Stop losses

[Pappon]

Hi Guys

I have a few questions in regards to stop losses:

1. How do you place your stop losses? What do you base it on? I currently upgrade mine each night is this an okay method?
2. What's a cheap broker for placing stops? I've got an e-trade account and have been using a trailing sell which is an additional $19.95 ontop of the exit fee $32.95 (gst inc)

[sammy84]

1) You can have a fixed % stop loss or place it under areas of perceived resistance for the intial stop. Its fine to upgrade each night so long as you have a system dictating why

2) Your getting ripped off. I use Macquarie prime, they charge no extra fees for stops, only the min brokerage ($20). I have just swapped to Go Markets, who only charge a min brokerage of $6. DYOR

Sammy

[Pappon]

1) I have just swapped to Go Markets, who only charge a min brokerage of $6. DYOR

Sammy

I just had a look it states 0.15% per trade?

[tech/a]

Your describing a TRAILING stop not a Stop Loss.

Which are you wanting to know about as setting each is in many cases entirely different.

[Pappon]

Your describing a TRAILING stop not a Stop Loss.

Which are you wanting to know about as setting each is in many cases entirely different.

Hi Tech

I'm interested to here your thoughts about both actually in what instance would you use a trailing vs a stop?

[disarray]

for a start, what is your investment timeframe?

for longer investments you'd use wider stops to allow for more market swings, for trading you'd use tighter stops to snatch more profit for yourself.

having a clear goal / outcome makes it easier to create and implement a strategy.

[Pappon]

for a start, what is your investment timeframe?

for longer investments you'd use wider stops to allow for more market swings, for trading you'd use tighter stops to snatch more profit for yourself.

having a clear goal / outcome makes it easier to create and implement a strategy.

Short term, i'd like to hear from traders and how they place there stops at a particular point? Was it because of a support level, moving average etc?

Only reason i'm asking is that I'm being quick basic in my stop losses i set it at a level where i don't expect the stock to dip down to the next day of trading. However if it does i'm happy to be stopped out, i also upgrade my stops each night as to lock in further profit.

[disarray]

the lowest low of the last 6 days is a common traders stop. stops can also be adjusted upwards at various intervals to limit risk based on price action, or pushed up to achieve breakeven before relaxing.

stops can be based on all sorts of things, elliot wave levels, support / resistance level or just about anything. it's about trial and error, and finding what works for you and your goals. with the recent market behaviour i've been using really tight stops on strong breakouts and looser stops on sustained breakouts, but as always its a work in progress. the entries are the easy part, knowing when to exit is the real trick in my opinion.

if you haven't already read Adaptive Analysis by Nick Radge. it provides an excellent grounding for people new to the game.

[kam75]

Hi Guys

I have a few questions in regards to stop losses:

1. How do you place your stop losses? What do you base it on? I currently upgrade mine each night is this an okay method?
2. What's a cheap broker for placing stops? I've got an e-trade account and have been using a trailing sell which is an additional $19.95 ontop of the exit fee $32.95 (gst inc)

1. How much do you want to lose? As a % of your trade? Relates to position sizing and money management. Most of the time, I use previous support levels to set my stops.

2. Cheap is not necessarily good.

[johenmo]

Pappon, when I strated learnign it used to drive me mad when people said there was no one way of doing anything (stops, entries, exits etc). I now understand. From reading I found there are many ways & I've tried ATR (which some people do).

Support/resisitance is always a good place to start but to me, the timeframe will have significant impact.

[MRC & Co]

Pappon, when I strated learnign it used to drive me mad when people said there was no one way of doing anything (stops, entries, exits etc).

Yes, very annoying..........and nothing but true!

Your stop placement all depends on what you are trying to do with the trade (i.e. your entry).

If you know why your taking the trade, then you can work out at which point the thing your trying to acheive has likely failed. At this point, you should exit.

Make sense? Probably not, but after practice, you will see what I mean.

[tech/a]

Its a complex topic. But there are factors which should be explored to get the best out of your M/M.
This really is where you can make a huge difference to your account.
Particularly in these times.

