Keep getting stopped out, just to see the position move to where i thought
I'm new to trading the /es. I have a smaller account. I mainly focus on fibs, pivots, swing high/low, as well as a lot of Mrtopstep.cpm type rules. That being said. Can anyone elaborate on Mrtopsteps 5 minute rule? See....I am having problems getting stopped out, then have the position rocket up 2-10 points in the direction I originally thought. Stops are set at 1.25-1.5 handle stop loss. I don't do pattern recognition. I use renko charts. If anyone has any thoughts on this other than the 5 minute rule, I would be greattful. Thank you.
I've had the same experience. In my opinion, Index futures scalping is too rigged to try to do manually ESPECIALLY with a small amount of equity. Try weekly options instead and if your broker is IB run quick!
Provided that you have an adequate sample size, find out the average time in market of your (profitable) trades. Probably your stop is in the average noise area of this period. If it is and you are no HFT expert, reduce your position size until you can afford a stop above the noise level. If you cannot afford this, switch to cheaper instruments where you can afford such stops. (If you still cannot afford these stops, stop trading. Your account doesn't meet the mathematical minimum requirements then, i.e. your prob of ruin is too high.)
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I have experienced this also. I believe that anyone with a small account and is trying to practice conservative risk management will run into this problem. From what I have learned through observation and research I have gathered that this is partly due to Smart money probing. Of course there are other factors as well, including scalpers taking profit.
One possible solution in my opinion is to wait for a pullback for an entry. Only problem with this though is that if the pullback is actually a reversal then you are still going to get stopped out anyway. I believe CHOKE's advice is the most pragmatic and to the point. But if you are like me you are probably dedicated to seeing your commitment through.
ON Renko: THis is just my opinion but I think Renko, HeikenAshi, Kagi or any noice reduction can be non productive for one using tight stops as the noise is what is washing out the tight stops. I feel like one who is trading small and tight needs to b in tune with the noise as that is what is stopping them out.
I have looked at many methods. Most that are published are methods used and devised by traders with big accounts. Especially noise reduction methods. Its easier for a large account with more risk tolerance to let a trade work. SO keep that in mind whilst researching.
THe only other option that I have been ablr to figure is to trade less and watch more and take a shot with a deep stop when probablility is high. Even still, that could be the day that puts your trading career to rest.
I once thought that trading overnight might be a good solution but the more I read about that the more ifeel like one may be susceptible to algos and manipulation.
Thanks for mentioning Mr. TOpstep by the way, i looked it up and found some good stuff. As far as the 5 minute rule goes I think this can be good for not getting caught in a crazy whipsaw but it could also put you in at the end of a short rally.
Keep in mind that I am a begginer also, and these are my assumptions.
One thing that is for sure in this realm of trading is that nothing is for sure.
What I have found especially when scalping the ES is that if you wait for confirmation by a price move to enter a trade then the likelihood of getting stopped out on a retracement is much higher. I don't know if that is you issue but it was with me until I bit the bullet and started to enter before the confirming price move. There is still the chance of price continuing past your entry but the hit is minimized because the stop can be much closer to the entry price.
It is better to have a spot in mind to enter a trade, for example, pullback to a moving average, and enter when price gets there rather than wait for price to move in your direction then enter.
In the first method you are assuming information risk for a better price, in the latter you are assuming price risk for more information on price direction. As a scalper I think it is better to assume information risk. When swing trading its better to assume price risk because stops on swing trades should be larger anyway. The ES is just too choppy to allow much price risk, it will tare you to shreds.
All this obviously assumes you have a method that has an edge, and is conducive to taking information risk.
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A major turning point for me (and i still have to keep it on the forefront of my mind) was when I realized the BEST trades
never look back.....manage the entry and manage the trade.....if it doesn't immediately make a large bar or move in your direction strongly, you don't have the best trade....cut it, reduce risk or get defensive.
if most of your entries don't move strongly, then you're not entering at the most opportune times
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Using short stops is a trap. You get stopped out too often by market noise and it does not mean anything.
You should always use a stop, but a stop that makes market sense. It should be your worse case scenario. With experience you know that if you are a buyer and the market starts breaking a specific price, it is sending you a bear signal. So your stop would be useful if for example you buy and the market gets slammed for some reason (like a big red candle). Your stop is your fire exit. In all other cases you should consider waiting for a reasonable pull back.