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The best idea for stoploss?

  • #21
  • Jun 4, 2024 4:28am Jun 4, 2024 4:28am
When your trading plan didn't work out.... You have a trading plan right?
Simplicity is the ultimate sophistication - Leonardo da Vinci
  • #22
  • Jun 4, 2024 5:07am Jun 4, 2024 5:07am
Quoting RickM
ONE HUGE trade win a week is all you need, just try and break even with the rest.
Hehe Rick. Unfortunately THAT is not as easy as it sounds. Otherwise, I agree with everything you said here regarding stops.

I will also test again my entry idea on the London Breakout with a volatility based stop like using the ATR x multiplier. In general, this seems to be a clever way because the stop then will adapt to changing market conditions / volatility. I've been pretty focused on good entries so far, but I should probably focus more on how to stay in a winning trade for as long as possible instead of a fabulous win rate.

Edit: Does anyone know of a simple breakout EA that can trade a range breakout (defined in time) with such a volatility stop based on the ATR/ADR and a multiplier. Ideally perhaps even a trailing stop, which ensures gradual profits if you catch a trend day. That would definitely help me to backtest instead of having to test manually for years again. Unfortunately, the EA's that I have found so far do not offer such a volatility stop.
  • #23
  • Jun 4, 2024 9:23am Jun 4, 2024 9:23am
Hello again friends,

Since it seems that we are all dancing around this issue anyway, why don't we just address it head on. There is nothing to be gained by disparaging other's trading styles. Its kind of like a gazelle telling a humming bird he can't run fast. Why don't we instead address what I see as the real issue. Your overall trading plan, and how a large portion of that plan should be dedicated to "risk management". I like to divide my plan into four major parts. (1) Overall goals for trading (2) Opportunity recognition, (3) Order execution, (4) Risk management.

As part of my risk management plan I have declared a certain percent of my account I am willing to risk for each trade (or each day's trading). I then take that percent as a monetized amount and divide that by the number of points (pips, ticks, cents) I am willing to allow the market to move against my position. I got that number of points (pips, ticks, cents) from at least the last six month's worth of data. Yes, I collect data on every trade and compare that to what I determine as my "calculated" stop and the "actual drawdown" that occurred on each trade. I average these together and then keep this as a dynamic statistic based on how I trade. As a side note...trading rules and statistics are all fine and good, but actual results of your actual trading work better. Here is an example of these results for this year's last 6 months:
Attached Image (click to enlarge)
Click to Enlarge Name: screenshot.png Size: 3 KB

As you can see my average "calculated risk" - that is where I actually place my stop is about 51 pts away from my entry. And that represents (on average) a risk-to-reward but about 1.67xR. However that is NOT what actually happens. My average actual risk is only a small portion of that larger stop and represents a much larger risk-to-reward profile. In addition I have actual results of largest drawdown (on a day of very high volatility) and compare that to average drawdown, and what those numbers actually mean in real money.


In addition to how much you are willing to risk, and how to translate that to how far away, you much also have a section of your risk management plan that deals with rolling your stops in favor of your position, thus reducing your risk, and/or locking in profit as you let your trade run. With this section comes the idea of "letting your suckers run", or taking profit and keeping your accuracy high. To do this you must refer to another part of your plan, your overall goal in trading. There is nothing wrong with accepting an overall goal of "riding trends" or "smaller more consistent profits". I fall into the latter. This works well with my risk management because I like to reach a certain goal each week, and when I am done...I'm done.

Thus my accuracy is higher but I don't get those 2 day or 4 day, or even 5 day long runs that can profit over 1,000 points or more. However I can do the same thing if I simply make a profit (including all day's wins/losses) of 100 pts per day. Yesterday was 150, so I'm taking the day off today.

The point being this all comes about because of a plan that has taken me several years to develop and refine, and literally thousands of hours logging and recording my own data based on how I actually interact with the market...good, bad and at times, VERY ugly.

To say my stop loss is x number of points, while true, is very misleading. There is far more to it than that. But again, I have not seen the thread originator chime in so it is hard to really know what his purpose was (is).
@xxxx§|[::::::::::::::::>
  • #24
  • Jun 4, 2024 9:44am Jun 4, 2024 9:44am
Quoting phrixusong
option 1. by percentage of total equity. e.g 50% option 2. by pip e.g 500 pips option 2. by times of TP. e.g 5 time of TP. which option works best? any other better options. thanks
i use #1 percentage of the account balance you place your stop wherever your system/market says to put it and because you need a SL to calculate the lot size needed for the risk %
  • #25
  • Jun 4, 2024 1:47pm Jun 4, 2024 1:47pm
Quoting dinpappa
{quote} A hedge is the same as using a stoploss and then placing a order in the opposite way with the same size, so how does stoplosses not work and hedge work?
There are only one 2 "states" when you can sleep on market. First is if there are no positions opened. Second if your position hedged. It is not possible to close the position always at the "right" time, same way it is not possible not to sleep.

