Calculating Stop and Profit Target via ATR - Psychology and Money Management | futures io social day trading
futures io futures trading


Calculating Stop and Profit Target via ATR
Updated: Views / Replies:8,977 / 14
Created: by drunkcolonel Attachments:7

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 7  
 
Thread Tools Search this Thread
 

Calculating Stop and Profit Target via ATR

  #11 (permalink)
Elite Member
Orlando FL
 
Futures Experience: Beginner
Platform: NinjaTrader
Favorite Futures: ES 6E
 
drunkcolonel's Avatar
 
Posts: 21 since Jul 2011
Thanks: 104 given, 10 received

Chart Three

Chart Three:

Observations:

O1. Watching the ticks come through on our Filled Bar, I observed relative ease of movement downward, only very briefly did the trade go 1 Tick against us. Unquestioningly the tick/price action was in our favor, with our trade putting on 1 ATR ( 3 Ticks going our way ).
O2. The next bar we still saw the trade in our favor, closing on its low with still 1 ATR on.
O3. Two blue bars appear next, the first with a small range of 1 Tick, and the subsequent with a range of 3 Ticks. However with that range we also went 1 Tick lower. Closing on it's open and still having 2 Ticks in our favor, I'm still not questioning the trade.
O4. Big Blue makes an appearance. This bar gives me a bit of a shock and unease, as it has a range of 6 Ticks and closes on its high. It also closes above our EMA15. The trade now registers 3 Ticks or 1 ATR against us.

Questions:

Q1. Based on [ O4 ] I begin to ask myself "Do I need to close this trade?"
Q2. Looking at the chart would you stay in the trade? Why or Why Not?
Q3. "To Close the Trade... or Not to Close the Trade... That is the Question..." Perhaps this question is too philosophical in nature, or too dependent on personal instincts or trading systems, however I have come across two competing ideas on futures.io (formerly BMT). The first is: "When you are wrong just get out, don't hold on and wait for the full stop out". The second is: "Take the stops, accept them, it's just part of the nature of trading". What philosophy do you subscribe to?

Answers:

A1. Though I am at unease, this is the very eventuality that this approach is explicitly meant to address -that through the use of a wider initial stop we will prove our trade had the ability to achieve our profit target. Eventually.

Decisions:

D1. Stay in the trade.

Supplementary Thoughts, Information, and Resources:

S1. Many times I try and think of Maximum Favorable Excursion and Maximum Adverse Excursion during the trade. Looking at the the first few bars my MFE was 3 Ticks, and my MAE -as incredibly brief as it was, would have been 1 Tick. When big blue showed up and the trade registered 3 Ticks against me, or put another way -half of my full stop of 6 Ticks, I tend to get really nervous as it has been my experience that once the trade "tips" to 4 Ticks against, the probability of a full stop out becomes virtually certain.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Reply With Quote
 
  #12 (permalink)
Elite Member
Orlando FL
 
Futures Experience: Beginner
Platform: NinjaTrader
Favorite Futures: ES 6E
 
drunkcolonel's Avatar
 
Posts: 21 since Jul 2011
Thanks: 104 given, 10 received

Chart Four

Chart Four:

Observations:

O1. After big blue, another blue candle painted against the position. This time with a range of 3 Ticks. It also happened to advance 1 Tick closer to our Stop Loss target. As noted in the previous post with [ S1 ] I unofficially consider these "Tipping Point Ticks", an ominous sign of what is to come.
O2. The next bar goes on to stop me out of the trade at 9:24AM. This candle has a range of 7 Ticks.
O3. For the trade we experienced a Maximum Favorable Excursion of 4 Ticks, and a Maximum Adverse Excursion of 6 Ticks, and the total time we were in the trade was 18 minutes.

Questions:

Q1. Is there any other information on the chart that would have been a flag to shut the trade down prior to big blue taking the trade 1 full ATR against me?

Answers:

A1. Dunno, I'm asking ya'll - hopefully someone might see something I do not and share!

