Stop loss/profit?

[CoffeeKing]

Yep a newbie... and learning as I go...but confusedas to what is meant by stop loss or stop profit in the thread "Ive done all the dumb things - suggestions"

correct me if I'm wrong but if you buy a share at $20 then put in a stop loss for $19.50 straight away after buying does this mean your share is sold at $19.50 instead of say $19.00 if the share kept going down?
Surely if you do the homework on the share and use a stop loss does that mean you think the share will go down, and if you think the share will go down, why get it in the first place?

Can anyone tell me, using Etrade, how you would put a stop loss in (just incase I need to know) and once a stop loss is in, if the share rises how do you remove the stop loss to sell at a higher price ( can it be done? ) as I have no idea's about stop losses or stop profits

 

[jama_kj]

Re: Stop loss / profit ???

Yep a newbie... and learning as I go...but confusedas to what is meant by stop loss or stop profit in the thread "Ive done all the dumb things - suggestions"

correct me if I'm wrong but if you buy a share at $20 then put in a stop loss for $19.50 straight away after buying does this mean your share is sold at $19.50 instead of say $19.00 if the share kept going down?
Surely if you do the homework on the share and use a stop loss does that mean you think the share will go down, and if you think the share will go down, why get it in the first place?

Can anyone tell me, using Etrade, how you would put a stop loss in (just incase I need to know) and once a stop loss is in, if the share rises how do you remove the stop loss to sell at a higher price ( can it be done? ) as I have no idea's about stop losses or stop profits

hey i'll try to answer ur qu's

the reason you put in stop los is for precautionary reasons and to limit your loss in case of a downturn. I mean of course when buying a share you are basing your decision on the belief that it will rise, but shares don'talways go up in straight lines they are somewhat volitile (esp in the current period we're in) so putting in a stop loss protects you from a sudden unexpected fall that may be caused by general market sentiment (ie. fears of recession, etc.) or by an unexpected release of news that brings the share down (a la centro, octavier/allco, ABC learning, etc.).

Now if you buy at $20 it will sell at $19.50 if it hits that amount on the way down. If, however, the share closes on $20 on monday and then opens the next day at $19 then it will not sell at $19.5 and will only be able to sell at $19 (the next available selling price).

As for etrade specifics i am unsure so hopefully someone else can answer that. you will be able to remove a stop if at any time you feel it is no longer necessary and you can sell at whatever price you want. the stop loss is essentially a 'pre-order' which asks the broker to sell at a particular price if it happens to reach it so as to limit any losses.


Hope this helps

 

[tcoates]

On E-trade.... once you are logged in, look under conditional order (under Trading).

There are a few different implementations in place here, each having different costs.

Each implementation also has "learn more" function guiding you through the process.

Tim

 

[Trembling Hand]

Surely if you do the homework on the share and use a stop loss does that mean you think the share will go down, and if you think the share will go down, why get it in the first place?

Actually i think you will find most traders KNOW that the next trade has a 50/50 chance of losing them money (give or take). That's why they MANAGE their trades that are losers by setting stops then moving on to the next trade.

This game isn't about being right its about knowing quickly when you are wrong.

 

[nioka]

Actually i think you will find most traders KNOW that the next trade has a 50/50 chance of losing them money (give or take). That's why they MANAGE their trades that are losers by setting stops then moving on to the next trade.

This game isn't about being right its about knowing quickly when you are wrong.

Anyone going into a trade expecting only a 50/50 chance of being successful may as well just play two up. To enter a trade you must have the odds well and truly in your favour. Anything under an 80% chance of success is gambling.. Well that's my way of looking at things.

 

[Trembling Hand]

Anyone going into a trade expecting only a 50/50 chance of being successful may as well just play two up. To enter a trade you must have the odds well and truly in your favour. Anything under an 80% chance of success is gambling.. Well that's my way of looking at things.

Rubbish!!

What happens if you have a 50 % win rate but your wins are 4 times your losers. You will end up being a very rich gambler!!!!!

My win rate over the last 3 years is 50% and I have made a stack of $$. My win rate for the 5 years before that was much higher and I lost many many thousands.

Odds in your favour don't just come down to win rate or being right. If you concentrate on that you are missing the point. its R:R that counts

 

[nioka]

Rubbish!!

What happens if you have a 50 % win rate but your wins are 4 times your losers. You will end up being a very rich gambler!!!!!

My win rate over the last 3 years is 50% and I have made a stack of $$. My win rate for the 5 years before that was much higher and I lost many many thousands.

Odds in your favour don't just come down to win rate or being right. If you concentrate on that you are missing the point. its R:R that counts

That is why only 5% of traders are successful. 50% break even and 45% are losers. 95% of normal investors are successful.
Congratulations, you must be in the 5%. However you needed the other 45% to contribute to your success.

 

[MichaelD]

Anyone going into a trade expecting only a 50/50 chance of being successful may as well just play two up. To enter a trade you must have the odds well and truly in your favour. Anything under an 80% chance of success is gambling.. Well that's my way of looking at things.

That is why only 5% of traders are successful. 50% break even and 45% are losers. 95% of normal investors are successful.
Congratulations, you must be in the 5%. However you needed the other 45% to contribute to your success.

Should we bite or should we not bite.

What the heck...bite.


This is simply incorrect.

1. Successful traders do very nicely indeed at 40-60% profitable trades depending on the style of system traded. It's not about being right, it's about how much you make when you're right.

2. You can design systems with 80%+ profitable trades - you just limit profits and let losses run. Unfortunately, eventually the losses catch up with you and wipe out a month or more's good work in 1 or 2 trades, if not wipe you out entirely.

