The Zen art of trading

Quoting Ohka

Disliked

As to entries & stops:

the stops I put in the market are purely meant to be a last resort in case of an emergeny - events that make it impossible to contact my broker and close my positions.

I close my positions myself, using another set of stops that I do not put in the market.

The closer you can place your entries at a reversal point, the tighter the mental stops can be. If you're good at this, it even allows you to size up your position without risking more than your pre-set limit.
My personal position sizing method is simply "fractional-f", where my effective risk (i.e. effective leverage) is limited by the mental stops I use.

My entries are based on reversals at Fibonacci- and Pivot Point levels and Bolling band extremes, but only so when at the same time MACD/RSI show a divergence with price action.
Currently I'm investigating using Imran's system (here on FF) as an entry confirmation at those price levels...

Happy trading
Ohka

Ignored

Quoting Unforeseen

Disliked

Hi Ohka,

I had done somthing very similar to you in the past. After reading much on stops and thoughts on how to normalize the risk, I think I will go back to exactly what you are describing. I looked up on how to do the ATR method for settings stops and I just don't like it. I realized that price alone will account for volatility and therefore normalize itself automatically.

I realized this is one easy win for simplicity over complexity.

I do have a question for you, I understand you have a mental stop, but isn't that a range? So for example is your risk model such that you will say risk between 2% and 3% and your mental stop has to fall within those parameters?

Ignored

Quoting Ohka

Disliked

using an ATR derived stop distance isn't half bad, as long as you combine it with a fixed maxium risk per trade. When volatility rises, you're ending up with larger stop distances. To remain within a fixed risk level per trade for that larger stop distance, you'd need to reduce position size.

Conclusion: using ATR-derived stops in combination with a fixed maximum risk per trade would be an effective implementation of the position size recommendations I posted before.

As to my mental stops: I don't use a stop-band, but a fixed stop per trade, based on my fixed maximum risk limit. The stops I actually put in the market are a multiple of that...

take care, collect pips!

Ohka

Ignored