Where would you place your stop?

C

cipherscribe

Given the attached scenario, where would you place your stop, given the last indication of the HL is based on ZigZag, so it could disappear if price descends below it. As such you don't really know you are at the HL yet.

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In other words, when would your Long be invalidated? Many 'experts' talk about placing stops where your trade setup becomes invalid. If you are trading based on HH's, HL's, is the current trade considered 'invalid' at any point down to the previous HL?

How do you reconcile taking a trade setup like this?
 
cipherscribe said:
Damn, apologies. I read your post incorrectly. So you would exit if price descended below the latest HL? I should have included the y axis for reference.

Reason for Edit: My stupidity. :-)
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No stop, exc for a catastrophe stop. I'd exit when the balance between buyers and sellers shifted, which would be at the lower high, assuming that price then dropped below the last swing low a few bars earlier. Otherwise, it would be a retracement in a continuing uptrend and I'd re-enter.

Probably more than you wanted to know.
 
dbphoenix said:
No stop, exc for a catastrophe stop. I'd exit when the balance between buyers and sellers shifted, which would be at the lower high, assuming that price then dropped below the last swing low a few bars earlier. Otherwise, it would be a retracement in a continuing uptrend and I'd re-enter.

Probably more than you wanted to know.
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Not at all. I appreciate your comments. Just so I am clear on your message, I have attached the following image. Can you let me know if this is what you would define as an appropriate exit? You have may have other methods which more closely define the balance of power, so for lack of a better definition, lets call it a lower high.


attachment.php
 
cipherscribe said:
Not at all. I appreciate your comments. Just so I am clear on your message, I have attached the following image. Can you let me know if this is what you would define as an appropriate exit? You have may have other methods which more closely define the balance of power, so for lack of a better definition, lets call it a lower high.
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The seventh bar after your "HH41". Where you've postulated an exit is WAAAAY too late. Even the MA is too late. Which is why I don't use indicators.

If you're stunned, I can post back your chart with the annotation.

Edit: Actually, I have a little time now, and you're interested, so . . .

Remember that this is all hindsight. Without a protocol, it's all just bullshit. With a protocol, you either follow it or you don't. But the protocol is there even if you aren't.

Here you go long in the first retracement after the reversal. If you had been short, you'd be out by now. After the long is taken, you wait for the first test, which is the test of the last swing low, which in this case is the only swing low. Or you can exit after price rolls over from HH33 and re-enter when that LSL is tested. Market doesn't care.

Next comes that pullback around 1100, but it can't drop more than 50% of the upmove, so you stay in. When price makes a lower high after HH41, you can exit there, or you can wait for your MA and exit when price drops below the last swing low. Again, market doesn't care. No exit at the congestion because it's just going sideways, not reversing.

And that's about it.
 
dbphoenix said:
The seventh bar after your "HH41". Where you've postulated an exit is WAAAAY too late. Even the MA is too late. Which is why I don't use indicators.

If you're stunned, I can post back your chart with the annotation.

Edit: Actually, I have a little time now, and you're interested, so . . .

Remember that this is all hindsight. Without a protocol, it's all just bullshit. With a protocol, you either follow it or you don't. But the protocol is there even if you aren't.

Here you go long in the first retracement after the reversal. If you had been short, you'd be out by now. After the long is taken, you wait for the first test, which is the test of the last swing low, which in this case is the only swing low. Or you can exit after price rolls over from HH33 and re-enter when that LSL is tested. Market doesn't care.

Next comes that pullback around 1100, but it can't drop more than 50% of the upmove, so you stay in. When price makes a lower high after HH41, you can exit there, or you can wait for your MA and exit when price drops below the last swing low. Again, market doesn't care. No exit at the congestion because it's just going sideways, not reversing.

And that's about it.
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Db,

I annotated my chart with your commentary prior to seeing your attachment. All I can say is that your descriptions are as good as your annotations! :-).

When you talk about a 'protocol', you mean your plan, the rules which guide you, and prevent you from acting on emotions., right?

Thanks for your insights. What I don't understand is the mechanism by which you managed to exit the trade so quickly after the HH41, yet managed to stay in the trade throughout the 100% retracement at 10:30am. Are you willing to risk a greater movement prior to meeting a good RR perhaps?

attachment.php
 
cipherscribe said:
Db,

I annotated my chart with your commentary prior to seeing your attachment. All I can say is that your descriptions are as good as your annotations! :-).

When you talk about a 'protocol', you mean your plan, the rules which guide you, and prevent you from acting on emotions., right?

Thanks for your insights. What I don't understand is the mechanism by which you managed to exit the trade so quickly after the HH41, yet managed to stay in the trade throughout the 100% retracement at 10:30am. Are you willing to risk a greater movement prior to meeting a good RR perhaps?

attachment.php
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Protocol, plan, drill, rules. To some people, a trading plan is going long "if it looks like it's going up". A plan is a little more than that.

It's not a 100% ret at 1030; only 50%. And if price were to drop below the last swing low, that's only a couple of points. Or, as I said, one could exit much higher and re-enter if the last swing low holds. The rules are adaptable to the individual's preferences. And the individual's demons.

As to RR, I don't bother with it. There's no way of determining the reward in advance, so why mess with it? The trader has no control over that. What he does have control over is the risk, so I suggest focusing on that.
 
dbphoenix said:
Protocol, plan, drill, rules. To some people, a trading plan is going long "if it looks like it's going up". A plan is a little more than that.

It's not a 100% ret at 1030; only 50%. And if price were to drop below the last swing low, that's only a couple of points. Or, as I said, one could exit much higher and re-enter if the last swing low holds. The rules are adaptable to the individual's preferences. And the individual's demons.

As to RR, I don't bother with it. There's no way of determining the reward in advance, so why mess with it? The trader has no control over that. What he does have control over is the risk, so I suggest focusing on that.
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Right, you did say you could exit and re-enter, true enough. I was going to ask what YOU would do, but hey, that really doesn't matter. Like you also said, its about ones own appetite for risk.

Interesting about RR. I, like alot of people, tend to exit too early. I am managing that by specifying an absolute minimum RR prior to exit. It's not as smart as being able to allow PA to determine my exit, but my real ability to read PA diminishes once I am in a trade. Now if you have a quick answer to that one... :-)
 
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