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If your stop is placed at a point where the conditions for the trade become invalid at your stop level that would be one thing. But you still should be able to see you are wrong on timing and Possibly right on direction. |
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Right, and if I have to sit tight to let the trade work, then I will vs. exiting and then re-entering later.
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Most people, however, use money stops. They base stops on the size of their account or on some risk to reward matrix. If your stop is based on how much you are able to lose, why not exit sooner once you realize that you are on the wrong side. You don't have to lose all of what you risked to be wrong.
This is one of the times that you can limit your losses. Sometimes the market will move against you and hit your stop. Other times the move towards it will be gradual and you can save capital by an early exit. CAPITAL PRESERVATION IS THE NAME OF THE GAME, AFTER ALL. |
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I found that the problem with thinking like that is you are going to exercise too much discretion on when to flatten a position, which in turn could turn into a winning position - just like the OP's initial post. I guess my view is that if you are not going to honor your stop, why place one to begin with? That just turns into a mental game - you have a hard stop on your DOM, but you know in your mind that you will probably hit the flatten button before that level is reached. So, the question becomes how and when do you flatten and why? I think there's too much discretion being exercised there, especially for a new trader. In the end, most new traders will hit the flatten button very quickly and end up taking many, many 'small' losses.
As for capital preservation being the name of the game, I would debate that as well. We are daytrading volatile instruments. To go into that game thinking 'I just want to survive' is a terrible mistake and a costly one. If you just want to try to break-even most days, why bother playing? To me, the name of the game is WINNING. Just keeping the capital already have does me no good. That's a terrible risk/reward setup - risk is your account size and the reward is to come out even or slightly ahead. I'll pass on those odds. Trading money should be RISK CAPITAL not the house payment.
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As a trader I need movement. If the market is not moving then nothing is being done. If you believe that one of the edges an off the floor trader has, is trend, then why enter a trade when trend in not present? Yes, the assumption was that the direction is correct. What is not known is how long the distribution/accumulation phase will be. While you're sitting tight waiting for the market to be marked up or down, there may be another market being marked up or marked down. |
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I agree, we all need movements to make money. No doubt. However, it is possible to enter what you believe to be the start/beginning of a trend only to find it stall a bit and then resume the move. That's not uncommon at all on the indexes. Actually, very rarely do we see a giant move in one direction. Most days we will see a smaller move, some pause (or rest) and then another move. This pause period can last 1 minute to 60+ minutes. You just never know how long. I am willing to wait it out vs. exiting and then re-entering later.
As for another market moving while you wait, that's based on what you are watching and how much you can trade. I trade the US indexes and the Euro FX. That's about it. So, when the YM is moving, so is the NQ, ES, and ER2 usually. When they are not moving, I am considering the EC. That's it. So, my cost of holding a trade is minimal b/c I have limited the markets I trade on purpose.
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***As for profit target exits:
I am glad they work for you. I believe exiting at a target is speculating on the future when it is not necessary to do so. |
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Not so much speculating as knowing your setups and what is a realistic profit objective. I am not looking to hit home runs here, just single after single, after single. For example, currently on the EC my profit target is 10 ticks from my entry. The reason is that I know that the EC can move 10 ticks in my direction before any type of retracement that could take my stop out. Once my target is hit, I look for a reason to re-enter in the same direction. If another signal appears - and during a strong trend they fire off like crazy - I will keep getting in and going for 10 and then look to re-enter.
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*****One more thing: I am very glad that we are able to have a civil debate on a topic without the name calling and boorish insults of the other sites. Thank you Soultrader for community such as this. |
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Very true. Some boards out there would have resulted with name calling and a bunch of negativity. Thanks Soul!