Decisions:

D1. NA

Supplementary Thoughts, Information, and Resources:

S1. I've started thinking long and hard about this general concept I'm referring to as "Tipping Point Ticks". As I've stated, my observations are generally that once a trade has advanced passed its "half way point" with regard to ATR, that it's more likely than not to continue in that direction, - typically taking out my stop. Upon further consideration, I questioned this supposition with regard to a the third bar after we got filled. Price was fighting back and forth, but did manage to go lower by 1 Tick at one point in the bar. By my loose definition, technically this should have been a Tipping Tick, thus indicating the direction should continue in that direction lower. This was not what was to be however. I'm currently trying to sort out if this path of thinking has value, or is some what more akin to going to a Mahler symphony and only trying to listen to the bassoon player honk away. No offence meant to any bassoonists in the crowd.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Reply With Quote
 
  #13 (permalink)
Elite Member
Orlando FL
 
Futures Experience: Beginner
Platform: NinjaTrader
Favorite Futures: ES 6E
 
drunkcolonel's Avatar
 
Posts: 21 since Jul 2011
Thanks: 104 given, 10 received

Chart Five


Chart Five:

Observations:

O1. This is the rest of the chart to show what eventually happened. As you can see around 9:35 we flirted with our Profit Target, and eventually a few bars later the market took off to the down side, and we would have achieved our goal.

Questions:

Q1. Was this more a case of poor trade selection, or a case of the stop being still yet too narrow?
Q2. What might have happened if we decided to use a multiple of three ATRs instead of two with our trade?
Q3: If we consider this exploratory concept of the "Tipping Point Tick" i.e. the 'point of no return' for our trade... this being Tick 4 in our first example... does it really make much sense to stick hard and fast to our 6 Tick stop?
Q4. As per [ S1 ] -one must ask... what does [ A3 ] say about our second example, that being our 9 Tick Stop Loss and 18 Tick Profit Target?

Answers:

A1. Not sure, additional insight is more than welcome regarding this question.
A2. If we used 3 ATRs our Stop Loss would have been 9 Ticks, and our Profit Target 18 Ticks. With our order filled at 1338.75, this puts our Stop Loss at 1341 and our Profit Target at 1334.25 respectively. As you can see from the chart we would have stayed in the trade, though perhaps a lot of nail biting and hair loss would have occurred... but eventually our Profit Target would have been achieved.

A3. It Depends... on something I'm starting to call "the jiggles". Let's play doctor for a moment and a assume a Trade walks into our office complaining of various symptoms. We ask "Well when did these feelings start?" ... and the patient responds, "Well, come to think of it... I was feeling just fine a few bars ago... but... I suppose it all started when I began having problems with things that I thought I could do, and should have been able to do, its embarrassing to talk about really... but I'm just having too much difficulty with it right now. What's wrong with me doc?"

We listen intently, trying to diagnose how healthy or sick our patient is. Finally looking at our chart in addition to reflecting on what he has told us... we conclude: "Well, I'm sorry to inform you but... unfortunately... you have a case of the Jiggles.

As the patients hangs his head... hands cupping his face... he shakes his head in disbelief and sniffles... "Oh Lord No... please..." He sighs... "What am I going to tell my Stop Loss?..."

Not wanting to deal with a hysterical Trade in our office we back off a bit. "Well hold on a minute there... I didn't say you were dying! There are a few types of cases of Jiggles... Stages One and Two statistically speaking you can live through, but after that comes Stage Three with the survival rate dropping off quite a bit, and finally there is Stage Four being unfortunately... a terminal case of the Jiggles.

The Trade looks up at us with watery eyes, and slowly... comprehendingly... begins to speak a soft question as something catches in his throat... "So... so... what are my chances doc?"

Stay tuned for the next episode of "Trades of Our Lives" a new market melodrama brought to you courtesy of futures.io (formerly BMT)!

Anyways, so our answer to him would depend on what we might define as a so called "minor case of Jiggles", a "troublesome" case, and finally the much dreaded "terminal" case.

Regarding that, I don't yet have a model, or know whether my track of thinking is worth more than cow spit at this point. Pressing on anyways however just shooting from the hip, one might say we hit troublesome jiggles when we gave our 1 ATR back very quickly in big blue, with the case being made for a terminal condition manifesting with the bar closing past the EMA on its high. Identifying a terminal case of jigglies would then lead us to close the trade down.

A4. Shooting from the hip once more, though we got away with staying in the trade by the skin of our teeth ( 1 Tick ) and were eventually profitable... I would still consider this a terminal case of Jiggles, forcing us to close the trade. Only by happenstance I would argue did we not get taken out. Given the terminal diagnosis in both our examples (Stop Losses of 2 and 3 ATR respectively), I am beginning to think that the answer to [ Q1 ] may lean much more toward being a case of poor trade selection.