Hedge work this way: if you have short and long position at the same time then the price is on the top you can close part of your long position and then open same amount back once it fall. Same way you can close your short on bottom and open back when it will go higher. Remember this is very simple description and there are a lot of math under that, but in simple works that's it. The key is not run same sizes if you are not trading. The distance between positions + fees = your loss. So you just have to get it back. In fact it is just the same like your original trading but a little bit more complicated because everything is upside down
Observer effect
  • #26
  • Jun 4, 2024 9:31pm Jun 4, 2024 9:31pm
Quoting pescador
{quote} Right. You have just demonstrated you have no idea about Low Frequency / High Leverage scalping. What you write could very well be profitable with other strategies, yours particularly; I do not argue against it. Each strategy needs a corresponding risk management. Mine obviously would not work with yours. If you like, let your "suckers" run, I don't care. I personally would not want to face a 65% draw down on my equity. If you tolerate that, power to you. BTW I use my strategy on my live account and not with demo or testing....
Hi Pescador

You need a pair of glasses because I said the win rate is only about 35%, not draw down 65%.
Draw down is about 5 to 7% which is acceptable when chasing huge winners.
In live forward testing I add a Cumulative Delta indicator which improves the win rate to 70% but unfortunately doesn’t improve on creating larger winners. Still it improves probability.

What’s that crap you wrote about me not understanding high leverage scalping, I am primary a Futures trader where I mostly scalp a DOM on NQ or ES for $50 to $150 a tick and do very well. Been trading for 25 years so I do know a thing or two about backtesting as I used to be an Algorithmic trader as well.

But I do agree with you that Backtesting is often a waste of time due to broker altering historical data to create unprofitable Algo’s mostly.

OK - what’s your story?
Trading thin liquidity at the boundary of the charts
  • #27
  • Jun 5, 2024 12:46am Jun 5, 2024 12:46am
Quoting phrixusong
option 1. by percentage of total equity. e.g 50% option 2. by pip e.g 500 pips option 2. by times of TP. e.g 5 time of TP. which option works best? any other better options. thanks

Pick your stop loss by identifying support or resistance levels, last swing high or low for example, above or bellow ranges etc.
  • #28
  • Jun 5, 2024 12:51am Jun 5, 2024 12:51am
Quoting RickM
{quote} Backtest your strategy and your'e find the right answer there. Generally for me, I just want top hit the Break Even tab as soon as possible so it becomes a stressless trade. But as a Stop is needed, go by the ATR of the market / time frame you trade and use 2 for general scalping or trading. 50% Win Rate is all you need so fall in love with losing trades - it stops you doing stupid things like averaging down or moving stops like the 90% of the losers do.

Where you entered the trade is rarely a good point for your stop loss, why would it be? stop losses should be placed in areas where there is some "protection" from a move against you, support and resistance levels.
  • #29
  • Jun 5, 2024 4:15am Jun 5, 2024 4:15am
Quoting phrixusong
option 1. by percentage of total equity. e.g 50% option 2. by pip e.g 500 pips option 2. by times of TP. e.g 5 time of TP. which option works best? any other better options. thanks
you can't say that, it depends entirely on your overall strategy and the instrument and TF you play with.
trading is like dancing, don't think and just listen to the music!
  • #30
  • Jun 5, 2024 6:15am Jun 5, 2024 6:15am
Quoting ryuryu
{quote} There are only one 2 "states" when you can sleep on market. First is if there are no positions opened. Second if your position hedged. It is not possible to close the position always at the "right" time, same way it is not possible not to sleep. Hedge work this way: if you have short and long position at the same time then the price is on the top you can close part of your long position and then open same amount back once it fall. Same way you can close your short on bottom and open back when it will go higher. Remember this is very simple...
Interesting sir, you're saying its pure math and I agree, but there is no mathematical advantage to hedging as far as i understand.

For example:
You buy 1 lot and it goes up, you make money. Exit for 1R.
You buy 1 lot and it goes down and hit SL, you exit and loose 1R.

