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Fixed vs trailing stops


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Fixed vs trailing stops

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  #11 (permalink)
Langley
 
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timo123 View Post
I like fixed

feels like a clean poop where you don't have to wipe, just in or out. Flush and on to the next trade

trailing is like this drawn out breakup, where you still go back there for sex. And even when you're fully broken up you still find a way to get back in at a later point because there's so much there and you haven't lost that much and end up back at square one.

Lol... Ive never heard to put so eloquently or more TRUE!!! Great post. My sentiments exactly.

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  #12 (permalink)
Langley
 
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RT777 View Post
It's a challenging and frustrating subject! I've been trying to understand what's best for a very long time, through backtesting and live trading.

Bottom line is what I've determined works best for me is to scale in/out frequently. I know you said you may only trade 1 lots and to me that's where the biggest problem is. Since the introduction of index micro contracts I've been able to adapt my trading to support scaling out on a much more regular basis. I grew tired of trying to figure out what exactly is best. I grew tired of second guessing myself on whether or not to hold a trade to my algos recommended targets. I've tried fire and forget type orders with attached stop and target and was never happy with the results. The only thing that has made the problem easier to deal with is to take partial exists imo.

Same boat RT777. I am still testing with one just because its so much easier to track mistakes and real entries ties to exits but my GOD ITS HARDER TO TRADE one lot. I used to get in one contract and let that ride. If it came against me Id add at full target away so if it came back to original order im break even then try to scale out as it went my way. That was soooooo much easier. I really dont think entries matter that much. Its all in the management after. But thats me.

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  #13 (permalink)
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WoodyFox View Post
In General...Stops can be managed better in a trending strategy. They usually screw up a mean reverting strategy.

This has been my experience also, but then, I don't do mean reversion very well either.

I think that, assuming you do mean-reversion trading (trading defined ranges and looking to bounce from the extremes back to the mean or maybe to the other side), it seems that the only thing that makes sense would be to put your stop just outside the range so if you're long, for instance, your stop is below the recent lows to protect you if it's not a range after all. Then you set a target to get out after a smallish move in your favor, maybe before the opposite extreme (or maybe the mid-point, near the mean), because that's likely all you'll get if it's truly a range. Maybe you even just make your target a fixed amount you want to grab in a hurry if you get it. Then fire it and wait and see....

The thing is that any other kind of trade management in this kind of situation is pretty iffy, because the moves are going to be short and swift, relatively speaking.

If you think you're in a trend, on the other hand, it seems to me that I want to start with a stop that gives the trade enough initial room to breathe, and then I want to trail it if it turns out that this is a trend after all. Also, I don't want to have a target at all, unless it's way, way up there -- simply because a trend will typically go longer than I expect it to. This is why I trail the stop, because I have no idea how far it will go, and I want to get what I can of it. This means I will always be stopped out after it has turned around and headed the other way, so I never get the maximum possible. But I won't get that anyway, outside of my dreams.

There is a lot to be said for scaling in and/or scaling out as the move progresses, but I always have found this too complicated. Probably if I had definite target levels in mind I could get my head around the scaling out part, taking off some as each target is reached, but this is still too complicated for me to do in real time (I'm very limited in this way ), and also I think targets are too arbitrary and I don't set them.

My bottom line is that I don't think one stop strategy is better in itself than any other, but that it depends on your basic trading strategy. I have attempted trading ranges and I don't do them well, and I am looking for the bigger trends.... so that means that I want to use the trailing stop idea.

But other trading styles make trailing stops a bad idea. It depends on what you're doing.

PS, the markets generally like to be in ranges more often than in trends, but trends are where the big money is to be had. So there's a balancing and an assessment of what's going on in your current market that needs to happen, rather than one being always better than another.

My opinion, anyway.

Bob.

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  #14 (permalink)
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Sandpaddict View Post
Same boat RT777. I am still testing with one just because its so much easier to track mistakes and real entries ties to exits but my GOD ITS HARDER TO TRADE one lot. I used to get in one contract and let that ride. If it came against me Id add at full target away so if it came back to original order im break even then try to scale out as it went my way. That was soooooo much easier. I really dont think entries matter that much. Its all in the management after. But thats me.

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My hat's off to anyone who can do this, but I seem to need more simplicity. Shows you that there's more than one way to do it, though.

Bob.

