Who Thinks Swing Trading is Dangerous?
Any kind of leveraged trading is potentially financially dangerous. What would the outcome have been if your trade was in the opposite direction with the same stop? Would that have been a winner or still a stop-out?
I'd say this isn't the easiest environment for swing trading index futures due to the fact that there's a lot of range bound movement within huge ranges and even a minor retrace within a larger move is quite juicy.
That said, if you're entering near extremes and not in the middle of a range, you should be able to enter with a much tighter stop than 60 points. If your target on a swing trade is say 100 points, you can easily take multiple small stop-outs and still get paid well on a low win rate system. Lose 50 points on 5 x 10 point stop-outs and net 50 points if your next trade is a 100 point winner.
The problem with using large stops is that they eventually get hit. At the same time it can be troublesome if the stop is too small getting you stopped out on noise or normal oscillations. So, if you use a 60 point stop-out and it gets hit twice in a row, well, you now need a 120 point winner just to breakeven. That's a tough one.
Generally, in my own trading, I find that it's better to take a small or medium sized loss and re-enter immediately (or shortly after) if I still feel my original trade idea is in play. Typically, if my stop is hit and price slows down or reverses. If price bursts through my stop, well, then my hypothesis may have been invalidated and I'll wait or consider reversing.
In principle, there's no difference between taking a 10 point loss and re-entering there if you still have the same price target in mind as the profit potential is now greater (you are buying/selling with a 10 point price improvement on original entry).
I hate losing, so it's still something I don't always respect myself as it can be psychologically hard to cut a loss, but I usually always regret it.
3 entries with 2 initial stop-outs yesterday afternoon.
Now I get it.