Decisions:

D1. NA

Supplementary Thoughts, Information, and Resources:

S1. Interestingly, when one considers what I've been calling the "Tipping Point Tick" ( which in our second case with a 9 Tick Stop would have been Tick 5) we can see that the trade did continue to move toward our stop once it was hit -as expected. That is however... until it didn't... and the price action started making some hefty moves back down. This lead me to [ Q4 ]
S2. In hindsight I now see "looking to the left" that the bars many times hit 1338 and did not continue downward... this would have been additional information supporting closing the trade down.
S3. Also in hindsight I realize something I did not when I put on the trade... a glaring oversight that we are headed into the New York open. Might the volatility of an opening session make quick work of my stops? I'm very inclined to say probably.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Reply With Quote
 
  #14 (permalink)
Elite Member
Orlando FL
 
Futures Experience: Beginner
Platform: NinjaTrader
Favorite Futures: ES 6E
 
drunkcolonel's Avatar
 
Posts: 21 since Jul 2011
Thanks: 104 given, 10 received

An End to this series of chart posts... but a Beginning as well...

A last word with regard to this series of chart posts.

Though this thread started with a pretty innocent question, and I thought it best to try and understand ATR through an example trade, of which I tried my best to be thorough with my analysis of ATR and what it means for keeping us in trades or placing our stops... I fear I may have gone too in depth. Some questions posed may not be really within the scope of the thread, but as I waded through my stream of thoughts I just kept writing everything down.

Venturing down this rabbit hole so far has helped me codify a lot of thoughts, but also has pulled back the curtain to even more questions... so I've decided to create a trading journal so that I can post my various analysis separately from this thread. It is called "Trades of Our Lives: A Market Melodrama" and can be found here: https://futures.io/trading-journals/22438-trades-our-lives-market-melodrama.html

With that out of the way, I want to try and keep the thread "on topic" so if it's already too far off base hopefully a moderator can move it or reclassify it or just yell at me or something.

Finally I want to continue on with this thread, and explore some more concepts such as Stop Loss placement within N number of ATRs of a swing high or low and see what results that might yield.

I look forward to responses and hopefully a lively -thought provoking discussion will ensue. Happy Trading.

Curt.

Reply With Quote
 
  #15 (permalink)
Elite Member
hollywood
 
Futures Experience: Intermediate
Platform: thinkorswim
Broker/Data: TD
Favorite Futures: futures
 
lsubeano's Avatar
 
Posts: 194 since Jun 2010
Thanks: 63 given, 149 received

Yes, ATR works.....I use it as a guide line. whether you use 5 to 30, doesn't make that big of a deal if you look for long term average.

I look at atr of week, day, 1hr, 10min. You can use highest atr reading of day week or month during the time you trade or use it to gauge current volatility.


Honestly, imo if you consistently trade similar setups and time frames, just measure how much the trades went against you and compare the best trades to average trades to worst....then you'll have a better idea.

Also don't forget time....if you're trading 3min time frames, it shouldn't take too long to figure out if you're on the right side of the trade or not.

Reply With Quote

Reply



futures io > > > Calculating Stop and Profit Target via ATR

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Jigsaw Trading: TBA

Elite only

FuturesTrader71: TBA

Elite only

NinjaTrader: TBA

Jan 18

RandBots: TBA

Jan 23

GFF Brokers & CME Group: Futures & Bitcoin

Elite only

Adam Grimes: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Free stock charts with ATR Trailing stop peglegtrading Traders Hideout 1 December 1st, 2011 02:48 PM
Rockwell ADR stop and target indicaor - not calculating correctly Jason11 NinjaTrader Programming 3 March 19th, 2011 07:53 PM
ATR Stop Trail need help pls Falco11 NinjaTrader Programming 6 January 20th, 2011 05:53 AM
Calculating 'Perfect Profit' Jura NinjaTrader Programming 6 July 15th, 2010 08:25 AM
where should profit target be placed? anniebee321 Beginners and Introductions 9 June 7th, 2010 08:38 AM


All times are GMT -4. The time now is 04:52 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-16 in 0.13 seconds with 30 queries on phoenix via your IP 54.163.210.170