What analysis do you use for trading?

[nomore4s]

Is there any evidence that moving an initial stop point to B/E actually "increases" gains simply because it makes a given trade a no loss trade?

For eg. Who is to say that if the original stop had been left in place, (and just missed being taken out) that the trade may not have continued on for a 2,3 or 4R winner ............

Hi Barney,

None of my discussions talked specifically about moving the stop to B/E only about reducing the risk of the trade once I have entered.

For me it depends on what market I'm trading and over what time-frame.

When trading the SPI on 1min bars I will move the stop to b/e as soon as possible - sometimes when the trade has only moved 2-3 points in my favour. My testing has shown that this dramatically improves my overall profitability in this market on this time-frame for a number of reasons.

But....

When trading ASX shares on EOD charts my techniques change to suit the market and type of set up I'm trading.
For instance I have one particular set up that once the trade is triggered if price reverses after my entry and then reverses again and manages to break back through the entry level I know that if price comes back and breaks that latest low, price then has around a 90% chance of either flopping around doing nothing or taking out my original stop, either way I know do not want to be in the trade anymore once that level is breached so that is where my stop is moved to. On average this level is somewhere around 50%-75% of my original stop, so I can therefore move my stop and reduce the risk of the trade without affecting the winning potential.

There are times when both these methods might cost me a profitable trade by stopping me out early but there are also plenty of times these methods have saved my full stop being hit which in the long run makes me more money then allowing my full stop to be hit.

The way I look at it is one less dollar I lose by controlling my risk once in a trade is one less dollar I have to make back to be profitable. The majority of my trading is solely about controlling my loses so when I have that good day, week or month I'm not just making back my losses.

This is where I believe the difference between theory and application comes in. A experienced successful trader learns the hard way that protecting capital is the key to longevity in the markets, there are times when conditions suit and there is plenty of money to be made but the majority of time it is about protecting capital and reducing loses - treading water really, so when the good times come you can take full advantage of it.

 

[barney]

Hi Barney,

None of my discussions talked specifically about moving the stop to B/E only about reducing the risk of the trade once I have entered.

For me it depends on what market I'm trading and over what time-frame.

Thanks for that NM4 .... I'm glad you replied with the highlighted point above, cause that is exactly what I was going to mention in my original reply ...

As you have mentioned, the time frame/instrument, and the way it is traded often requires a totally different approach.

Trading the 1 minute Euro while its in a mid week "waffle zone" may be a totally opposite trade to trading the Euro an hour or day later when it hits a 24 hour or weekly low/high etc etc ......

Good thread, and good on "Mr J" for taking some heat which often helps get some good info out .....

Cheers.

 

[motorway]

Motorway,



Finally getting to the point, and reality. Why would anyone trade something that appeared Not what I said random to them?? ( I can not think of one. Simple answer is that this is a straight gamble, real traders, winning traders do not play in something that appears random to them, they wait for the setup their experience has shown has an edge.

brty

Motorway

 

[It's Snake Pliskin]

Moving your stoploss limit to breakeven is not a "free trade"

Especially if you are paying outrageous brokerage rates.

But the initial stop guarantees a loss if hit. That affects the numbers.

Not sure what you mean? Are you suggesting other stops may be more important because they can 'guarantee' break-even or profit?

Mr J,

The initial stop guarantees a loss if hit. The effect is a minus to the results table. I'm not suggesting anything.

 

[motorway]

If you are willing to be stopped out at your entry price - why enter there in the first place? Never give a contract back to the market unless you have to (i.e. as defined in your rules): take off half your lots at 1:1 R:R and hold the remaining trade as a risk free asset on your book.

Ok so a PRICE is just a PRICE ?
So ==>49. 50. 51 .52. 51. 50

50 is just 50 and if it was good enough then it is good enough now ?

But

5. Every moment in the market is unique.

OH so PRICE is not JUST PRICE ?

It is a unique moment (a momentum ) which maybe needs a unique response ?

Even if it looks like the same price / moment / momentum ?

