Very very interesting because I am using an initial stop loss below the previous 20 days lowest low (pivot point). The question I have is ------ is there an optimum n days (other than 20) for a long term trend riding strategy? Or alternatively does anyone use an initial stop loss below the lowest low on another duration (besides 20 days) that works better.The question being "Where to set it"
(1) Initial Stop.
If long term then I'm likely to add to positions which have a much higher timeframe.So will give far more room. Ive found the optimum (from testing)---regradless of method of stop placement is 8-12% of initial buy price. This gives a balance of being far enough away from most noise (SUN yesterday)--but not that far away that you find yourself lot in between initial buy and stop for prolonged periods---hence opportunity cost.
Third - when setting a stop loss position, it must be determined using some sensible chart-based concept. Such as a prior low, or clear support level. It is no good putting it half way down towards a support level.
Cheers
Where is his re entry into the same stock or a different one ?
In Getting out the point is so you can get in..
I regard a stop loss as OFFENSE
it gets you out to get you in
You retreat before large forces of SUPPLY
only for one reason
TO ATTACK
OFFENSE IS OFFENSE
DEFENSE IS OFFENSE
Getting out of what could be good MAKES NO SENSE
unless you get into something BETTER
RETREAT is ATTACK
( IF OPPRTUNITY PRESENTS )
A test where in getting out you don't get back into something
IS no test..
because It Stops opportunity LOSS ( Yes as I said it stops loss too )
Please enter favourite military analogy "------------"
Many examples of retreat leading to victory (Or could have )
Must be many where NO retreat proved disastrous
Stalingrad anyone ?
Much to learn from Confederate Civil War General
Joseph Eggleston Johnston
Johnston would only engage against the superior forces of Sherman on His own terms He wanted to either ambush him or make him overextend his lines
He continued to use a stop loss waiting for the right opportunity to enter the fray...
He continually set ambushes and when they were avoided withdrew
If he never got the chance to attack he would have kept all his powder dry.
Because if his Army was destroyed there was no second chance
But with it intact... There was always a chance...
John B Hood stood and fought in series of charges
after which there was no more any army to Speak of, and Sherman marched to the sea...
Johnston was blamed for not attacking.. For continual defensive movements.
But that was wrong (imho ) He knew that the best offense was from defense
esp when the market can steam roll over the top of you like Sherman...
But The whole point of getting out was to GET IN
Not just to GET OUT
It is part of the ENTRY TECHNIQUE
you get out to get IN
You move left to move right
up to go down etc
motorway
Its a very general comment--
Anyway they obviously are taking the same number of shares with a wider stop value.
They are not
(1) fixing their risk by taking a fractional position sizing
Or
(2) using a fixed Risk amount.
By the way it doesn't necessarily guarantee a greater win rate.
If its too wide it can cause you opportunity cost as the trade wallows between entry price and stop price.
The sweet spot seems to be no more than 12% from the buy price and no less than 6% from the buy price. IE $1.00 buy 88c or at worst 94c as a rule of thumb---the stop can be technical and if it falls in that range then its pretty good from my testing.
So if someone uses a wider/tighter stop with the same number of shares, does this mean that they would be risking different sizes of their portfolio per trade. E.g. instead of say 2% then maybe 1% or 3%?
What are your thoughts on this? Do you think fixed fractional is one of the more or least effective ways to place stops? (I am finding that I'm struggling to generate large multiple of R gains e.g. most seem to range between 0.5R and 1R, which is very frustrating). I'm not sure if I'm missing the piece of some sort of puzzle here.
So with that general guide (from your experience) of 6-12%. Does that mean you would not take one like this (irrespective of whether it is a good entry or not. I'm more concerned about the gap from entry to initial stop in this example).
Here it looks ok from a techincal point of view (support line). But the stop is only 2.5% from entry. Even that looks widish on this chart. (entry is on the first bar to break support)
Some of the companies I've entered like this one don't move by a huge percentage on average. Are these poor companies to trade?
View attachment 42844
As traders, we shouldn't really focus on the return of each individual trade; rather we should focus on the overall return of our portfolio.
I would not be trading this your bottom picking.
Very low reward to risk.
Trade with momentum.
I am short on this one in the practice sim. I entered on break of support (maybe could have waited for confirmation with this one).
How is it low reward to risk? Can you please explain what constitutes a high reward/risk trade? And how I might identify them.
I was hoping for some opinions on this trade. I entered on the day after the highlighted bar (the first wide one) and you can see my initial stop at $0.39.
So far the profit on this trade is 1.5R. Stop loss is 7.1% from entry price. Is the stop on this on ok? I put it here so that if it goes back below the line I am out.
I use a similiar approach except that there is no really standard application of stops that fit all especially in the current market.
You've got the concept, its just what you are prepared to risk/lose that now determines the $ value of the stop bearing in mind that you don't want to really tight stops to accommodate account size or buy volume.
Look at the stop from a practical chart point of view and then see if it is going to be a trade that you can consider rather than deciding that you want to trade it and then trying to make a stop fit, you will cop a thousand small lashes that way.
My initial "look" at the chart of any candidate involves glancing at the low of the bar prior to the current bar (provided that its low is lower, if not then the bar before that) and then making a quick mental calc of whether its distance would be too expensive if it turns against me.
I seldom continue further with anything that involves double digit percentage stops.
Two examples that came up last night where I would apply this approach successfully are CPL and IMD.
Have a look at both of those and tell me what are your views or approach.
The main thing is that you have a known or planned loss figure that you are prepared to lose and in some cases you may be able to apply a target based on a previous and current pattern.
This is the case on two of my current holdings (ALK and ILU) where I know the stop and can reasonably predict a target.
Once they start moving in the right direction the next bit is when do you move the stop to the breakeven point ?
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