Hedge:
You open buy + sell, it goes up, you exit long = 1R on long, -1R on short. It's like you never even had a position, because you're BE. Now if you open a new long when it goes back down, its the SAME as if you would just open a long right now and nothing else, its even more expensive to hedge because you give more fees away..
  • #31
  • Jun 5, 2024 7:40am Jun 5, 2024 7:40am
Quoting RickM
{quote} Hi Pescador You need a pair of glasses because I said the win rate is only about 35%, not draw down 65%. Draw down is about 5 to 7% which is acceptable when chasing huge winners. In live forward testing I add a Cumulative Delta indicator which improves the win rate to 70% but unfortunately doesn’t improve on creating larger winners. Still it improves probability. What’s that crap you wrote about me not understanding high leverage scalping, I am primary a Futures trader where I mostly scalp a DOM on NQ or ES for $50 to $150 a tick and do...
OK, sorry, I misunderstood what you wrote. So 65% of your trades are losers, not 65% draw down, I understand now.
That makes your strategy the opposite of mine: you trade algorithmic, high frequency scalping with 65% lose rate and I trade manually low frequency precision scalping with a win rate between 80-90%.
I think you cannot compare these two strategies in terms of risk management.
Neither can one compare executing a manual, discretionary strategy on a live account as I do, with some backtesting results without any real risk, as your example was about.
That was my point.
  • #32
  • Jun 5, 2024 8:16am Jun 5, 2024 8:16am
Quoting dinpappa
{quote} Interesting sir, you're saying its pure math and I agree, but there is no mathematical advantage to hedging as far as i understand. For example: You buy 1 lot and it goes up, you make money. Exit for 1R. You buy 1 lot and it goes down and hit SL, you exit and loose 1R. Hedge: You open buy + sell, it goes up, you exit long = 1R on long, -1R on short. It's like you never even had a position, because you're BE. Now if you open a new long when it goes back down, its the SAME as if you would just open a long right now and nothing else, its even...
The math is not that straight my friend. If you have 100% short vs 90% long hedge for example then if the price goes away from you then you have smaller (comparing if there was no hedge) loss because the short position exist and it gains profits too. In fact you can always be in hedge even from your first trade. I understand that is sounds complicated but who said trading is easy Of course there are a lot of "if" and you have to calculate everything but in easy words in works much better than trying to predict "best sl" ratio. As I said many times there are no positive expectation in using stops.
Observer effect
  • #33
  • Jun 5, 2024 9:03am Jun 5, 2024 9:03am
I usually place a stop loss by looking at where the support resistance zone is and adjusting the risk tolerance prepared in a trading plan. Maybe the most difficult thing is to be patient, sometimes my patience disappears because I get bored of waiting for the right price to adjust my risk tolerance.
I trade at FXOpen
  • #34
  • Jun 5, 2024 11:20am Jun 5, 2024 11:20am
Quoting dinpappa
there is no mathematical advantage to hedging as far as i understand.
Indeed, Dinpappa, you are right that there is no mathematical advantage. In fact, for most brokers there is a disadvantage. When you are fully hedged you have paid your broker commission to be effectively out of the market! Moreover, with most brokers you eat up your leverage/margin (although some brokers cancel out opposing trades when calculating the margin requirements). When creating the hedge and later closing one side of the hedge, there is additonal risk of a failing execution (e.g. being partially filled) which makes the hedge not perfectly 1:1 balanced, thus leaving you exposed to the market.

No, if you want to be out of the market, simply close your position. Do not hedge with an opposing trade!

The only reason to hedge could be a psychological one. If you have a hard time taking your losses, it might feel less bad to hedge. Also, if you are stacking up multiple positions, hedging could simplify the bookkeeping needed. However, for automated Expert Advisors this bookkeeping can be kept internally and there is no need to see old positions on the screen.

Quoting ryuryu
If you have 100% short vs 90% long hedge for example then if the price goes away from you then you have smaller (comparing if there was no hedge) loss because the short position exist and it gains profits too.
Close your long, and open a 10% short. Exact same effect, but you pay less commission and use up less margin that you can use for other trades.
  • #35
  • Jun 5, 2024 11:47am Jun 5, 2024 11:47am
I agree that there is no mathematical advantage to using hedge vs. StopLoss.
But there is a conceptual advantage if you trade manually and hedge through synthetics instead of directly with the same instrument.
It gives you much more flexibility, but is more challenging for your attention.
Particularly if you trade for example with Interactive Brokers, if you have three trades open (synthetic hedge) and effectively you are flat, you do not pay any rollover/overnight fee at all.
So you can have your hedge running as long as you want to without paying a cent for maintaining it.
I used to trade a synthetic hedge for years quite successfully, but with the time it just got too stressful for me because of the attention needed.
So I settled with my current strategy, that used to be my secondary one for more than 10 years. Additionally, with my current broker synthetic hedging would be just too costly.
  • #36
  • Jun 6, 2024 10:09am Jun 6, 2024 10:09am
Quoting yoriz
{quote} Indeed, Dinpappa, you are right that there is no mathematical advantage. In fact, for most brokers there is a disadvantage. When you are fully hedged you have paid your broker commission to be effectively out of the market! Moreover, with most brokers you eat up your leverage/margin (although some brokers cancel out opposing trades when calculating the margin requirements). When creating the hedge and later closing one side of the hedge, there is additonal risk of a failing execution (e.g. being partially filled) which makes the hedge not...
You are 10000% correct. there is NOT ANY mathematical advantage to hedging, end of story, and @ryuryu saying there is advantage and its all "advanced maths" is just not correct, its easy to act smart and say its advanced and then not explain, but its hard to actually proove it... because its just not correct xD

