Should I lower contract size for a wider stop loss? - futures io
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Should I lower contract size for a wider stop loss?


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Should I lower contract size for a wider stop loss?

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  #1 (permalink)
Faste
Baltimore, MD
 
 
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Ive been practicing scalping on ninja trader for a couple of months now and one of the biggest issues I've had is my stop getting hit extremely early and then the market moving in the direction that I had expected/planned for it to.

Ive seen some things about people making their stop loss, 1:3 or 1:4 and I'm assuming they are basing it off of their profit factor.

Would it be a good idea, to lower contract size and instead widen my stop loss for a margin of error at my entries?

Side note:
Only have been trading for about 5 months now any and all information is welcomed. Also my first post here.

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  #2 (permalink)
 xplorer 
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Faste View Post
Ive been practicing scalping on ninja trader for a couple of months now and one of the biggest issues I've had is my stop getting hit extremely early and then the market moving in the direction that I had expected/planned for it to.

Ive seen some things about people making their stop loss, 1:3 or 1:4 and I'm assuming they are basing it off of their profit factor.

Would it be a good idea, to lower contract size and instead widen my stop loss for a margin of error at my entries?

Side note:
Only have been trading for about 5 months now any and all information is welcomed. Also my first post here.

Hi, welcome Faste.


I assume that by 'practicing scalping' you mean SIM trading, is this the case?


Also, are you familiar with the terms MAE and MFE?

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Faste
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Yeah Ive been practicing paper trades on NinjaTrader with scalping, and I am actually not familiar with those terms, first time hearing of them.

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  #4 (permalink)
 xplorer 
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Faste View Post
Yeah Ive been practicing paper trades on NinjaTrader with scalping, and I am actually not familiar with those terms, first time hearing of them.

OK no worries.

Firstly, if you are replying to someone and want to make sure they get notified, either quote their prior post or name them like so --> @xplorer <-- that way they will get a notification.

About MAE


Quoting 
The Maximum Adverse Excursion, commonly abbreviated MAE, is a term used to measure how much a trade moves against you from the entry point, usually expressed in ticks. For example, if your entry price on a long position trade in Crude Oil is 76.00, and while you were in this trade the market moved against you to a low price of 75.75, this represents a MAE of 25 ticks (76.00 - 75.75).


Do you record your trades? For example, if I were to ask "how many trades have you taken since you started", would you have a record?

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  #5 (permalink)
Faste
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xplorer View Post
OK no worries.

Firstly, if you are replying to someone and want to make sure they get notified, either quote their prior post or name them like so --> @xplorer <-- that way they will get a notification.

About MAE




Do you record your trades? For example, if I were to ask "how many trades have you taken since you started", would you have a record?

I have my live trading record for my actual account but I reset my sim accounts funds to match my live trading account and unknowingly reset all of my sim trading performance on NinjaTrader .

I have made 205 total live trades however, I have noticed that Ninjatrader counts an extra # of trades for different exits on multiple contract trades.

I also have a very scuffed google sheets document of all my live trades.

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  #6 (permalink)
 xplorer 
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Faste View Post
I have my live trading record for my actual account but I reset my sim accounts funds to match my live trading account and unknowingly reset all of my sim trading performance on NinjaTrader .

I have made 205 total live trades however, I have noticed that Ninjatrader counts an extra # of trades for different exits on multiple contract trades.

I also have a very scuffed google sheets document of all my live trades.

So the MAE suggestion was about getting familiar with what it is: how far a trade goes against you before turning the other way and (ideally) hitting your target.

MAE tracks that, on average. NinjaTrader has this as metric, so over a number of trades it can give you this as reference point.

For example, if your average MAE is 20 ticks that means that on average your trades go 20 ticks against you before turning around - that indicates that your entry point can improve.

On the other hand, if your MAE is 5 tick chances are you have a optimized trade entry, but from your OP this does not sound likely.

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  #7 (permalink)
Faste
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xplorer View Post
So the MAE suggestion was about getting familiar with what it is: how far a trade goes against you before turning the other way and (ideally) hitting your target.

