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All in All out Trade Management - how much breathing room?


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All in All out Trade Management - how much breathing room?

  #1 (permalink)
 
treydog999's Avatar
 treydog999 
seoul, Korea
 
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I am having a bit of a conundrum. especially because of 1 lot trade. I know people say scale out with multiple lots, which does have its own pros and cons. But this situation happens to me pretty much on a daily basis and it applys to anyone who does AIAO.

You take a trade and you are in the green. say your stop is 15 ticks and target is 30 ticks. When do you start trailing your stop? if at all?

Now lets take this a step further, your 3 ticks from hitting your target, where is your stop? Is it still at a full stop? So you're risking 27 on paper + 15 actualized so 42 Net to gain 3? or even if you're at break even your risking 27 to gain 3? That math just does not make sense to me. However if i trail up aggressively i do cut myself off at the knees sometimes.

So say I take a 1:1 squeeze stop after we have made it 50% of our way to target. It could be any percentage but its easy to think of this way. If our target is 30 and we make it to 15 we now move stop to break even (Risking 15 for 15 more) When we get to 20 we move our stop up to + 10 (risking 10 to gain 10). When we are at 25 ( move stop up to +20 risking 5 to gain 5 more). Etc....

I have not done any math on this. i am actually quiet poor at looking at situational and combinatorial probabilities. But what is a good way to manage this risk? I mean it just gets me that if you do AIAO and never move your stop, you could be 1 tick from target and get a full stop out. Seems ridiculous to me. But also if you trail to aggressively you never actually get your full targets. THOUGHTS?

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  #3 (permalink)
 
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 liquidcci 
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Backtest then forward test only way to find what "might" work best. Trailing stops are hard to backtest though. You are trading blind if try to set on just what you think might work. Also because every setup is different it is not something someone can tell you set it this way and it work. I like the idea of trailing stops but so hard to test I don't use them. I will move stop once to BE plus 1 on some setups but that is based on extensive testing as it is easier to test a one time move.

"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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  #4 (permalink)
 Koepisch 
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Hi @treydog999,

if you have a backtestable pattern then you could test different trade management techniques on your historical trades. For my own purposes i've build an own tool to get the statistics done, but i'm sure you can get that also within ninjatrader (create an strategy with public variables for your position managment logic - and do optimize). Thats a question of effort to get the answer to your questions.

Because every system is different i think that there is no common answer to your question. It's MUCH harder to get the statistical results if you manage your position within one trade.

For an long time i have worked with initial targets (+trailing), but actually i test using different targets with one trade and using limit orders at these levels. I try to let 1/3 of the position run into the next upper resistance/fib cluster zone. It's clear that the "running positions" are protected from being loosers.

I prefer to enable a bar trailing stop at the initial target (with small range or tick bars charts). It cuts the losses (from do the trailing) short and it can hold you longer in the trade. Additionally i look at the key reversal times of the instrument (from own statistics) and apply an ATR trailing stop at the open positions at that times (working on that).

It's a long way to leave the AIAO path with confidence.

Koepisch

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 trendisyourfriend 
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treydog999 View Post
...I have not done any math on this. i am actually quiet poor at looking at situational and combinatorial probabilities. But what is a good way to manage this risk? I mean it just gets me that if you do AIAO and never move your stop, you could be 1 tick from target and get a full stop out. Seems ridiculous to me. But also if you trail to aggressively you never actually get your full targets. THOUGHTS?

My opinion is that you need to test it and see what is more profitable. Indicator Warehouse did a tool (Profit finder) to test out various trailing stops. It's a bit expensive maybe a scripter here at futures.io (formerly BMT) could create a similar tool. Anyway, it's possible to find your own answer without spending too much time.

Indicator Warehouse Profit Finder for Basic Strategy - YouTube

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  #6 (permalink)
Ecko
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I've eliminated B/E stops out of my trading. I take a loss or I take a profit. Sure it's not 'fun' to take a loss after the trade went in your favour first. But don't look at the outcome of 1 trade, look at the results of 20-50-100-... trades.

