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In general, the stop goes at the price where the market would have to trade to invalidate your trade idea.
The problem with a hard stop is that not all trade ideas are so easily invalidated by the market simply trading there. My main gripe with a hard stop is that it makes it more difficult to be flexible. Set your stop, set your profit, and "leave it in god's hands" ... that doesn't work for me, personally. With some software, a stop can be set to trigger on various conditions, which makes them more viable for me. For example, you can set a stop to trigger only if X number of shares/contracts trade that price; or, trigger the stop when it's touched, but only execute after X seconds have passed, in case it's a quick stop run that immediately reverses. Those are more intelligent ways to exit trades IMO, and so I tend to not use the singular condition of "if someone trades this price (or beyond), I want out."
In general, most people should use a hard stop, and there are times I've wished I had, and times when I'm glad I don't. Don't get me wrong -- if I'm looking for a 100 tick move in CL, and it's gone for me 30 ticks already, I will have a stop in, usually to secure a tick or two to cover costs. But in this case, it's not a "stop loss," it's a "keep profit." And, a disaster stop far enough away from noise in the event of technical issues is a good idea. If I'm holding overnight I'll have a stop 100 or 200 ticks away just in case war erupts while I'm sleeping.
There are many subjects to discuss around this (liquidity and stops, for example), none of which you are prepared to absorb yet, so, welcome to trading and best of luck to you.
I had a friend who traded too big on sim and then when he switched to real money it loss it all in one day.
I think you should trade 1 lot and as you say aim for consistency.
There is a real danger in your lucky start in that you may feel overconfident and go to cash too soon and too aggressively. If you remember it was luck and use it as a confidence strengthener later then you can change the danger into a strength.
If you are trading one contract and then it goes against you don't double down (unless that was your plan before the first and you have an enormous bankroll). You might have a winner and learn a bad habit.
I agree Josh. I think this is a very important statement.
This is very important for new traders to remember. The second implication of this statement is that if placing a stop at this level (where your trade idea would be invalidated) is too far from your entry to align with your money management 1R level then you shouldn't enter the trade.
As an example, if you are thinking of selling at 2601 and the short trade would not be invalidated until 2610 (9pts) and your 1R (your risk unit) is 5 pts ($250) then you should not take the trade.
in futures it's easy to make 1000% a month and even easier to lose everything when on tilt. knowing how to pace yourself and money management is critical.
It's like playing poker, you can be on a great run but if you risk all your bank roll everytime eventually you WILL lose.
Sim trading is great for trying out new ideas BUT you MUST treat it as though it is a real money account, or you're just wasting your time and setting yourself up for disaster in a live account. Focus on risk, profits will take care of themselves.
After many years of live trading, I still occasionally use my sim account to test code or practice trading in a market that is not favorable to my method.
Never trade real money until you are consistently profitable sim trading (for several months, not just a few lucky days).
Good trading.
