Determining a stop loss

[OGRooney]

OGRooney, please refrain from insulting other members. Any further insults will incur an infraction

Also, if you are going to discuss topics like this then a chart is the best way of visually representing this so we can see what you are talking about. Alternatively please use exact figures and examples so members can see what you mean rather than simply saying "at the resistance level"

Fair call... Sorry if I offended you Boggo.

On Friday night, when EURUSD broke resistance at 1.2332, a breakout could have occurred but didn't. Anyone who had a stop placed anywhere between 1.2332 and 1.2388 would have been stopped out - even though the long term trend did not change direction. In fact this correction was quite in line with the daily trend - I'd want to see a clear break of 1.2388 before I were to exit any EURUSD shorts.

 

[Boggo]

Fair call... Sorry if I offended you Boggo.

Nope, not warranted but didn't offend me, more a case of you heading in the direction of attacking the poster of a contrarian view which is often a sign of weakness in your own statement when it is tested.
The rules of Aussie Stock Forums come before those of any thin skinned individuals and that in turn makes it fair for everyone on here.

Be prepared to have your views tested, it also helps reduce confusion if you are prepared to present the example that you obviously have if you are verbalising it.

Back to the stop loss bit, don't forget that you can re-enter the item when it turns back up as in my chart example of IAU above. I got stopped out of over 60% of my trades last FY and still made a good profit.
I expect that one third of my trades will cost me money, one third will break even and one third will make money.
That is the theory and in reality that is very close to being right.

The winning trades will look after themselves, the (potential) losing trades are the ones you have to control otherwise you become an unwilling 'investor' and before you know it you are averaging down and getting in more **** than the first settlers.
The old argument that they will turnaround is true in most cases but remember that if something drops 50% then it has to gain 100%, ie double, usually in double the time as well.

Just my

 

[TulipFX]

I expect that one third of my trades will cost me money, one third will break even and one third will make money.
That is the theory and in reality that is very close to being right.

The winning trades will look after themselves, the (potential) losing trades are the ones you have to control otherwise you become an unwilling 'investor'

Summed up in this video:

 

[OGRooney]

Back to the stop loss bit, don't forget that you can re-enter the item when it turns back up as in my chart example of IAU above. I got stopped out of over 60% of my trades last FY and still made a good profit.
I expect that one third of my trades will cost me money, one third will break even and one third will make money.
That is the theory and in reality that is very close to being right.

I'm sorry but I completely disagree with that theory. I'm no statistician, but the probability of a trade breaking even is not 33.33* percent, as it is entirely up to you: there is a 49.999999*% chance either way that the price will fluctuate - markets do not remain static. A break even is the equivalent of flipping a coin, catching it and never revealing the result.

I've just looked at an account I opened on Thursday evening:
Made 16 trades, with 2 breaking even (12.5%), 3 taking loss (18.75%) and 11 making profit (68.75%), tripling my account equity (229% profit).

and if you take out the break evens:
14 Trades, 3 taking loss (21.42%) and 11 taking Profit (78.58%)

I haven't been trading for long enough to compare a financial year, but if you'd like to compare any 16 consecutive trades from the past week or so I'd be interested to see how our stats compared.

 

[prawn_86]

What % of account size are you risking per trade? 300% from 16 trades must have hit some massive winners or else your position sizing is extremely risky

 

[OGRooney]

What % of account size are you risking per trade? 300% from 16 trades must have hit some massive winners or else your position sizing is extremely risky

If I'm using 500:1 leverage, I tend to maintain a margin level of 1000%, so I'm relatively safe, but still have the option of getting down and dirty in a breakout. With this account the first trade was opened at a relatively high risk (400% margin level), but the level of risk decreased over time as profits were accumulated.

Either way my hit/miss percentage remains the same.

 

[prawn_86]

If I'm using 500:1 leverage, I tend to maintain a margin level of 1000%, so I'm relatively safe, but still have the option of getting down and dirty in a breakout. With this account the first trade was opened at a relatively high risk (400% margin level), but the level of risk decreased over time as profits were accumulated.

Either way my hit/miss percentage remains the same.

But how much of your account size do you risk per trade? IE if a trade was to hit your stop, how much of your capital would be lost?

I would suggest you search through ASF for position sizing and have a read up as that is what helps traders survive int he long term

 

[OGRooney]

But how much of your account size do you risk per trade? IE if a trade was to hit your stop, how much of your capital would be lost?

I would suggest you search through ASF for position sizing and have a read up as that is what helps traders survive int he long term

I understand position size, that account was high risk, I was prepared to lose the balance.
Either way, my argument was concerning Boggo's win/breakeven/loss/33.33% theory and his hit/miss rate (which a lot of people would find unsatisfactory). My talk of profit was just the icing on the cake, not a point of argument.

 

[prawn_86]

I understand position size, that account was high risk, I was prepared to lose the balance.
Either way, my argument was concerning Boggo's win/breakeven/loss/33.33% theory and his hit/miss rate (which a lot of people would find unsatisfactory).

Totally depends on expectancy.

You could lose 80% of trades and only lose $10 per trade but on the 10% you win you might make $500 per trade. Providing this system has funds to sustain the drawdown periods and has been backtested and is known to give those returns then it would be OK to a lot of people

 

[skc]

I understand position size, that account was high risk, I was prepared to lose the balance.
Either way, my argument was concerning Boggo's win/breakeven/loss/33.33% theory and his hit/miss rate (which a lot of people would find unsatisfactory). My talk of profit was just the icing on the cake, not a point of argument.