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 TrendTraderBH 
Detroit, Michigan
 
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This is the correct answer and very simple.....but not easy in real time LIVE. The temptation to overcome moving to BE is imho a deciding factor in whether one is profitable as a trader or not.

Why? Because moving stops to BE basically hurt your winning trades in my experience. Seems counter-intuitive but my LIVE experience shows this to be the case.

Moving stops "should" be reserved for if the signal is no longer valid or market conditions (ie. breaking a trend line, doji, etc) then exiting a trade prior target tends to work.



Ecko View Post
I've eliminated B/E stops out of my trading. I take a loss or I take a profit. Sure it's not 'fun' to take a loss after the trade went in your favour first. But don't look at the outcome of 1 trade, look at the results of 20-50-100-... trades.


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 liquidcci 
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TrendTraderBH View Post
This is the correct answer and very simple.....but not easy in real time LIVE. The temptation to overcome moving to BE is imho a deciding factor in whether one is profitable as a trader or not.

Why? Because moving stops to BE basically hurt your winning trades in my experience. Seems counter-intuitive but my LIVE experience shows this to be the case.

Moving stops "should" be reserved for if the signal is no longer valid or market conditions (ie. breaking a trend line, doji, etc) then exiting a trade prior target tends to work.

Moving stops to BE can be a great tool. At one time I thought they did more harm than good. They should never be used for an emotional backstop. But there are certain markets certain setups where they can reduce draw and increase profit substantially in some cases. Like anything in trading though only implement if your have a clear case via stats to use.

"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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  #9 (permalink)
 
treydog999's Avatar
 treydog999 
seoul, Korea
 
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So what I am getting it a, it depends. Do your own homework. Unfortunately my set up is not programmable or straight back testable. But I have over 80 trades live (all managed differently unfortunately) to go off of. I guess i will just study up on my journal and see what's best.

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 PandaWarrior 
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treydog999 View Post
I am having a bit of a conundrum. especially because of 1 lot trade. I know people say scale out with multiple lots, which does have its own pros and cons. But this situation happens to me pretty much on a daily basis and it applys to anyone who does AIAO.

You take a trade and you are in the green. say your stop is 15 ticks and target is 30 ticks. When do you start trailing your stop? if at all?

Now lets take this a step further, your 3 ticks from hitting your target, where is your stop? Is it still at a full stop? So you're risking 27 on paper + 15 actualized so 42 Net to gain 3? or even if you're at break even your risking 27 to gain 3? That math just does not make sense to me. However if i trail up aggressively i do cut myself off at the knees sometimes.

So say I take a 1:1 squeeze stop after we have made it 50% of our way to target. It could be any percentage but its easy to think of this way. If our target is 30 and we make it to 15 we now move stop to break even (Risking 15 for 15 more) When we get to 20 we move our stop up to + 10 (risking 10 to gain 10). When we are at 25 ( move stop up to +20 risking 5 to gain 5 more). Etc....

I have not done any math on this. i am actually quiet poor at looking at situational and combinatorial probabilities. But what is a good way to manage this risk? I mean it just gets me that if you do AIAO and never move your stop, you could be 1 tick from target and get a full stop out. Seems ridiculous to me. But also if you trail to aggressively you never actually get your full targets. THOUGHTS?

AIAO is mathematically superior to scaling out. But scaling in is better than AIAO in the sense that it allows you to lose small and win big. See my post about this here

I think for me at this beginning stage of experimentation, it is far better emotionally to exit the trade at +27 than +20 which is better than +15 or +10 or BE on some sort of pull back. In other words, let the trade breath but as it gets closer and closer to target, trail it based on some premise. I am using two with trend bars back once it gets reasonably close and then one bar back until it either hits the target or the stop. However the caveat here is this: Whatever happens you must be emotionally ok with it. Even if it goes 100 ticks further in your favor, you have to realize that is what you set out to do and regardless of what "might have been" you are ok. This is the nature of trading. The constant unknown. Learn to embrace the uncertainty of it and let be.

good luck on this....once you get comfortable with whatever method you choose, I think your trading will dramatically improve beyond where it is now.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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Last Updated on June 10, 2013


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