I try to control myself not to cut my winning positions earlier than my plan. I think that this is more difficult than using stops. Anyway, I hardly get stopped in my "worst case stop". I usually get out of the trade when I see the conditions that make me enter in the trade are gone. It usually happens before my original stop gets hit.
I have to agree as well, this is one of the hardest parts to this game, proper stop placement, whether it be the initial stop placement or the right amount to trail a stop by or whether or not to move to break even or break even +1 after you have a few ticks in the bank. I have to say that more often than not if I move my stop to break even after I have 4 or 5 ticks in a move, it seems like the wrong thing to do as it comes back and tags your stop only to go on and hit your original profit target. So I'm with you guys on this one, they are a necessary evil, but can frustrate the heck out of you at the same time.
Stops are not frustrating if u have already builded a system/method tha has an edge, and tested it over time. If this system/method has builded with SL and has a positive return on long term, just take your stops and go on...
If u have a method/system, without SL, tested on a long term with positive return, if u would add SL u can try to use the overall max mae (maximum adverse excursion) in ticks + 1 or 2 ticks.
Know where to exit a trade is very important, if not essential, unless u have a bottomless account.
Take your Pips, go out and Live.
The following user says Thank You to LukeGeniol for this post:
Don't trade the first 15 minutes of the open. Look at the ranges on your bar charts, candle charts, etc.
You can tell a lot from the opening as to how to place your stops.
For example, if you trade ES, the range from high to low is 6 points for the first 15 min, that is volatile, if you use 2 point stops, you will be stopped. Why? Murphy.
So you will need to adjust your stops if your risk tolerance is high. if not, wait for a calmer market.
If you chose to increase your stops, you can also increase your targets accordingly.
The bar sizes play a crucial role, and you can even wait 30 minutes before placing trades if you are a true beginner.
Sometimes a stop out can be used as an indication that the market has turned around, so don't get paralyzed, and reverse with it. I am NOT telling you to over trade, but at times if market conditions have changed, you can trade in that direction and recover, at the very least some.
Lastly, DONT use 1 minute charts as a reference to place your stops. It's the worst source of reference for stops.
PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
The following 2 users say Thank You to mattz for this post:
I see stops as an airbag, I dont wait for them to blow. Just like i dont drive into a tree because i have a airbag. They are for me as an emergency crash or ???? But I also trader to get in at a bottom or top for a short. So if i see i am wrong I dont give more than 3 ticks and wait for what i see as the next entry. Now i should mention i only trade a 3350 volume about same as 1 minute on the ES. So I have a lot of trades and low risk and a lot of action. Works very well for me.
But you should know i ended up trading this way because i usually lose on longer time frames. i learned that i am very impatient and the 3350 vol works for me. Now why i had to blow out an account to figure that out????? But all good now. I also like to use the DOM reverse button a lot. My beleif is that if i dont see a trade working in my favor then beleive myself and reverse.
Best of trading to all!
The following user says Thank You to sellit for this post:
I have about ten years of experience, mostly trading stock index futures. A lot of that time has been spent repeating the same mistakes over and over again, which I still do, but much less often now.
Here's my take on stops, for the type of trading that I do ..... first of all, stops suck, so .... have really good entries (patience and study) and minimize the # of times they will be hit IF, they are far enough away - semi-disaster stops, as it were. So that's what I use in trading the NQ - stops that are far enough away to likely not get hit and of course, the ideal place is (but far enough away to not be part of the washed out crowd stops) major/minor support or gap areas - that's where patience on the entries comes in. If you're entry is further away - extended - from such an area, take a smaller position. BTW, I only trade long (so I can only be wrong in one direction and I don't get dizzy), and I only trade the stock indexes. I also take a small enough position where I won't have nightmares if it does go against me - that is a big key; keep the position size reasonable. If it does go against me, I will still take what seem to be good entries on the long side (with equity indexes only) on the way down, buying weakness to add to my position but still honoring that semi-disaster stop and initiating a new stop for the new buy.
Besides blowing out your account with too large of positions and NOT taking a stop, another important way that people fail at trading is by dying the death of a thousand cuts, having stops too close (often caused by too large positions that might cause you to get uncomfortable very quickly) and having MANY of them get hit. I guess there are a handful of people that can scalp like that but it's not me.
So, stops yes, but far enough away after your great entry with reasonable position sizing that it's unlikely it will get hit.
Depending on your time frame and instrument traded, using options instead of stops might be an option.
I did some calculations with SPY and ES options on this option calculator which lets you calculate positions that include both options and an underlying, such as when using protective calls or puts. I found that with at the money puts/calls protecting a long/short position, on certain time frames, you can often get about twice as many ticks of protection with as you can get by using a stop loss. For example you could have a stop loss at 10 ticks that cost you a certain amount of money, but with a protective put you could have a drawdown of 20 ticks but only risk the same amount of money.
Of course you give up some potential profits on your long/short underlying, but depending on your trading plan, this might be a worthwhile trade-off.
Here are a couple links I found on the subject while researching:
Well, folks, my problem with stops is that here, in Brazil, we use STOPs on the broker server, and I had my STOP activeted by the broker, because we had a disgreement on the platform paynet. Since there I don't use programed STOPs on long-term portfolio, and keep an eye on short-term ones. Nevertheless, I think STOPs are essential, but have to recover my trust! (I dont use the same broker anymore.