Hedging this way = retarded

Hedging through different assets = could be good, depends on the trader.
  • #37
  • Jun 6, 2024 10:11am Jun 6, 2024 10:11am
Quoting ryuryu
{quote} The math is not that straight my friend. If you have 100% short vs 90% long hedge for example then if the price goes away from you then you have smaller (comparing if there was no hedge) loss because the short position exist and it gains profits too. In fact you can always be in hedge even from your first trade. I understand that is sounds complicated but who said trading is easy Of course there are a lot of "if" and you have to calculate everything but in easy words in works much better than trying to predict "best sl" ratio. As...
Still no mathematical edge? 100% short and 90% long and it goes down and you make money, true, same if you have 10% short 0% long..? xD
Or if u had 100% short and 90% long and it goes up, then you loose money even if you're hedged.
Mate, its not advanced mathematics, its simple maths, and its not an edge.
  • #38
  • Jun 6, 2024 12:48pm Jun 6, 2024 12:48pm
Quoting RickM
Ultimately this is why most traders fail to become profitable. Focussing on how big or small a loss should be isn’t the X factor - it has no long term effect on traders profitability. All our time and energy needs be to redirected into developing strategies that let winning trades run as long as possible. Here is an example on a strategy I have been back testing the last week ( hobby out of mine to test strategies) that runs a Super Trend indicator on Renko 9 on the NQ futures markets. It loses 65% of occasions and will often run drawn downs of...
Well said, i used to hear this in the earlier days of my trading career and i did not understand and after many years of failure then it later sunk in.
And from there my account grew easier and i began enjoying my trading.
THE TRUTH IS SIMPLE,ACCEPTING THE SIMPLICITY OF THE TRUTH IS WHAT IS HARD
  • #39
  • Jun 6, 2024 3:27pm Jun 6, 2024 3:27pm
Quoting dinpappa
{quote} Still no mathematical edge? 100% short and 90% long and it goes down and you make money, true, same if you have 10% short 0% long..? xD Or if u had 100% short and 90% long and it goes up, then you loose money even if you're hedged. Mate, its not advanced mathematics, its simple maths, and its not an edge.
If you think that 100% short and 90% long is equal to 10% short and 0% long... Oh... Nothing to discuss then.

Anyway I have no time to teach anyone basic math. I just said that there is no positive expectation in using stops. There is no rule how to set it. All your ideas that it must be set on support, resistance, x2 of tp and so on are just dreams and has nothing under that. I repeat: to gain back 30% loss you have to earn 47% (no fees included!). Using stops is the way to lose the deposit. It is just a matter of time.
Your stops are free fuel for the big player since they are always market orders. That's why all the forums and web are full of "advises" how stops are cool and how it protect you As if someone is seriously worried about your money
Add liquidations to the chart and check what your stops doing. It is not so hard to understand. But much harder than posting nonsense on the forum, yeah

p.s. I'm off that funny place for 1 year again. See ya
Observer effect
  • #40
  • Jun 7, 2024 2:10am Jun 7, 2024 2:10am
Quoting ryuryu
{quote} If you think that 100% short and 90% long is equal to 10% short and 0% long... Oh... Nothing to discuss then. Anyway I have no time to teach anyone basic math. I just said that there is no positive expectation in using stops. There is no rule how to set it. All your ideas that it must be set on support, resistance, x2 of tp and so on are just dreams and has nothing under that. I repeat: to gain back 30% loss you have to earn 47% (no fees included!). Using stops is the way to lose the deposit. It is just a matter of time. Your stops are free...
why so quick to dismiss someone who has a different opinion?

isn't the debate ultimately important and essential for realisation?
trading is like dancing, don't think and just listen to the music!
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