Lot of traders i interact from time to time are having a hrad time with my wide stop loss trading and risk management strategy. I have always said if one is happy and satisfied with their current strategy- keep on doining it. I am just sharing my journey starting from being a 10 ticks profit type of trader to my current risk management strategy. Each one of the traders whom i know and who are at a level where i want to be- have a very similar strategy.
Following post from Dr. Steenbarger indirectly makes a point ( at least the way i read it).
" I strongly recommend reading the research study of speculator skill from Barber, Lee, Liu, and Odean. They studied the returns of daytraders over a 15-year period, the largest sample I am aware of in such a study. Their study is also unique in that it looks at the ability of traders to make money in a second year after having made money in the first.
The authors conclude that "there is clear performance persistence." The very top traders who make money net of fees tend to continue to make money going forward. The traders who lose money tend to continue losing money.
Here is the most important conclusion, however:
"In the average year, 360,000 individuals engage in day trading. While about 13% earn profits net of fees in the typical year, the results of our analysis suggest that less than 1% of day traders (less than 1,000 out of 360,000) are able to outperform consistently." (p. 15).
In other words, 87% of day traders in a given year lose money after fees are taken into account. About .28%--one in 360--is able to make money after fees year over year.
To be sure, that small group of very successful day traders earns a significant return. After expenses, they average +28 bps per day. Compare that to the 350,000 out of 360,000 daytraders who average a daily loss of 5.7 bps per day after expenses.
The authors conclude that day trading skill genuinely exists. They also conclude that it is very, very rare. "
I happen to believe that i do not want to give my self pass/fail grade based off my ability to pick exact turning points of an intraday move based off my ability to pick them within 10-20 ticks stop loss.
Last edited by mfbreakout; August 19th, 2014 at 09:09 AM.
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If 100+ ticks desired on a trade, one has to learn to ignore 20-30 ticks bounces in between and HOLD. No longs yet. There is never ever a good counter trend set up, so take your time if thinking about longs. It took 2 hours to get paid and if not careful 20-40 ticks of that can disappear in a NY minutes if using that magic stop loss.
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If your are talking about stop loss based of 45 minutes OR above ORH in case of A down yes, but those are just starting points. I used to use them strictily to the tick but got nicked couple of times, so i expanded the stop loss based off ATR.
With 45 minutes OR- stop loss is mostly 50-80 ticks wide to begin with.
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