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  #15 (permalink)
Langley
 
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RT777 View Post
I've actually gone down this path quite far. I took my basic algo that worked on one time frame and adapted it to multi-intraday timeframe support. So now what I do is leave my base chart on 5 min candles but I plot the results (entries, stops, exits) of at least 5 different tf's on it. Sometimes I only have 1 signal, sometimes all 5. Sometimes they come in clusters and sometimes they are very spread apart. Since I'm discretionary I look for clusters of lines. In the past I only had 1 number, now I may have a range of say 10pts on NQ. If my max number of micros is 10, then I'll attempt to scale in within that range. At the same time, the algo will give me a different exit and stop for each of those timeframes. This is where I'll set my tp's to scale out.

Even if you don't have multi tf support or your system doesn't fit the description, I think you could still do partial exits based on other factors and I think in the long run it becomes less stressful than watching that great trade turn negative after 'almost' hitting your target. Slow and steady wins the race imo and trading singles makes each trade very 'binary'. A smoother PnL can be achieved with some method of scaling.

RT777 Im going go back and read all your posts. Everything you write I have a crazy affinity to. Seems we have maybe not the same trading style but definitely the same belief structure of how markets work! Please keep posting. I enjoy reading and learn alot from you.

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  #16 (permalink)
Langley
 
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bobwest View Post
My hat's off to anyone who can do this, but I seem to need more simplicity. Shows you that there's more than one way to do it, though.

Bob.

Hi bobwest. I think theres an infinite ways to trade. If the math works thats all that matters. Psychology just gets in the way of the math. Thats the hard part.

Good trading to you!

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  #17 (permalink)
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There are definite pro's and con's to doing this. Also too I couldn't do it without the help of an algo. For those that expressed an interest I'm providing a screenshot of a typical 'good' setup. In this case I have a cluster of possible short entries on NQ in the range of 9473.75 to 9477.50. Depending on what other lines I have on other products I do have to make a decision how I want to scale in. Also too note there is a second cluster above 9500. If I feel lucky I'd take the first set of entries. Also you'll see at the top of the screen I have developed a preset number of entries/stops and exits. For the most part I can get in/out very quickly with 1 click. Most of the time I could enter these directly into the broker software but often enough having these buttons available immediately to either get in or out asap has also proven to be valuable. Once the number are hit the stops and target will show up on the screen, although I already have a sense of what they will be from other info on my screen.


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  #18 (permalink)
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...and here is what happened. The light dashed red lines are the stop and targets for the 3 signals within the cluster. In this case all target hit, that is NOT often the usual situation. You can also see the stops above the entry in light dashed red lines, luckily for this trade they were just far enough away. Also too you will see the stops don't move in, but the targets did move in relation to the MAE. All of this is what my backtesting has shown me to be the best way for my particular algo. It's very much short term scalping, however every product I ever tested (about a dozen with 10 years plus intraday data) all exhibit this behavior.


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  #19 (permalink)
Langley
 
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RT777 View Post
...and here is what happened. The light dashed red lines are the stop and targets for the 3 signals within the cluster. In this case all target hit, that is NOT often the usual situation. You can also see the stops above the entry in light dashed red lines, luckily for this trade they were just far enough away. Also too you will see the stops don't move in, but the targets did move in relation to the MAE. All of this is what my backtesting has shown me to be the best way for my particular algo. It's very much short term scalping, however every product I ever tested (about a dozen with 10 years plus intraday data) all exhibit this behavior.


Thank you RT777. Thats pretty much been my experience as well. First on untested data. Then on walk forward, then real live experience. Each time with a reduction in actual results. This is with percentage and dollar trailing stops only.

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Sandpaddict View Post
Thank you RT777. Thats pretty much been my experience as well. First on untested data. Then on walk forward, then real live experience. Each time with a reduction in actual results. This is with percentage and dollar trailing stops only.

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You're welcome I enjoy the discussion! I wrote a bunch of different stop/target systems and for years I tried testing all the different combinations. After years of seeing the same behavior I pretty much leave the stop as fixed and the target as inward trailing. I still keep the functionality to test different ways in hope that one day I'll figure a super great trending system that works well with a trailing stop. But so far no such luck. I've also been able to test my system with multiple entries which I consider averaging, not martingale lol. Some products appear to have a significant benefit to multiple entries up to a limit typically of only 2-3 signals max. After that the results become nebulous at best. I also find that the more volatile a product is, the worse it is to add contracts and you're probably better off limiting entries to just 1 or 2.

I've often wondered if this is particular to my algo or more of a statistical reality in the markets...so much to test so little time

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