So 50 is not just 50 ?

and just because then does not mean NOW


5. Every moment in the market is unique.

Motorway, does you head get sore? You clearly have far to much information stored. You are like a walking encyclopedia

Get a long STICK
and balance it on your finger

Tell me what makes the STICK FALL ( or even just move in the first place )
How do you make the stick Stay relatively still in a range

How can you keep the Sticks movements smooth and walk or even run in one direction. TREND.

It is not predicting what the stick is doing


But you can produce all sorts of non random behaviour just the same.
and yes there is intention.

Two movements ==>your hand ( THE HALFWAY POINT )
and the end of the Stick ( The swings ).


When a car gets in a skid ?
What causes you to lose it ?


Motorway

 

[Boggo]

Originally Posted by sinner
Moving your stoploss limit to breakeven is not a "free trade"

My understanding of breakeven is that it takes all the costs, ie. buy and sell etc into account !

 

[lukeaye]

My understanding of breakeven is that it takes all the costs, ie. buy and sell etc into account !

That would be the definition of breakeven, so if something doesnt cost me anything, it must be free!

 

[pixel]

Si Hoc Legere Scis Nimium Eruditionis Habes

Numquam habes nimium eruditionis! Vivis ac discis, aut non vivis longiter.

 

[sinner]

That would be the definition of breakeven, so if something doesnt cost me anything, it must be free!

Unless it is part of a systematic approach I disagree. If the market has moved to a point you deem safe for "breakeven limit" to be put in place on your order, why/how is your original stoploss limit price level invalidated?

 

[tech/a]

PS: I believe anyone using the terminology of "free trade" to mean moving stops to BE is using the terminology incorrectly.

Remove your initial capital in the trade + brokerage and let the profits run with or without stops = Free trade.

Is there any evidence that moving an initial stop point to B/E actually "increases" gains simply because it makes a given trade a no loss trade?

Of course if you understood the concept then you wouldnt be asking.
Think over the next 500 trades.

 

[nunthewiser]

Of course if you understood the concept then you wouldnt be asking.
Think over the next 500 trades.

Yes the number of false shakout exits would zoom astromically i would say therefore proving that perhaps ones original entry stop was indeed the correct place to stay with ones stop giving the trade space to move ESPECIALLY in a channel situation ..

But hey each to there own , if it works for you in the long run , more power to ya .

 

[ThingyMajiggy]

When to move a stop to B/E is my problem, every time I seem to try it, I get stopped out, gives me the heeby geebies, so I don't tend to, I just leave my stop where I originally set it, but I can see the upside to it, I think its just me that is stuffing it up

 

[barney]

Of course if you understood the concept then you wouldnt be asking.
Think over the next 500 trades.

Can you elaborate on that please Tech .... I have no access to backtesting facilities, but the stats which give a definitive bias either way would be interesting .... Cheers.

 

[tech/a]

When to move a stop to B/E is my problem, every time I seem to try it, I get stopped out, gives me the heeby geebies, so I don't tend to, I just leave my stop where I originally set it, but I can see the upside to it, I think its just me that is stuffing it up

Sam.
I use 2 distinct times with my discretionary trading.
(1) When the trade looks under threat and I have "Some Profit" I'm not a subscriber to sitting on a pre determined stop watching it get taken out when clearly my original reason for taking a trade is either under threat or negated. As an example a trade bar which rises sharply only to be sold off on extreme volume.

Can you elaborate on that please Tech .... I have no access to backtesting facilities, but the stats which give a definitive bias either way would be interesting .... Cheers.

Barney you dont need to backtest this.
If you can deminish your initial risk over 500 trades your closed trade R/R will be improved relative to someone who didnt.

 

[barney]

If you can deminish your initial risk over 500 trades your closed trade R/R will be improved relative to someone who didnt.

I'm not actually arguing against this point Tech (I love getting trades to B/E ), but I often wonder whether it is as cut and dried as many traders make it out to be.
As Nun pointed out, how sure can we be that the higher percentage of shakeouts/hit stops are not costing us those 5% of outliers trades that actually make the E/curve positive ........
My gut feel is it is the individual traders call, and not something that can be measured accurately

NM4 gave an excellent breakdown of how he approaches different instruments/time frames, which I thought summed it up well, and I assume you work along similar lines.