My own particular view is---

As I'm only trading short term and the moves are generally short I dont want to give away more than I have to at each end of the trade.
I love to pyramid and reasonably quickly,I love to quantify risk for each pyramid and I have each pyramid trade stand alone unless on EXIT as opposed to stopped out or taken out by trailing stop.

This is where I do get an edge,significant at times.

So the Stop or INITIAL stop is what is used to calculate position size.
A little thought has you realise that the closer the Initial stop is to the buy price then the more you'll be able to purchase for a quantified risk.

Here is where timeframe does make a vast difference.
For short term trading it is often the case when having only EOD data that you'll find good trades but your entry will be a little later compared to guys like me.
You'll also find you'll have (In comparison to my trade) a worse expected R/R
Reward to Risk Ratio.
And less stock for often the same risk.

I'll use as an example AGO
Its one I have had on my watchlist for sometime.
I'll say you risk $500/trade.
As an EOD trader you may have found it tonight and could be considering a trade.
See both charts below for commentary
The first is a Daily chart and the second the 60min chart which I used for entry today.

So Would you question the expense of live trading software and data?

I'll write up a trailing stop example later.

I hope this clarifies your STOP LOSS question with some food for thought

[johenmo]

Here is where timeframe does make a vast difference.
For short term trading it is often the case when having only EOD data that you'll find good trades but your entry will be a little later compared to guys like me.
You'll also find you'll have (In comparison to my trade) a worse expected R/R
Reward to Risk Ratio.
And less stock for often the same risk.

I'll use as an example AGO


Thanks Tech - the example was just right for me. I also have felt that the RR others mention to what I calculate was higher. And the amount of stock.

Much appreciated
John

[So_Cynical]

Interesting read Tech...i cant get over the fact that looking at your top
chart, im buying at your stop and looking to sell at where your buying. :)

Just goes to show there's buyers and seller at all prices...im not day trading.

[tech/a]

Interesting read Tech...i cant get over the fact that looking at your top
chart, im buying at your stop and looking to sell at where your buying. :)

Just goes to show there's buyers and seller at all prices...im not day trading.

Yes
Very true and I'm sure there were traders who traded a 5 min chart and were in and out today!

The exercise wasnt about whats best but how some factors that are normally over looked---impact on a trade.

[MRC & Co]

Interesting read Tech...i cant get over the fact that looking at your top
chart, im buying at your stop and looking to sell at where your buying. :)

Just goes to show there's buyers and seller at all prices...im not day trading.

Yep, I would be in the same boat as you So_Cynical. Someone for everything.

Good overview on stops though by Tech.

:)

[canaussieuck]

Interesting read Tech...i cant get over the fact that looking at your top
chart, im buying at your stop and looking to sell at where your buying. :)

Just goes to show there's buyers and seller at all prices...im not day trading.

In a bearish environment this is the way to go. With the general trend down i take the breaks on the short side and some of the failures on the long side, depending on what sector they're in, its getting choppy again though, so i'm really favoring selling all failures to the long side and taking breaks to the short side.

Cheers,


CanOz

[Mr J]

Technically, stops should be placed just beyond a point of signficance, meaning a point of support, resistance or a pivot (i.e. swing high and swing low).

However, I prefer to use smaller stops. I've found my profitable trades haven't needed as large a stop as would be technically correct, which makes sense since I'm looking to get in as or just before a strong move.


for longer investments you'd use wider stops to allow for more market swings, for trading you'd use tighter stops to snatch more profit for yourself.

I don't think the timeframe matters - the ratios stay similar and that all that changes is the scale. The stops get wider in terms of dollars/points, but so does risk and profit targets. If anything, the stops are probably slightly tighter on longer timeframes as there's far more liquidity in play, so "limits" (such as support and resistance) will probably be more respected. I see the only difference between a 5min chart and 15min chart is that one trades quicker than the other, and that one's noise is another's retracement. The stops, profit targets etc will have a similar scale.


Just goes to show there's buyers and seller at all prices...im not day trading.

We're all making trades for different reasons. Some like the fundamentals, some think it's "hot", some might be taking profits, others might be balancing a portfolio, some might be in for a quick profit, and then we're all trading different timeframes. A retracement on one chart may be a trend on another, one man's garbage is another's treasure. Noise on one chart may be a tradeable range on another. A buy on one chart may be a sell on another. There are so many different perspectives out there, it's great.

