Mostly day timeframe, hold time for winners is usually about 30 minutes to 4 hours, depending on the day type and time of day. I like the idea that it is a "stop profit" order... lol, good stuff.
Yes, I keep track of MAE (I call it max drawdown on a trade on my spreadsheet). I have a chart that shows profit to MAE. "Good" is 2:1 (profit:MAE) and better. "Okay" is 1:1. Some trades are simply great and have like a 10:1, but most are in the 2:1 range.
When to say "this trade will not be a loser" is quite tricky sometimes. How many stops to BE have been triggered with a favorable move following, versus genuine "I'm wrong at this point"? Depends on the trader of course. But (for ES anyway) the 10-12 tick favorable move is tricky -- this morning, it would have killed me. Other times, it is fine. Again, that's where judgement comes in, and why I don't like to have a rule that says this, as the rule does not take the market context into consideration.
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By the way, this topic is something I have wanted to discuss with others for some time, and it is not the direct result of a single trade today. I have put thought into this before and today seemed to be a good time to open the topic up for discussion in a new thread.
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A corollary / related question ... I wonder how many traders who we would consider "professional" are using things like ATM strategies, and other platform features that are so focused on among retail traders. I mean, does a professional trader really care about bells and whistles involving order entry and the like? Just thinking out loud.
In my opinion, which is based on talking to a ton of people in various roles, is that such things (ATM, etc) are never on a list of considerations. Those things are just for retail.
But you have to keep in mind that institutions and funds have other tools in place instead, like dedicated risk managers and a long laundry list of what they can or cannot do risk wise, so in most ways they are far better off than retail because they simply cannot move their stops or make foolish decisions.
But I think things like trailing targets and stuff are not used too widely because it's just an arbitrary number that makes no sense. If you move your stop, there should be a reason other than "price moved in my favor 10 ticks".
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Some guys have the luxury of almost unlimited capital and they are very patient plus they can trade big enough size and hang around to get out of a well averaged position.
They may also be long the "wings" and essentially hedged or they may lay risk off in the other products or use options. Some guys don't sweat too much because they know the "pairs" relationship and that everything tends put in a range in such a way to allow for an escape.
IMO a typical sole prop should not trade without some way to hedge or lay off risk. It is unfortunate that taking a loss through a stop is for most people the most practical way.
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I use ATMs and Interactive Brokers. I use this mostly because I'm in Thailand and it's not unusual for connections/power to drop for an extended period.
So - with this in place, my risk of equipment failure is covered.
One of the advantages of guys in prop shops and other institutions is that they pay a lot of $$$ for infrastructure and don't have to worry about the stuff I do.
In terms of stops - my initial stop is 4 ticks. The way I trade, I don't expect my trades to go against me much. In fact, for a lot of trades, I don't expect it to go against me more than 2 ticks. Other trades, I'll give a lot of wiggle room. Just depends on the trade.
I'd never use an automated trailing stop, it seems an odd thing to do. You spend all that time getting an entry and then you give up when it comes to managing the trade! I have to say, reversing a trade seems equally odd to me.
What I do like about ATMs is that it puts orders out there for me that I can then move about.
I know a few professional day traders and full-time retail traders trading outrights & without exception, they all know where they will exit a losing trade. This is a stop. Doesn't matter whether you have an order out there, it's still a stop. I've never met a professional day trader that didn't know where they'd exit a trade if it went against them.
If you have the infrastructure and you have the mental strength, you don't need a stop order out there. If you trade a slower market - like the treasuries, you can often work an exit and get out with a tick of price improvement.
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One thing to consider is that the best management technique for any trade (or series), is only known in hindsight.
What would have made you more money today could have lost you money yesterday.
I scale out of trades but I do have an exception. There are times where I will just jump on a move. I'll do this if I think the market is good for an extended move and probably won't offer much chance to get back in. Happens 1-2 days out of 10. For those trades, I think a small initial position is more suitable and then add on as it goes your way. It gets less risky as the move continues.
Other than that - I scale out. I trade short term and the way the ES is, I find it suits me to trade that way. I am sure someone could 'prove' mathematically that another method is more profitable but they aren't going to come & press the button for me, are they?
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