[ZenMachine]

Originally Posted by RichardTodd »

Like you say, 50% retracements are so common that they are often considered entries, so it didn't make sense to me.

Does that mean that 50% line is often considered legitimate enough to be used as an entry?
If so, it sounds to me that it may be a good place to place stops too. (I am a little confused....)

Originally Posted by RichardTodd »

Of course, the market doesn't know or care where they got in, so they are cutting the cord between their stop placement and their analysis of the market.

So true!!
I definitely make this mistake when I'm too worried about losing.
Thanks for your insight!

[RichardTodd]

Originally Posted by ZenMachine »

Does that mean that 50% line is often considered legitimate enough to be used as an entry?
If so, it sounds to me that it may be a good place to place stops too. (I am a little confused....)

Well, the reason I asked about research in the first place is: it may well be just fine for the type of trading you are doing, on the markets you are doing it on. The last thing I would do is tell you not to move your stops someplace. You know, it's easy to fall into the pattern of detailed study when it comes to entries, and just wanting rules of thumb when it comes to exits. But, in some ways exits are actually the harder problem!

I will say this: for my style of trading, it pays to anticipate the future, but wait to act until the market shows its hand. In other words, let's say I know from experience that my market often finds support at about a 50% retracement from a big push up. So, when price starts stalling out, I might expect price to retrace half the move and continue. That doesn't mean I'm going to just throw a stop under that level while price is still at the top, and hope for the best. I'll be watching for signs that buyers are stepping in, and once I've seen that, I can require (via my stop) that support hold.

On the other hand, if price blows right through the 50% area, I know buyers didn't step in, and I'm glad my stop is still below the last s/r I actually witnessed. If I know I'm NOT going to be glad to sit through a bigger retracement for some reason, then it's better for me to just exit the trade at the top, rather than gamble on phantom support showing up in the middle. I can always re-enter, after all.

(although in real life I'm better about telling myself I can re-enter than I am about actually re-entering. I have a kind of post-trade euphoria that makes me less sharp for a few minutes after each trade!)

[thalestrader]

Here is how the USDJPY from last night turned out: I've included a screenshot taken right before I shut down last night, and one from this morning. Price racted back to the entry point of 95.41, and then declied to make a lower low. If I were trading this, (and I were awake!) I'd have moved the stop to 95.42, which is one tick above the reaction high. That stop would have been hit and the result a -1tick loss. If I had been trading this, and I were not awake, then this would have been stopped out for -20 ticks.

Someone might ask if a better initial stop, and one which would not yet have been hit would have been above yesterday's high. I would say technically yes. However, this would have resulted in nearly a 50 tick risk for a only a 3 tick first target.

Anyhow, that is how we do it. So easy, even a nine year old can do it consistently well.


Best Wishes,

Thales

[thalestrader]

Originally Posted by thalestrader »

Someone might ask if a better initial stop, and one which would not yet have been hit would have been above yesterday's high. I would say technically yes. However, this would have resulted in nearly a 50 tick risk for a only a 30 tick first target.
Best Wishes,

Thales

Rain has changed our plans a bit today, and I took this shot of the USDJPY just as we popped in a few moments ago.

As you can se, the technically better stop would have kept you in the trade and both targets would have been hit (though the route price took was not as I had expected).

I guess this shows that sometimes, the correct stop, though a larger risk in both nominal dollars and % equity, is often less risk in reality than a tighter stop.

Second blue line indicates a possible re-entry for a short, but I only looked at the chart quickly, so I can't say for sure I would have wanted to take that trade myself. And this is, of course, all hindsight at this point. I just thought some folowing along might find an update to be of interest.



Best Wishes,

Thales

[Gabe2004]

Maybe the tight stop with a re-entry would have been a good idea as well? (it is in hind sight )

[ZenMachine]

Wow.... this is a bit painful (going head to head against a 9 yr old girl!), but hopefully someone may find it entertaining.

I was playing USDJPY last night too, though in lower time frame (5min/1min).

I didn't find this setup until the price was falling through prior day's high. That's why the entry point is a little off.
I don't know if I would've entered at Thales' daughter's entry point, because (this is all post thought) I thought that it was too close to prior day's high (95.36).

Thales, your daughter's setup looks much better than mine!
I have a lot to learn from her

[thalestrader]

Originally Posted by Gabe2004 »

Maybe the tight stop with a re-entry would have been a good idea as well? (it is in hind sight )

Well, in the end, I was looking for a potential opportunity last night to use as an example to answer a question put to me in another thread. In that thread, I wrote that it was not a live trade, but it was "the closest thing I could find" at that time to what I considered a tradable opportunity. In the end, I would have passed on it, because I would have wanted my stop above yesterday's high. Since the first profit target was only 30 ticks below entry, but a stop above the prior high would have been nearly 50 ticks, I would say that was no trade. I have not had a chance to ask my daughter what she would have thought, but I would guess that the small first target would have caused her to pass. But, otherwise, that was very much the type of opportunity she is looking for.

I just got back in from NYC, and a quick look at the USDJPY shows the relevance of those S/R levels used as profit targets even though it took price 10-12 hours to reach them.

Also, Gabe, look at how price reacted back to your short entry to retest the breakdown point. If you miss the initial break, selling the retracement can be a good second chance entry point in itself.

Originally Posted by ZenMachine »

Thales, your daughter's setup looks much better than mine! I have a lot to learn from her

Your trade looks fine if I am reading your post correctly. You shorted just below 95.41, and it looks like the first profit target was hit, and quite possibly the second as well.

Best Wishes,

Thales

[forrestang]

Originally Posted by ZenMachine »

Wow.... this is a bit painful (going head to head against a 9 yr old girl!), but hopefully someone may find it entertaining.

Thales, your daughter's setup looks much better than mine!
I have a lot to learn from her

Oh it's entertaining

Join the club!