MAE tracks that, on average. NinjaTrader has this as metric, so over a number of trades it can give you this as reference point.

For example, if your average MAE is 20 ticks that means that on average your trades go 20 ticks against you before turning around - that indicates that your entry point can improve.

On the other hand, if your MAE is 5 tick chances are you have a optimized trade entry, but from your OP this does not sound likely.


So from my live trades from the first of the year till now, I have a 6 tick Avg. MAE and a 5 tick Avg. MFE.

I do use a scalping strategy and for a period in time my stop loss was 6-8 ticks so that would make sense as an average.

So I want to aim on increasing MFE and decreasing MAE, and I'm assuming the best way to work on this is just working on my entries?

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 xplorer 
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Faste View Post
So from my live trades from the first of the year till now, I have a 6 tick Avg. MAE and a 5 tick Avg. MFE.

I do use a scalping strategy and for a period in time my stop loss was 6-8 ticks so that would make sense as an average.

So I want to aim on increasing MFE and decreasing MAE, and I'm assuming the best way to work on this is just working on my entries?

Yes, in general working on your entry is meant to be improving decreasing your MAE, but an MAE of 6 is not bad.

What market are you trading?

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  #9 (permalink)
Faste
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xplorer View Post
Yes, in general working on your entry is meant to be improving decreasing your MAE, but an MAE of 6 is not bad.

What market are you trading?

Currently have been focusing strictly on the MES. Have a smaller account size currently at 2000 as I'm writing this post.

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 xplorer 
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Faste View Post
Currently have been focusing strictly on the MES. Have a smaller account size currently at 2000 as I'm writing this post.

I don't trade MES/ES but generally they have a higher liquidity than CL which is what I'm most familiar with.


There's plenty of threads about ES/MES here, and there's also tons of material about scalping.


I'd suggest to use the search engine at the top right corner of the screen and look for the keywords you're after to refine your ideas.


Good luck.

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 SBtrader82 
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Faste View Post
Ive been practicing scalping on ninja trader for a couple of months now and one of the biggest issues I've had is my stop getting hit extremely early and then the market moving in the direction that I had expected/planned for it to.

Ive seen some things about people making their stop loss, 1:3 or 1:4 and I'm assuming they are basing it off of their profit factor.

Would it be a good idea, to lower contract size and instead widen my stop loss for a margin of error at my entries?

Side note:
Only have been trading for about 5 months now any and all information is welcomed. Also my first post here.

Quick answer is "yes". This is always a great idea and normally the wisest decision.

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 Sandpaddict 
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Faste View Post
Ive been practicing scalping on ninja trader for a couple of months now and one of the biggest issues I've had is my stop getting hit extremely early and then the market moving in the direction that I had expected/planned for it to.

Ive seen some things about people making their stop loss, 1:3 or 1:4 and I'm assuming they are basing it off of their profit factor.

Would it be a good idea, to lower contract size and instead widen my stop loss for a margin of error at my entries?

Side note:
Only have been trading for about 5 months now any and all information is welcomed. Also my first post here.

The way you should look at this is if you ALREADY have an EDGE is to deifine your "R" (Risk) for the trade by taking your entry minus your stoploss in ticks-size-dollars divided by a percentage of you account.

(I would never suggest going above %1 risk on account but with $2000 I might go as high as %2 if I was really confident)

Example. You have a $2000 account. Your stoploss is 8 ticks away. Each tick is $1.25 (micro ES in this example).

So your "R" (risk unit) on this trade is $40 and 8 ticks.

($2000 X %2 = $40) (8 ticks X $1.25 = $10) = 4 contracts.

Now you take that 4 contract loss at 8 ticks for a $40 loss or you take profits at one "R" at $40 or two "R" lets say at $80.

Your objective is to make sure you are always looking to take more than one "R" in profits but NEVER take more than a one "R" loss.

Just insert the risk management framework into your already profitable system.

If your system isn't profitable to begin with NO amount of money management will help. It might help slow the bleeding but the eventuality is the same.

Hope this helps.

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