Getting shaken out of trades

[banco]

I've been trading the opening 90 minutes of US grains futures contracts. I usually look for short term reversals. I'm slightly in the green but I've been getting frustrated as I'll often enter a short only to see the market reverse down 2 ticks after I'm stopped out (I'm using a 4 tick stop and a 6 tick target). I know to some extent this is just how trading goes but feel like I could do better.

Obviously I could widen my stop and target to an 8 tick target and 8 tick stop. Other option I was thinking of is scaling in but not sure how to structure it (ie should all scales have same target and stops).

Grateful for any advice.

 

[DeepState]

By setting your limits and stops the way you are, there is a considerably higher likelihood of producing a losing trade. When your stop is hit, a fair chunk of the time (a bit more than half, due to spread, or even higher if you have some true directional insight) you will see the market rebound in the frustrating way you have witnessed.

Whether to use wider stops or not, or move them to symmetric positions, or ladder, depends on the nature of your strategy. At a guess, something to try may be to widen to 8pts and manage symmetric stops/limits. If you are indeed skilled, you will end up with more wins than losses and the size of those wins will be about the size of the losses if you just run the thing out until one of these is hit, for the most part, with a time stop otherwise being applied.

You will see a number of trades bounding back from a stop. However, if you look, you will also find about a similar proportion of limits being hit which were the local peak.

One benefit of moving to wider stops/limits, is that the cost of risk management falls relative to the size of the insight. The tighter the boundaries, the lower the edge you get to extract, after crossing spreads. To illustrate what I mean, if your stops/limits were 0/0 points, you only incur transaction costs and your edge never gets a run. The wider the stops/limits, the more your edge gets to run.

Naturally, this depends on whether your insight is expected to work over a range of 8pts each side, or whether the insight is tighter, in which case it may be 'within the bounds of arbitrage'...or, in other words, can't be utilised because the costs of implementation eliminate the edge.

 

[minwa]

Which grains market exactly ?

You trade the opening 90 minutes so you will be at the screen until you close the trade ? Use a mental stop. Put your hard stop a few ticks further for catastrophe purposes like lack of discipline/internet failure etc. But close it out manually when it hits your real closer mental stop. You don't want your orders in there in a thin market for it to be hunted.

 

[banco]

Thanks Guys. I appreciate your advice. I should actively monitor it but I tend to put the trade on and then go for a short walk as I have found the temptation to take a small profit is often too great if I'm watching it live.

I primarily trade soybeans.