Cheers.

For me it depends on what market I'm trading and over what time-frame.

When trading the SPI on 1min bars I will move the stop to b/e as soon as possible - sometimes when the trade has only moved 2-3 points in my favour. My testing has shown that this dramatically improves my overall profitability in this market on this time-frame for a number of reasons.

But....

When trading ASX shares on EOD charts my techniques change to suit the market and type of set up I'm trading.

There are times when both these methods might cost me a profitable trade by stopping me out early but there are also plenty of times these methods have saved my full stop being hit which in the long run makes me more money then allowing my full stop to be hit.

This is where I believe the difference between theory and application comes in. A experienced successful trader learns the hard way that protecting capital is the key to longevity in the markets,

 

[sinner]

Remove your initial capital in the trade + brokerage and let the profits run with or without stops = Free trade.

Like I said. Unless you are systematically and consistently doing this on every trade which meets some criteria in some method of your trade plan, then I disagree strongly.

Having done my own backtesting, I found (as barney just mentioned) taking half off at 1:1 to reduce your risk to 0 has a much better expectancy in terms of outliers.

Of course if you understood the concept then you wouldnt be asking.
Think over the next 500 trades.

I understand the concept very well thankyou, but have yet to see any evidence which was requested. My own backtests of various instruments on various methodologies over thousands of data points showed me that moving SL to BE instead of taking half off at 1:1 (and thus keeping the original trade parameters intact) removed most chances of catching the fabled outlier trade.

If we are thinking over the next 500 trades as you say, you should be able to show some systematic approach. Otherwise how can you quantify it? If you can't quantify it how does it fit into your plan?

 

[tech/a]

I'm not actually arguing against this point Tech (I love getting trades to B/E ), but I often wonder whether it is as cut and dried as many traders make it out to be.
As Nun pointed out, how sure can we be that the higher percentage of shakeouts/hit stops are not costing us those 5% of outliers trades that actually make the E/curve positive ........

We cant.
Woulda coulda shoulda has no place in business.
I know what my win or loss is on a trade the only control I have is minimising loss---nothing more.I cant eliminate it and I cant pick the exact top or bottom but I can continually work on my restriction of loss and maximisation of open profit.
I cant wonder what if its like having 5 trades to trade we pick 3 and they fail and the other 2 boom. You can only trade what you have and live by the decisions you make. Your bottom line is YOUR bottom line.

My gut feel is it is the individual traders call, and not something that can be measured accurately

In hindsite yes--I would have bought 1 million BRM at 10c!

NM4 gave an excellent breakdown of how he approaches different instruments/time frames, which I thought summed it up well, and I assume you work along similar lines.

In some ways yes.

Cheers.[/QUOTE]

 

[sinner]

Here is a perfectly valid real world example of a trade I took late last year:

Short EURJPY at 135.691 with a 10 pip SL.

I took half my lots off at 135.591 and kept my original SL in place.

SL to BE traders would have missed out - big time.

Meanwhile I cashed my remaining lots out for +1000 pips earlier this year.

 

[ThingyMajiggy]

Sam.
I use 2 distinct times with my discretionary trading.
(1) When the trade looks under threat and I have "Some Profit" I'm not a subscriber to sitting on a pre determined stop watching it get taken out when clearly my original reason for taking a trade is either under threat or negated. As an example a trade bar which rises sharply only to be sold off on extreme volume.

Yeah, I agree.

Do you tend to move stops up as the trade goes in your favour, or wait for clear spots to move the stop to, like low volume pull back etc or do you just move it to B/E and thats it?

 

[tech/a]

Here is a perfectly valid real world example of a trade I took late last year:

Short EURJPY at 135.691 with a 10 pip SL.

I took half my lots off at 135.591 and kept my original SL in place.

SL to BE traders would have missed out - big time.

Meanwhile I cashed my remaining lots out for +1000 pips earlier this year.

Sinner.

Exiting at B/E doesnt exclude a trader from taking part in any further trades.

I like your long term trade method.