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Breakeven Stops: At Entry or 1-2 Tic Profit?
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Breakeven Stops: At Entry or 1-2 Tic Profit?

  #1 (permalink)
Chicago Illinois USA
 
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Breakeven Stops: At Entry or 1-2 Tic Profit?

Experiencing a conundrum:

I can set a breakeven stop after so many tics of open profit in NinjaTrader, either automatically as part of an ATM or just dragging my original stop order. So far, I have been using the automatic route - which is nice because either the ultimate target is reached, or the breakeven (Entry +1 Tic) is reached (Heads you win, Tails you don't lose). Of course, there are times when Entry +1 is filled only to see the ultimate target get reached soon after - suggesting I learn to take some heat and move the stop myself after the retracement is over.

Could I ask for thoughts on this, please?

Thanks, and all the best!

MTCTrades


Embrace methods that only fail occasionally and reject methods that only win occasionally
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  #2 (permalink)
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  #3 (permalink)
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Instead of going to breakeven after a certain amount of profit, try moving your stop 50% so that you are now risking only half as much.

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  #4 (permalink)
Legendary Market Wizard
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I use OCO with stop at +1 only after I'm 50% of the way to my first target.

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  #5 (permalink)
Chicago Illinois USA
 
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olobay & Massive I: Thank you for exposing me to good ideas I would not have thought about! I will try these on the historical replay.

Thanks Again!

MTCTrades


Embrace methods that only fail occasionally and reject methods that only win occasionally
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  #6 (permalink)
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I really hope this doesn't come off as arrogant, or elitist. You likely need to continue to discover and develop your own personal trading plan. Its really not about a tick here or there, 50% stop loss, or anything else. it's about what your plan, and probabilities yield and your ability to make that happen.

What is your expectancy? What is that expectancy based on? If you built a plan that says "If this, then that, otherwise this other thing", and you've taken a fair amount of error-free trades that strictly adhere to those parameters, the answer will actually present itself.

Go back over a hundred days of charts. Look for your set ups. document the behavior. Then test the theory, and more importantly, your own ability to stick to it on a go-forward basis. 50 trades, 100 trades, 250 trades....Whatever it takes. You will find it. It's simple but definitely not easy. I've been working on it for a long time - much longer than I ever would have thought it takes.

Not knowing your set ups, time frame, context, account size........ there's probably no way for anyone to accurately answer that question.

Hope it helps.

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  #7 (permalink)
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bbilotta,

Thank you for your reply. In no way are your thoughts coming off arrogant or elitist. I shall go back over the last 40-50 days in the Playback mode and see what worked in the market, and with me. I am hopeful the answer will present itself after some (perhaps a lot of) study.

Thanks Again!

MTCTrades


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  #8 (permalink)
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bbilotta View Post
What is your expectancy?

I would just add I would be very careful with the definition of expectancy when you click on the link. That basically comes from the expected value calculation of an independent and identically distributed random variable(iid).

Are a series of 10 trades independent? Probably not, there is probably at least some slight dependence

Are a series of 10 trades identically distributed? Surely not.

The issue then with trying to have a single average expected value is you would under bet situations that the "true" expected value is higher than average and over bet situations that the "true" expected value is lower than the average. Of course we probably can't know the true expected value of the trade but chances are most the time it is not going to be near the average IMO.

I just don't think moving the stop is even the right question then. At the least this movement would have to scale with volatility. You can't do the same thing like this with the VIX at 10 vs the VIX at 50.

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  #9 (permalink)
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centaurer View Post
I would just add I would be very careful with the definition of expectancy when you click on the link. That basically comes from the expected value calculation of an independent and identically distributed random variable(iid).

....

I just don't think moving the stop is even the right question then. At the least this movement would have to scale with volatility. You can't do the same thing like this with the VIX at 10 vs the VIX at 50.


Exactly right, and that's the point I think. You must remove as much randomness as possible until you've got a solid foundation. Expectancy for me - trading the ES, NQ, CL is simply (Win% x Avg Win) - (Loss% * Avg Loss), in ticks, not dollars. And my homework requires I track every possible trade opportunity offered under the rules of my plan. My homework is without emotion. There I can determine my probabilities. I'm trying to whittle down the randomness to my own emotional limitations and abilities to do my job, follow the rules.

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  #10 (permalink)
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bbilotta View Post
Exactly right, and that's the point I think. You must remove as much randomness as possible until you've got a solid foundation. Expectancy for me - trading the ES, NQ, CL is simply (Win% x Avg Win) - (Loss% * Avg Loss), in ticks, not dollars. And my homework requires I track every possible trade opportunity offered under the rules of my plan. My homework is without emotion. There I can determine my probabilities. I'm trying to whittle down the randomness to my own emotional limitations and abilities to do my job, follow the rules.

But this formula (Win% x Avg Win) - (Loss% * Avg Loss) is highly flawed for the statistical properties of trades. This makes sense on an IID process that there is only one win/loss %. Then with an IID process the more samples you take the more informative the average win and average loss becomes.

This all breaks down with market data because the distributions change over time. The distribution of a trade for ES on Monday is not the same distribution as a trade on ES from early February bouncing out of the lows.

It is viewing the trader as the generating process as opposed to the market.

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