[Aussiest]

So the Stop or INITIAL stop is what is used to calculate position size.

A little thought has you realise that the closer the Initial stop is to the buy price then the more you'll be able to purchase for a quantified risk.

Here is where timeframe does make a vast difference.
For short term trading it is often the case when having only EOD data that you'll find good trades but your entry will be a little later compared to guys like me.
You'll also find you'll have (In comparison to my trade) a worse expected R/R
Reward to Risk Ratio.
And less stock for often the same risk.

I'll use as an example AGO
Its one I have had on my watchlist for sometime.
I'll say you risk $500/trade.
As an EOD trader you may have found it tonight and could be considering a trade.
See both charts below for commentary
The first is a Daily chart and the second the 60min chart which I used for entry today.

So Would you question the expense of live trading software and data?

I'll write up a trailing stop example later.

I hope this clarifies your STOP LOSS question with some food for thought

So tech,

Let me get this clear. You were willing to risk $500 to make $1000? I'm gathering that you set your inital stop at 1R?

If i am willing to lose $300.00 on this trade, then:

300/0.25=1200 shares.

If could increase my entry level to $30.25, which means my position size would be:

300/0.5=600 shares.

Please bare in mind i may have reasons for entering this trade. Everybody has different reasons for everything, but just trying to get a grip on my entries.

30150

[Aussiest]

I could prob even take my s/l down to $29.50.

[tech/a]

So tech,

Let me get this clear. You were willing to risk $500 to make $1000? I'm gathering that you set your inital stop at 1R?

No thats not clear.
In the example at the time I was 1R in profit.

[Chorlton]

Its a complex topic. But there are factors which should be explored to get the best out of your M/M.
This really is where you can make a huge difference to your account.
Particularly in these times.

My own particular view is---

As I'm only trading short term and the moves are generally short I dont want to give away more than I have to at each end of the trade.
I love to pyramid and reasonably quickly,I love to quantify risk for each pyramid and I have each pyramid trade stand alone unless on EXIT as opposed to stopped out or taken out by trailing stop.

This is where I do get an edge,significant at times.

So the Stop or INITIAL stop is what is used to calculate position size.
A little thought has you realise that the closer the Initial stop is to the buy price then the more you'll be able to purchase for a quantified risk.

Here is where timeframe does make a vast difference.
For short term trading it is often the case when having only EOD data that you'll find good trades but your entry will be a little later compared to guys like me.
You'll also find you'll have (In comparison to my trade) a worse expected R/R
Reward to Risk Ratio.
And less stock for often the same risk.

I'll use as an example AGO
Its one I have had on my watchlist for sometime.
I'll say you risk $500/trade.
As an EOD trader you may have found it tonight and could be considering a trade.
See both charts below for commentary
The first is a Daily chart and the second the 60min chart which I used for entry today.

So Would you question the expense of live trading software and data?

I'll write up a trailing stop example later.

I hope this clarifies your STOP LOSS question with some food for thought

Tech,

Out of interest, when you pyramid into another trade on the same stock, do you :

1) use exactly the same trailing stop from the first trade as your exit?
2) use a new trailing stop but with the same exit conditions, as the 1st trade taken?, or
3) Use a new trailing stop with a completely different exit condition?


Just curious.....

Cheers,

Chorlton

[jonojpsg]

Just thought I'd vent my frustration at my last couple of stops activated and ask if anyone has ideas about how I might get around it.

Had a couple of Sopt GOld minis opened at 914.5 and 917.5 Friday and was watching it hover around 9.17 thinking yep this looks OK, I'll set my stops at 908 and 909 which would see me lose max $300 and $200 on each. Of course the next day I look and see the price at 917 and think, yep that's OK but then notice that boht of my positions got stopped out :mad::banghead:

The price dipped to exactly 908 :banghead::banghead: overnight.

While I only lost my maximum I was willing to, if I had not set stops I would have still been in the green?

[Mr J]

While I only lost my maximum I was willing to, if I had not set stops I would have still been in the green?

