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Tight Stops can give false comfort
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Tight Stops can give false comfort

  #11 (permalink)
Membership Revoked
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liquidcci View Post
I must admit I have a romance with CL. Speed and range crazy though as I have around 60 to 70 tick range between my stop and target yet rarely in a trade over 10 to 20 minutes. Perfect day trade instrument.

Haha, I'm also in love with CL, she is a rewarding mistress...

I trade in a similar fashion as you do... When I started out, everyone warned about the "insane" volatility, but I've never felt more connected to an instrument. You generally find out fast if your right or not, time-based stops can be quite efficient...

This week has been phenomenal, hopefully it will continue!

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  #12 (permalink)
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I'm finding it's better to focus on exit efficiency and taking what the trade will give me, which places less emphasis on how accurately I timed my entry.

I think entry efficiency has much more volitility and variance than focusing on exit management, which if done properly, is more timeless and consistent.

I've heard people say this before as well and I've actually never understood it. I wonder if there is any statistical/mathematical argument that can distinguish between entry optimization vs. exit optimization? To me, entries and exits are simply adjustments in your relative exposure - an "exit" is simply an "entry" into a flat position. Whereas an "entry" is simply an "exit" from a flat position.

I'm curious to hear more about this.

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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  #13 (permalink)
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Stops suffer from the same problem of duality as does leverage. Used properly it is an indispensable tool, but used improperly it will inhibit or destroy your P&L. Improperly placed stops will not only limit your risk, but will also limit your opportunity. Fixed price-based stops and trailing stops can seriously degrade your performance, and cause a slow but certain death. Failure to use stops can of course, result in sudden and certain death.

Simply because a market moves against a position does not necessarily mean that the underlying trade idea is invalid. The important thing is to know your trade idea and what would truly invalidate it. In other words trade the market and not your P&L, and to try base your stop on where you are wrong the market.

Personally, all my stops are mental, unless I walk away from the computer. Try to find them - you won't. But I'll find your stops if you place them at obvious levels, and I'll be more than happy to take the other side of them.

If you are uncertain where the “ I’m wrong the market “ price is, then base your stop on sound money management principles. To do the job properly:

• Determine how much you are willing
to risk on each trade.

• Understand the risk of the trade you
are about to take and size the trade
appropriately.

• Track the trade going forward.

• Pay attention to your risk points;
take small losses before they become big
losses, but allow the price action to dictate your actions

Proper money management begins with proper position sizing which will inevitably aid you in your stop placement.

Personally, all my stops are mental stops, unless I step away from the computer. Try to find my stops - you won't! but, I'll find your stops if you place them at obvious levels, and I'll be more than happy to take the other side of them!

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  #14 (permalink)
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Surly View Post
I've heard people say this before as well and I've actually never understood it. I wonder if there is any statistical/mathematical argument that can distinguish between entry optimization vs. exit optimization? To me, entries and exits are simply adjustments in your relative exposure - an "exit" is simply an "entry" into a flat position. Whereas an "entry" is simply an "exit" from a flat position.

I'm curious to hear more about this.

I think entry, exits and position sizing all need to be adjusted to find optimal setup. They all play together and adjusting one effects optimal on another. So I try to look at everything and its effect on overall system.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #15 (permalink)
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Stops suffer from the same problem of duality as does leverage. Used properly it is an indispensable tool, but used improperly it will inhibit or destroy your P&L. Improperly placed stops will not only limit your risk, but will also limit your opportunity. Fixed price-based stops and trailing stops can seriously degrade your performance, and cause a slow but certain death. Failure to use stops can of course, result in sudden and certain death.

Simply because a market moves against a position does not necessarily mean that the underlying trade idea is invalid. The important thing is to know your trade idea and what would truly invalidate it. In other words trade the market and not your P&L, and to try base your stop on where you are wrong the market.

If you are uncertain where the “ I’m wrong the market “ price is, then base your stop on sound money management principles. To do the job properly:

• Determine how much you are willing
to risk on each trade.

• Understand the risk of the trade you
are about to take and size the trade
appropriately.

• Track the trade going forward.

• Pay attention to your risk points;
take small losses before they become big
losses, but allow the price action to dictate your actions

Proper money management begins with proper position sizing which will inevitably aid you in your stop placement.


Personally, all my stops are mental stops, unless I step away from the computer. Try to find my stops - you won't! But, I'll find your stops if you place them at obvious levels, and I'll be more than happy to take the other side of them!

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  #16 (permalink)
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tigertrader View Post
Stops suffer from the same problem of duality as does leverage. Used properly it is an indispensable tool, but used improperly it will inhibit or destroy your P&L. Improperly placed stops will not only limit your risk, but will also limit your opportunity. Fixed price-based stops and trailing stops can seriously degrade your performance, and cause a slow but certain death. Failure to use stops can of course, result in sudden and certain death.

