that I would almost always hit my stop and take a 2% loss. So I figured I would raise my stop to a 3%, that helped a little. But I was still hitting my stops more than I would hit my target profit. I started to notice that if I wouldnt have had a stop and just held on for an hour or so I would have made 2-3% on my trade instead of loosing. So I stopped putting stop orders. And I started to do the opposite, immediatlely after placing a short order I would place a limit buy to cover order at 2%. This was working awesome, I was taking my profits at 2% everytime. This worked good for about a month and I was consistently making 3-4% a day. Well all it took was two bad trades and I was back where I started a month ago. So I would like to get some advice on how I can manage my risks better? The stocks I trade are verry volatile. So putting in a stop at 3% is way to close for comfort. What would you guys recommed? thanks in advance for your help.
-Brandon
I hope all that made sense, if not let me know and I can clarify.
More...
I agree with TheStudent. But you'll also want to look up the subject of "stop running" or "stop gunning", then you'll know why your stops were being hit so often. It's supposed to be illegal but obviously there's no enforcement in that direction. I don't know if volatility stops (qv) are immune to gunning but the real key is figuring out a good exit strategy for stocks that doesn't depend on stops at all. Good luck.
 
I have a feeling that he is not big enough to make it worth while for anyone to gun for his stops, and it doesn't sound like he is placing his stops at any big support/resistance areas.

My suggestion is to look at support and resistance and place your stops above (for resistance) and below support. You should also look at the average range (High - Low) or use open/closes if it gaps and place your sops outside of that range.
 
Thanks for the replies. And your right Im not that big of a fish yet. Im trading about 30K. This is gonna tell you how unexperienced I am, but how do you look for resistance and support? Do you have an example you can show me? And could you please explain more on the open/close gaps? Most of the stocks Im trading are big % gainers for the day. I wait till they gap up for the day and then sale them short.
Thanks,
Brandon
 
Quote from koonsdawg:

Thanks for the replies. And your right Im not that big of a fish yet. Im trading about 30K. This is gonna tell you how unexperienced I am, but how do you look for resistance and support? Do you have an example you can show me? And could you please explain more on the open/close gaps? Most of the stocks Im trading are big % gainers for the day. I wait till they gap up for the day and then sale them short.
Thanks,
Brandon
More...

here's one way you can look at S/R info:

http://deltat1.com/Education/tools/pivot-calculator/index.htm

hth

take care -

omni
 
Its also worth having a look at volumes when considering your stops: some software offers you the facility of placing stops that are hit only if there is good volume.

This way you'd avoid to suffer the psychological damage of having your trade taken out with a big loss on sudden spikes or gaps.

And this is just one of the facility to manage your risks you can have at your disposal on certain platforms and software. A good platform sustaining this kind of order is IB in conjunction with Ninja Trader. Also Directaccesselite is a good brokerage supporting complex stop orders.


Good luck with your trading.

Piero
 
His stop isnt much....most stops r set @ same place by many traders, the the stops are taken out....can't u see on ur chart what happende..the surpise bar especially areound noon when the market becomes sideways for awhile the boom move u p slihgtly above previous high and down below previous lows....seen this a few thousand times but we are told it doesnt happen...i wouldn't know, all I know is find where the safe stops can be placed .....if u ever figure out safe stop points ur worries are over....
 
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