[dandxg]

This is a good subject that is overlooked by many. It's hard to comment in detail without knowing more and I am no expert. It appears you are a discretionary trader. My rule is if you have 3 losing trades in a row you must stop. Reason being you are not in touch with the market. Tues and Wed a 10 tick stop would get blown through easy. I had to pass on a lot of setups in ER2 that required a stop 2 times what I comfortable using. Oh well, that's life and there will be many more. I forget you said it, but it goes like this, ameuters look at reward and pros consider risk.

From an R to R perspective I feel you need to be going for a tleast 2-1 reward to risk with a stop trailed to break even that you need to determine. As you become a better trader you get more intuitive and you may see a reversal coming and over ride that 2-1 and grab 10 ticks instead of waiting for 20. But your new and discipline will make or break you. I know a few traders that are willing to take many small loses and when they win get 4-1 R to R, but their win rate is below 50%. Look up positive expectancy on google, it what really matters.

[timokrates]

Originally Posted by Hlm »

To give specific suggestions about stops I would need to know more about you strategy and how consistent it is. Ten ticks on the YM is usually not considered a lot to risk. However, it depends on your setup.

But from my experience these may help:

First...your daily stop should be something you can get back in a timely matter. For me, this is about 1.5 days worth of earnings. You will be amazed how much better you trade the next day knowing there is a good chance you will be back to even or green at the end of the day. This works much better than being faced with the psychological aspect of trading more aggressively trying to make up for days if not weeks of earnings too fast.

Second...not having a hard daily target might help a lot with figuring out your daily stop. Try having a soft target where at that point you move up your daily stop. Give yourself the chance to continue being in "sync" with the market. When you start trading multiple contracts this might be a point where you drop down in size. You can also be EXTRA picky at this point knowing that it's no big deal if you don't take another trade. Many of my biggest winners have been in the last two hours of trading (time squeeze).

Third...figure out when you statistically trade the worse and don't trade it. For many people this is during lunchtime when volume is low.

Fourth...I follow the rule that if I have three stops in a row I stop, push back, and take a short break. I will then come back and review the reasons why I got stopped out. Obviously something is going terribly wrong be it psychological or just a market that isn't in sync with my strategy. If this is in the morning I may or may not trade the afternoon. If this happens in the afternoon I am done. In trading there is no room for revenge. The market doesn't care and will destroy you without skipping a beat.

Fifth...try to find a good combination of targets and trailing stops. There is usually no reason to take a losing trade when the target is missed by a few ticks. Many times at worse a breakeven can be achieved. Also, when trading with one contract you can still have more than one target. The first target could be an area where when reached you start a tight trailing stop. Many times this is very useful when S/R areas are in close in proximity.

Great post, thanks HLM!

What would you call a high probability setup?

Confluence of S/R (even on different timeframes) with the trend?

[GeneTrash]

"Amateurs look at reward and pros consider risk." Now that is a big wakeup for me haha. My mindset is definitely geared towards reward first. I am glad I was introduced to this quote early.

I like the idea of taking a break after 3 bad trades and analyzing why they failed. I think it will make we work at observing the market instead of just calling it quits and coming back the next day.

I have also started to read the CBOT report on Market Profile and am realizing that my issue probably isn't as much my stops as it is my entry points. As I get better, my trade success hopefully will depend less on where my stop is and more on a good entry and a overall positive indication (volume, price, S/R etc.)

Thanks again for the help guys. I think I've learned more in a day from this post than in weeks by myself.

[Hlm]

Originally Posted by timokrates »

What would you call a high probability setup?

Confluence of S/R (even on different timeframes) with the trend?

A high probability setup is one in which the combination of win rate AND risk/reward give you a positive expectancy. Just like dandxg said, someone with a ninety-nine perfect win rate can still lose overall if the risk/reward is too great.

For me, a highly positive expectancy trade is one where you enter on the turn of a pullback around S/R in the direction of the larger trend. In other words just a simple continuation trade. This type of trade allows you to place a relatively tight stop (usually last swing high or above S/R) while having multiple levels of momentum on your side. Usually there is enough momentum that you can safely take a breakeven or a smaller stop if the trade fails. It is even a greater plus if the S/R areas are based off Market Profile.

How you determine the setup depends on the individual. Some use higher timeframe candlesticks or internals for the larger trend while others just use moving averages and oscillators. Also, many use tick charts below their setup timeframe to time their entries more precise.

Hopefully that answered your question.

[torero]

Originally Posted by Hlm »

For me, a highly positive expectancy trade is one where you enter on the turn of a pullback around S/R in the direction of the larger trend. In other words just a simple continuation trade. This type of trade allows you to place a relatively tight stop (usually last swing high or above S/R) while having multiple levels of momentum on your side. Usually there is enough momentum that you can safely take a breakeven or a smaller stop if the trade fails.

This is exactly how I play my setups. Those small stops are the best risks you take without losing your nerve or shirt. Once it goes my way, I usually add more at the 2nd pullback. This is the sweetest spot you can get from a trade.