Which volatility measure for setting stops ?

[syswizard]

There are indicators like Historic Volatility and then there are simple calcs like Highest High minus Lowest Low over a period of time. Finally, there is the VIX index.
Which one does everyone use to help set their stop loss points ? With recent volatility, fixed stops have been getting decimated IMHO. Stops need to be adjusted to this volatility.
How does everyone do it ?

 

[Robert Morse]

I don't use stop orders. I have mental stops. They are triggered when I lose the most money I'm willing to lose on an idea or when the situation that was part of my expectations turned out to be wrong or I no longer have the same confidence in my trade. I'm not a day trader. I'm very good at taking losses and moving on.

 

[syswizard]

I don't use stop orders. I'm not a day trader.

Ah...thanks for the response Robert, but technically I am asking for day traders who use stop orders to speak up.

 

[Metamega]

I’ve always used keltner channels on a chart. Find it helps visualize moves. 20 day EMA with 2 atr bands. Helps account for volatility with position sizing and ATR.

 

[KCalhoun]

I’ve always used keltner channels on a chart. Find it helps visualize moves. 20 day EMA with 2 atr bands. Helps account for volatility with position sizing and ATR.

Robert's thinking is exactly right for day trading too.

I'm a hardcore day trader (did over 9,000 live stock/etf day trades last year) and I use tape reading, P&L, price action, time of day and whole number plus OHLC based stops, depending on the specific chart.

I've traded as much as $4.9 million dollars worth of order flow in a single year, w tax return proof

I use VIX TRIN and in vs out day S&P market internals to help with position sizing and scaling decisions. For timing, note typically you get pivots at 10am, 11-12 noon buy/sell programs and again after 3pm

 

[tiddlywinks]

Something of critical importance (which the mentioned Keltner setup does address)...

A larger target goes with a larger stop!!

Such a simple concept so many do not understand and fail to benefit.

 

[SunTrader]

I use proprietary time and price stops both to enter and exit.

Price knows nothing of targets.

 

[syswizard]

I’ve always used keltner channels on a chart. Find it helps visualize moves. 20 day EMA with 2 atr bands. Helps account for volatility with position sizing and ATR.

Thanks for that idea Meta...greatly appreciated. However, what time-frame are you talking about ? Daily ? Whew, in this market, that's a wide, wide stop. It doesn't apply to someone who is scalping for a few minutes in ES with large size.
I wonder if Keltner channels would work on shorter time-frames, say 200-500 ticks ?

 

[syswizard]

Robert's thinking is exactly right for day trading too.

So stops based on calculations are worthless you say ?

I'm a hardcore day trader (did over 9,000 live stock/etf day trades last year) and I use tape reading, P&L, price action, time of day and whole number plus OHLC based stops, depending on the specific chart.
I've traded as much as $4.9 million dollars worth of order flow in a single year, w tax return proof
I use VIX TRIN and in vs out day S&P market internals to help with position sizing and scaling decisions.

All very impressive credentials, but doesn't leave me with much information. re: "S&P market internals"...what exactly are these numbers ?. And this is not for setting stops, only position sizing , correct ? I am looking for stop setting ideas and rules.

 

[syswizard]

I use proprietary time and price stops both to enter and exit.
Price knows nothing of targets.

Appreciate that comment and comes back to my idea that stop setting is an art-form. Of course your response provides me with no valuable detail...i.e. "proprietary".