What is your strategy when a trade goes against you

[NihabaAshi]

	Quote:	jperl
	You enter an intraday trade long, and the trade immediately goes against you. What do you do? Here are several possibilities: 1)You exit the trade at your preset stop and wait for a new entry 2)When the price action hits a support point, scale in 3)When the price action drops below a support point, reverse the trade and increase size. 4)exit on the close of the day and take a loss whatever that is. 5)exit when my risk tolerance is hit. There may be other options. Let's here from you and tell us what you would do.

I'm a strong believer to map out the trader prior to entry.

Anyways, my contingency plan involves #1, #2 and #3 depending upon the price action at the time of the trade.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term

"Volatility analysis is a doorway to consistent profits."

[brownsfan019]

	Quote:	cooter
	Sure, we can. Your ENTRY may be valid, but based on the faulty premise of your trade setup which may not be valid. And the point I was making is that your trade setup might not be valid to begin with, especially if you are always getting stopped out. Of course, your definition of valid and validity might vary....

Coot - how do we define 'valid' then? I guess that's why I'm not understanding here...

[cooter]

	Quote:	brownsfan019
	Coot - how do we define 'valid' then? I guess that's why I'm not understanding here...

Simple. Validity refers to (in this context) a strategy that yields a statistically significant positive expectation of return (assuming that was the result you intended to achieve).

Remember, you can design, test and implement a strategy that does not yield a positive/winning result.

And you can enter and exit correctly per this setup.

Just because you execute this setup correctly, does not make it a winning strategy if the premise upon which your strategy was designed was flawed to begin with.

And that's my point.

[brownsfan019]

So you are saying that if the strategy itself is flawed, your doomed no matter what, right?

If so, doesn't that go w/o saying? I mean, a losing strategy will lose over time no matter what. Hopefully everyone here understands that basic premise.

My point was that you can in fact have a winning strategy that is easily turned into a losing one b/c of stop placement and stop movement. Therefore, if you find yourself often watching trades go in the direction you wanted but only after being ticked out of the trade, examining the stop placement is needed. And that minor change can make a big difference. And back to the topic on hand - if you are 100% comfortable in your stop placement, then you simply allow the stop to be hit (to prove you are wrong) or let the trade go.

[dalby]

"If you have a stop that is routinely being taken out and then the trade moves in your favor,"

if that is ROUTINELY happening, then i agree - the trade setup IS faulty.

clearly, you should set your ENTRY where this "setup" places the stop

cause if the stop is hit there constantly, then it moves in your favor, then THAT is where you should be entering.

that's kind of self-evident

a big part of my trading is knowing how retail trades - where they place their stops and entries because then i know how to trade - NOT like retail. after all, most retail traders lose money

if u enter at price X, and price routinely takes out your stop at X-10, why not set your ENTRY at X-10?

[cooter]

Unfortunately, this is the kind of "self-evident" stuff that supposedly "goes without saying" which trips up many a trader, newbie and seasoned alike.

Just because one may "think" his or her trade setup is "valid" does not make it so. Analyzing and breaking down your flawed and winning trades can help pinpoint the errors in recognition or execution, and determine whether the strategy was really worthwhile after all.