That time, yes, but what if it had dropped to 850? There are two possible reasons (at least that I can think of) for using stop losses. The first is to protect ourselves - insurance against a large move or when we're unable to exit ourselves. The second reason is if we can identify a point where the market says our strategy is not working, allowing us to get out automatically. I consider both reasons to be necessary; the first because it is sensible risk management, and the second because a pre-defined exit point is part of a good trading plan.

[beamstas]

Just thought I'd vent my frustration at my last couple of stops activated and ask if anyone has ideas about how I might get around it.

Had a couple of Sopt GOld minis opened at 914.5 and 917.5 Friday and was watching it hover around 9.17 thinking yep this looks OK, I'll set my stops at 908 and 909 which would see me lose max $300 and $200 on each. Of course the next day I look and see the price at 917 and think, yep that's OK but then notice that boht of my positions got stopped out :mad::banghead:

The price dipped to exactly 908 :banghead::banghead: overnight.

While I only lost my maximum I was willing to, if I had not set stops I would have still been in the green?

Was this with IG by any chance?

[Wysiwyg]

Just thought I'd vent my frustration at my last couple of stops activated and ask if anyone has ideas about how I might get around it.

Had a couple of Sopt GOld minis opened at 914.5 and 917.5 Friday and was watching it hover around 9.17 thinking yep this looks OK, I'll set my stops at 908 and 909 which would see me lose max $300 and $200 on each. Of course the next day I look and see the price at 917 and think, yep that's OK but then notice that boht of my positions got stopped out :mad::banghead:

The price dipped to exactly 908 :banghead::banghead: overnight.

While I only lost my maximum I was willing to, if I had not set stops I would have still been in the green?


Was this with IG by any chance?

That sort of thing happened to me many many times. Too accurate to be coincidental. Yes, who was the broker please?

[tech/a]

Tech,

Out of interest, when you pyramid into another trade on the same stock, do you :

1) use exactly the same trailing stop from the first trade as your exit?
2) use a new trailing stop but with the same exit conditions, as the 1st trade taken?, or
3) Use a new trailing stop with a completely different exit condition?


Just curious.....

Cheers,

Chorlton

Chorlton.

It depends where the ptramid shows itself.
If its running then I'll tighten up the initial stop.
The pyramid stop is always as close as I can get it. If I'm watching this isnt a problem.
Often I'm not and miss many!
So All of the above at various times.

[Cartman]

Just thought I'd vent my frustration at my last couple of stops activated and ask if anyone has ideas about how I might get around it.

Had a couple of Sopt GOld minis opened at 914.5 and 917.5 Friday and was watching it hover around 9.17 thinking yep this looks OK, I'll set my stops at 908 and 909 which would see me lose max $300 and $200 on each. Of course the next day I look and see the price at 917 and think, yep that's OK but then notice that boht of my positions got stopped out :mad::banghead:

The price dipped to exactly 908 :banghead::banghead: overnight.

While I only lost my maximum I was willing to, if I had not set stops I would have still been in the green?

Hi Jono,

i thought Gold dropped as low as 905 ish overnight?? ---- nothing sinister there i can see from your provider whoever they are --

(how to fix the problem) ----- daily range for Gold has been maybe around 20ish last few days ??? ---- dont follow it/quick glance --

at the time you took your position/s daily range was maybe 4-5 ish ?

had you allowed 15 down from your entry point, youd still be in, but would have cost you more had you been hit ---- not advice, but maybe worth considering in your trading system ---

its a fine line between running an ultra tight stop (losing less, but winning less often) and giving it the headroom it might require to get a runner ---
Cheers.

[jonojpsg]

Thanks all :)

Yep, using IG. Do I need to be on the lookout for this sort of thing? Consider changing brokers?

Yep, price could have droped to $850 :eek: but I was pretty confident it wouldn't given the move up recently. I am agreed on the essential use of stops, however have only just started using them on every trade and have seen a number hit on intraday moves that have then reversed upwards again :(

So I need to have a closer look and assess the likelihood of large intraday moves, such as $20 swings on gold, and set my stops accordingly.

Will let you know how I go.

And yep the low was 905.60, so not exactly on my stop. 900 might have been a better level especially given it's psychological strength as a barrier?