Stop losses

tech/a · 9 May 2009

Aussiest said:
So tech,

Let me get this clear. You were willing to risk $500 to make $1000? I'm gathering that you set your inital stop at 1R?

No thats not clear.
In the example at the time I was 1R in profit.

Chorlton · 9 May 2009

tech/a said:
Its a complex topic. But there are factors which should be explored to get the best out of your M/M.
This really is where you can make a huge difference to your account.
Particularly in these times.

My own particular view is---

As I'm only trading short term and the moves are generally short I dont want to give away more than I have to at each end of the trade.
I love to pyramid and reasonably quickly,I love to quantify risk for each pyramid and I have each pyramid trade stand alone unless on EXIT as opposed to stopped out or taken out by trailing stop.

This is where I do get an edge,significant at times.

So the Stop or INITIAL stop is what is used to calculate position size.
A little thought has you realise that the closer the Initial stop is to the buy price then the more you'll be able to purchase for a quantified risk.

Here is where timeframe does make a vast difference.
For short term trading it is often the case when having only EOD data that you'll find good trades but your entry will be a little later compared to guys like me.
You'll also find you'll have (In comparison to my trade) a worse expected R/R
Reward to Risk Ratio.
And less stock for often the same risk.

I'll use as an example AGO
Its one I have had on my watchlist for sometime.
I'll say you risk $500/trade.
As an EOD trader you may have found it tonight and could be considering a trade.
See both charts below for commentary
The first is a Daily chart and the second the 60min chart which I used for entry today.

So Would you question the expense of live trading software and data?

I'll write up a trailing stop example later.

I hope this clarifies your STOP LOSS question with some food for thought

Tech,

Out of interest, when you pyramid into another trade on the same stock, do you :

1) use exactly the same trailing stop from the first trade as your exit?
2) use a new trailing stop but with the same exit conditions, as the 1st trade taken?, or
3) Use a new trailing stop with a completely different exit condition?

Just curious.....

Cheers,

Chorlton

jonojpsg · 10 May 2009

Just thought I'd vent my frustration at my last couple of stops activated and ask if anyone has ideas about how I might get around it.

Had a couple of Sopt GOld minis opened at 914.5 and 917.5 Friday and was watching it hover around 9.17 thinking yep this looks OK, I'll set my stops at 908 and 909 which would see me lose max $300 and $200 on each. Of course the next day I look and see the price at 917 and think, yep that's OK but then notice that boht of my positions got stopped out

The price dipped to exactly 908 overnight.

While I only lost my maximum I was willing to, if I had not set stops I would have still been in the green?

Mr J · 10 May 2009

jonojpsg said:
While I only lost my maximum I was willing to, if I had not set stops I would have still been in the green?

That time, yes, but what if it had dropped to 850? There are two possible reasons (at least that I can think of) for using stop losses. The first is to protect ourselves - insurance against a large move or when we're unable to exit ourselves. The second reason is if we can identify a point where the market says our strategy is not working, allowing us to get out automatically. I consider both reasons to be necessary; the first because it is sensible risk management, and the second because a pre-defined exit point is part of a good trading plan.

beamstas · 10 May 2009

jonojpsg said:
Just thought I'd vent my frustration at my last couple of stops activated and ask if anyone has ideas about how I might get around it.

Had a couple of Sopt GOld minis opened at 914.5 and 917.5 Friday and was watching it hover around 9.17 thinking yep this looks OK, I'll set my stops at 908 and 909 which would see me lose max $300 and $200 on each. Of course the next day I look and see the price at 917 and think, yep that's OK but then notice that boht of my positions got stopped out

The price dipped to exactly 908 overnight.

While I only lost my maximum I was willing to, if I had not set stops I would have still been in the green?

Was this with IG by any chance?

Wysiwyg · 10 May 2009

jonojpsg said:
Just thought I'd vent my frustration at my last couple of stops activated and ask if anyone has ideas about how I might get around it.

Had a couple of Sopt GOld minis opened at 914.5 and 917.5 Friday and was watching it hover around 9.17 thinking yep this looks OK, I'll set my stops at 908 and 909 which would see me lose max $300 and $200 on each. Of course the next day I look and see the price at 917 and think, yep that's OK but then notice that boht of my positions got stopped out

The price dipped to exactly 908 overnight.

While I only lost my maximum I was willing to, if I had not set stops I would have still been in the green?

beamstas said:
Was this with IG by any chance?

That sort of thing happened to me many many times. Too accurate to be coincidental. Yes, who was the broker please?

tech/a · 10 May 2009

Chorlton said:
Tech,

Out of interest, when you pyramid into another trade on the same stock, do you :

1) use exactly the same trailing stop from the first trade as your exit?
2) use a new trailing stop but with the same exit conditions, as the 1st trade taken?, or
3) Use a new trailing stop with a completely different exit condition?

Just curious.....

Cheers,

Chorlton

Chorlton.

It depends where the ptramid shows itself.
If its running then I'll tighten up the initial stop.
The pyramid stop is always as close as I can get it. If I'm watching this isnt a problem.
Often I'm not and miss many!
So All of the above at various times.

Cartman · 10 May 2009

jonojpsg said:
Just thought I'd vent my frustration at my last couple of stops activated and ask if anyone has ideas about how I might get around it.

Had a couple of Sopt GOld minis opened at 914.5 and 917.5 Friday and was watching it hover around 9.17 thinking yep this looks OK, I'll set my stops at 908 and 909 which would see me lose max $300 and $200 on each. Of course the next day I look and see the price at 917 and think, yep that's OK but then notice that boht of my positions got stopped out

The price dipped to exactly 908 overnight.

While I only lost my maximum I was willing to, if I had not set stops I would have still been in the green?

Hi Jono,

i thought Gold dropped as low as 905 ish overnight?? ---- nothing sinister there i can see from your provider whoever they are --

(how to fix the problem) ----- daily range for Gold has been maybe around 20ish last few days ??? ---- dont follow it/quick glance --

at the time you took your position/s daily range was maybe 4-5 ish ?

had you allowed 15 down from your entry point, youd still be in, but would have cost you more had you been hit ---- not advice, but maybe worth considering in your trading system ---

its a fine line between running an ultra tight stop (losing less, but winning less often) and giving it the headroom it might require to get a runner ---
Cheers.

jonojpsg · 10 May 2009

Thanks all

Yep, using IG. Do I need to be on the lookout for this sort of thing? Consider changing brokers?

Yep, price could have droped to $850 but I was pretty confident it wouldn't given the move up recently. I am agreed on the essential use of stops, however have only just started using them on every trade and have seen a number hit on intraday moves that have then reversed upwards again

So I need to have a closer look and assess the likelihood of large intraday moves, such as $20 swings on gold, and set my stops accordingly.

Will let you know how I go.

And yep the low was 905.60, so not exactly on my stop. 900 might have been a better level especially given it's psychological strength as a barrier?

Stop losses

tech/a

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Chorlton

jonojpsg

Mr J

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Wysiwyg

Everyone wants money

tech/a

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