3. Traders make money by transferring risk from the outright losers (the bad, undisciplined traders without a positive expectancy trading plan) and those that succeed despite themselves (the buy/hold crowd).

4. Is it gambling? Yes, but with one very important difference. With trading, YOU can get to be the casino, not the punter.

5. 95% of investors do not succeed - the most reliable figure I have seen is 30%. Telstra 2 anyone?


Radge has many succinct ways of summing up trading and the markets, and this is one of my favourite quotes;

"The only thing you can control in the market is how much you are prepared to lose."

Amen to that.

 

[bingk6]

It's not about being right, it's about how much you make when you're right.

Indeed !! and more to the point how much you lose when you're not right.

 

[Wysiwyg]

Exceptional enlightenment there from Michael D.

The stop loss education is an ongoing thing as my brief scenario shows me ...

I opened an account trading CFD`s and within two weeks i had doubled my account trading indices.THEN about 90% of my trades were losses (beginning with the charts i displayed some time back in the CFD thread) one after the other.I couldn`t believe i could be wrong on so many consecutive occasions.I decided that because my stop losses were being hit I would not use them and hold out for the reversal thinking i couldn`t be consistently wrong.

So i said, if the market (love those generalisations ) wanted to take then i would see how far they/it were prepared to go.The market took almost everthing in my CFD account.One trade after the other no matter short or long.Strangely just before this phenomenon i heard the whisper that they were gonna take it back and i could have ceased trading and preserved my acc. balance.

The lesson i learned was

"The only thing you can control in the market is how much you are prepared to lose."

 

[Nick Radge]

Anyone going into a trade expecting only a 50/50 chance of being successful may as well just play two up. To enter a trade you must have the odds well and truly in your favour. Anything under an 80% chance of success is gambling.. Well that's my way of looking at things.

Nioka,
I'm really disappointed in this comment from you. You are a senior poster so I am very surprised. I keep seeing people suggest that the best trading information is found on this (and other) forums. However, I contend, strongly, that there is also a lot of incorrect information. This comment is one.

There are about 3 specific reasons why 95% of people lose money in the markets. I am that confident that I would suggest that intimately understanding those 3 reasons can only create success. Understanding and abiding by those 3 concepts cannot ever create failure.

There is a distinct difference between 2-up (or any casino based gambling) and trading. A trader can make him/herself the house with simple concepts. Obviously I am able to backup my comments and would be more than willing to do so.


This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

 

[nioka]

Nioka,
I'm really disappointed in this comment from you. You are a senior poster so I am very surprised. I keep seeing people suggest that the best trading information is found on this (and other) forums. However, I contend, strongly, that there is also a lot of incorrect information. This comment is one.

There are about 3 specific reasons why 95% of people lose money in the markets. I am that confident that I would suggest that intimately understanding those 3 reasons can only create success. Understanding and abiding by those 3 concepts cannot ever create failure.

There is a distinct difference between 2-up (or any casino based gambling) and trading. A trader can make him/herself the house with simple concepts. Obviously I am able to backup my comments and would be more than willing to do so.


This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Oops!!! I stand corrected. I guess I over emphasized my point but I stand by my statement that I would never enter a trade where I personally consider the odds are only 50/50.

 

[CoffeeKing]

Many thanks to the replies and the information learned,
it will be taken to the next level...

 

[MichaelD]

I stand by my statement that I would never enter a trade where I personally consider the odds are only 50/50.

The overwhelming research body of evidence would suggest that every trade you enter has pretty much exactly these odds.

 

[wayneL]

I used to train a few gallopers for fun. My best horse had 56 starts but only 10 wins; a win rate of ~18%.

Those ten wins paid my wages for several years, bought a property, vehicles and a lot of bling.

Case closed.

 

[CFD]

What odds!

 

[nioka]

The overwhelming research body of evidence would suggest that every trade you enter has pretty much exactly these odds.

Thats rubbish. You are back to two up. Don't you believe in research and an educated guess? Quote me some of the research.

 

[wayneL]

Thats rubbish. You are back to two up. Don't you believe in research and an educated guess? Quote me some of the research.

You're dead right and you're dead wrong. There are all sorts of different methods with different win rates. Most technical trading systems are pretty much bang on 50% though, give or take.

I think what you have, is an inability to consider methods outside of your own experience/expertise.

BTW, Two Up would be outrageously profitable if the payout was 2/1. This is the concept that you are completely missing.

 

[Nick Radge]

...that I would never enter a trade where I personally consider the odds are only 50/50.

Okay. I accept that. Perhaps you can post the next 10 trades in advance. I simply can't see that you'd know ahead of time whether a trade will be a win or a loss but I also accept I have a lot to learn I have run at a 40% win rate for 10+ years so am willing to take on that little bit more.

My point with this win% concept is that it creates what I call "The Beginners Cycle". Its the want to be right. Its the want to find something better. Its how we've been brought up that causes it, but it is, in my opinion, a destructive force in the trading arena.

I think its different to attempting to find a 'comfortable' way to participate in the market, but even then a new trader will still attempt to take that and make it better. This creates all sorts of residual issues, both directly and indirectly.

If a new trader can remove this 'being right/being wrong' concept they will be a lot closer to finding the Holy Grail.

 

[stargazer]

Hi
Would you rather 7 out of 10 winners (70%) at 1.50 win
outlay 10
return 10.50
profit 5%

or

1 out of 10 winners (10%) at 20.00 win

outlay 10
return 20

profit 100%

Cheers
SG