Different systems and different methods work on different win rate. Personally I wouldn't read too much or extrapolate a 16 trade sample size.

And do go learn about proper risk management. Even if you are on a good thing you can still blow it by doing a bad job on risk.... make that you will blow it at some stage without proper risk management.

 

[OGRooney]

Totally depends on expectancy.

You could lose 80% of trades and only lose $10 per trade but on the 10% you win you might make $500 per trade. Providing this system has funds to sustain the drawdown periods and has been backtested and is known to give those returns then it would be OK to a lot of people

I agree, All I've been saying is this system could be made more efficient by reducing the amount of times you were incorrectly stopped out (ie times that you would have made $500 but instead chose to incur a loss)

 

[OGRooney]

And do go learn about proper risk management. Even if you are on a good thing you can still blow it by doing a bad job on risk.... make that you will blow it at some stage without proper risk management.

And please learn to write sentences that don't start with "and" - This works really well when you want to put someone down about their lack of education.

 

[skc]

And please learn to write sentences that don't start with "and" - This works really well when you want to put someone down about their lack of education.

Exactly which part of my post made you think that I was trying to put you down about your lack of education?

 

[Joules MM1]

.... learn about proper risk management. Even if you are on a good thing you can still blow it by doing a bad job on risk.....

+1

before :bunny:

after :afro:

 

[OGRooney]

Exactly which part of my post made you think that I was trying to put you down about you lack of education?

"and do go learn propper this and that", say that to yourself out loud with an upper class English accent and you might get why I thought you were putting me down/or attacking me/or whatever it is you call it when 3 people are already telling someone and some other helping hand chimes in... do you enjoy stomping a bloke after your mates have put him on the ground for you?

This is getting ridiculous Prawn, I just wanted to share my and look how many people think that's unacceptable. I stand by my original statement that it is a good idea to give your stops a "little" lee way.

I've only been doing this for a few months... I actually know a whole lot and I'm doing pretty damn well.

 

[prawn_86]

As i have said to you before, ASF is a place for detailed discussion and reasoning. If you have an opinion, members will ask you why and for examples. By doing this it enable us all to learn and hopefully grow as people and traders. There are many experienced traders here with years (or decades) of time in the markets, and a lot of them are willing to freely give their time and knowledge.

We are all here to share ideas and help each other, and so far it seems the only person getting defensive is youself. I would strongly suggest you read the "Posting Guidelines" thread to find out more about what sort of community ASF is trying to foster.

With regards to your original statement, what would you classify as a little leeway? What % above the 'usual' stop level would you place your stops? What R:R do you normally trade with? All these sorts of questions are important in trying to figure out if your strategy may be useful for others. If you dont want to answer them then simply dont reply.

 

[CanOz]

it is a good idea to give your stops a "little" lee way.

I would agree here, whats wrong with waiting to see? I can't see TH or Joules using hard stops trading discretionary on index futures. If you looking at the depth of market and you see buyers step in right where your soft stop 'should be', then you'd let it ride for a few more seconds/minutes yeah?

Usually my stops are away from the price and i use the order flow to tell me when i am wrong and its time to spew it up...I'm hardly able to be considered successful at this yet though, so i'll defer to the more credible....

CanOz

 

[OGRooney]

With regards to your original statement, what would you classify as a little leeway? What % above the 'usual' stop level would you place your stops? What R:R do you normally trade with? All these sorts of questions are important in trying to figure out if your strategy may be useful for others. If you dont want to answer them then simply dont reply.

I am talking about setting your stop according to support/resistance and how it is wiser to maybe leave 10/20 pips headroom if you want to prevent being unnecessarily stopped out due to market volatility. I've already quoted a risk to reward ratio in my original post, I aim to take at least twice what I risk. This is what confuses me, I gave two useful tips that would really only help beginners and then all these experts start trying to drill me on the nuts and bolts of my overall strategy. Come on guys, my tips were and are valid - If you set your stop too tight, you risk getting stopped out and if your not wining at least twice what your risking, it's too risky/not worth it.

If you look over the thread no one had actually contributed anything about stops in regards to support/resistance, which I found quite strange... do you all just use stops that relate to your account balance and not take the market into consideration at all? This seems absurd to me. I take both my account balance and recent price movements into consideration.

 

[OGRooney]

I would agree here

Thanks mate.

 

[skc]

"and do go learn propper this and that", say that to yourself out loud with an upper class English accent and you might get why I thought you were putting me down/or attacking me/or whatever it is you call it when 3 people are already telling someone and some other helping hand chimes in... do you enjoy stomping a bloke after your mates have put him on the ground for you?

I see no reason why you would interpret my sentence with an upper class English accent, as opposed to say a Southern Kentucky yobbo accent. Nothing in my post was trying to attack you and it is unforunate that you have interpreted it as such. The same applies to a number of other posts in this thread - most are just debating the topic at hand and I can't see anthing directed at you personally.

16 trades being an inadequate sample size to determine win% longer term is a simple statement of fact. If you have a larger sample size from your months of trading feel free to put those on the table.