Simply because a market moves against a position does not necessarily mean that the underlying trade idea is invalid. The important thing is to know your trade idea and what would truly invalidate it. In other words trade the market and not your P&L, and to try base your stop on where you are wrong the market.

If you are uncertain where the “ I’m wrong the market “ price is, then base your stop on sound money management principles. To do the job properly:

• Determine how much you are willing
to risk on each trade.

• Understand the risk of the trade you
are about to take and size the trade
appropriately.

• Track the trade going forward.

• Pay attention to your risk points;
take small losses before they become big
losses, but allow the price action to dictate your actions

Proper money management begins with proper position sizing which will inevitably aid you in your stop placement.


Personally, all my stops are mental stops, unless I step away from the computer. Try to find my stops - you won't! But, I'll find your stops if you place them at obvious levels, and I'll be more than happy to take the other side of them!

So, you don't set Stop Loss; Right ? When does your mental stop get stopped by you and you ONLY.

Lolu

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  #17 (permalink)
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lolu View Post
So, you don't set Stop Loss; Right ? When does your mental stop get stopped by you and you ONLY.

Lolu

I stood next to retail broker in the bond pit for 20 years, and after the bonds went to the screen, I stood next to a retail broker in the bean pit - for a very good reason. I wanted to fade retail orders, especially retail stop orders. Fade retail - step in front and race commercial orders. To certain extent, I can recreate the experience electronically, because "dumb money" doesn't know where, and how to place their stops. This makes for some very high probability trades. I am not going to place my stops in the market so the predatory algos can stop hunt for my stops - it's part of my trading "gamesmanship". Basically, I get out my longs, at-the-market, when I don't want to be long anymore and cover my shorts, at-the-market" when I don't want to be short anymore. This is of course, executed within the parameters of a sound money management/ position sizing framework. I will physically place stops orders in the market that are not protective, for obvious reasons. But I will probably be "goosing" the market with market orders when the stops are elected.

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  #18 (permalink)
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lolu View Post
So, you don't set Stop Loss; Right ? When does your mental stop get stopped by you and you ONLY.

Lolu

I stood next to retail broker in the bond pit for 20 years, and after the bonds went to the screen, I stood next to a retail broker in the bean pit - for a very good reason. I wanted to fade retail orders, retail stop orders. Fade retail - step in front and race commercial orders. To certain extent, I can recreate the experience electronically, because "dumb money" doesn't know where and how to place their stops. This makes for some very high probability trades. I am not going tp place my stops in the market so the predatory algos can stop hunt for my stops - it's part of my trading "gamesmanship". Basically, I get out my longs, at-the-market, when I don't want to be long anymore and cover my shorts, at-the-market" when i don't want to be short anymore. This is of course, executed within a sound money management/ position sizing frame work. I will physically place stops orders in the market that are not protective, for obvious reasons. But I will probably be "goosing" the market with market orders if I think it's appropriate.

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  #19 (permalink)
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...Personally, all my stops are mental stops, unless I step away from the computer. Try to find my stops - you won't! But, I'll find your stops if you place them at obvious levels, and I'll be more than happy to take the other side of them!

Let's pretend price is in a downtrend, it's making LL and LH. As a good trend follower i might want to jump on board at the next pullback (LH). Obviously, i'll place my stop above this LH. I would bet almost everyone is doing that.

Let's pretend price is bottoming up, i see a HL a few ticks away from the bottom. I also notice this new HL is resting at a high volume node created at the bottom (shift of volume at the bottom). Not a fool, i see an opportunity to go long and place my stop below the bottom of this whole setup.

So my question... what is wrong with these scenarios ?

In fact, could you define what is a poorly placed stop loss ?

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  #20 (permalink)
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trendisyourfriend View Post
Let's pretend price is in a downtrend, it's making LL and LH. As a good trend follower i might want to jump on board at the next pullback (LH). Obviously, i'll place my stop above this LH. I would bet almost everyone is doing that.

Let's pretend price is bottoming up, i see a HL a few ticks away from the bottom. I also notice this new HL is resting at a high volume node created at the bottom (shift of volume at the bottom). Not a fool, i see an opportunity to go long and place my stop below the bottom of this whole setup.

So my question... what is wrong with these scenarios ?

In fact, could you define what is a poorly placed stop loss ?

What's wrong is, you are doing what everyone else is doing. It's obvious, and professional traders take advantage of this fact - so do the algos. A lot of the passive algorithms are programmed to take advantage of these tendencies by selling the new highs and buying the new lows. How many times have you been stopped out, only to have the trade turn around and go back in your favor?

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