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How you place your stop loss?

  • #21
  • Jan 25, 2009 10:33am Jan 25, 2009 10:33am
Quoting yyc196
Hi,

I am glad for the great comments here, but is there any indicators that can be used to signal stoploss? I wish to find an effective and more mechanical way to tell me when should I close my losing trade.

This could be a stupid question, but it is useful for me.
yyc

personal i use a self-modified version of "daily_range_calculator" (bottom) and some others, just for information, mainly i use the average stats, attached a snapshot from my live account
google is your friend...

hope that helps

IX
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  • #22
  • Jan 25, 2009 7:43pm Jan 25, 2009 7:43pm
Hi All,

I refer the web site recommended by birdt:

http://www.trading-naked.com/StopsandExitsbyBUFFY.htm

I found one which is very similar to my system here, please see attached.

Instead of using EMA, I used Alligator (I exit when the bar hit the red line of the alligator. As you know, alligator is made up of 3 MA with some offset.
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  • #23
  • Feb 12, 2009 9:26pm Feb 12, 2009 9:26pm
Quoting yyc196
Hi All,

I have been trading demo for quite some time, I am quite happy with my current trading system except on the stoploss where I totally got no good strategy on placing a stop loss. I realized that a good stoploss is very important to trading and it is useful to have one to protect the profit you are having and even worst it shall stop you from lossing more!

I would like to ask if anyone here to share their advise. I hope that we use this thread to discuss solely on stoploss and how you manage your stop loss.

Good Day!
Well i think it depend's upon your trading system. My System suit's me alot coz my winning ratio is good. So I Alway's set my SL to -120 Pip's which rarely hit's. But My target profit is +30 Pip's on less volatile pair's and +50 Pip's on volatile Pair's.
Yea I Know where is money management? But My whole trading set up is working very well for me
  • #24
  • Feb 13, 2009 5:14am Feb 13, 2009 5:14am
Wow Hacker,

Your SL is 4:1 to your TP, that is a very large range of SL, so what is the reason for such a large SL. Your SL management is telling me that out of 10 trades you must not loss more than 2 trades, else you are going to make heavy loss!!!

yyc

Quoting PipHacker
Well i think it depend's upon your trading system. My System suit's me alot coz my winning ratio is good. So I Alway's set my SL to -120 Pip's which rarely hit's. But My target profit is +30 Pip's on less volatile pair's and +50 Pip's on volatile Pair's.
Yea I Know where is money management? But My whole trading set up is working very well for me
  • #25
  • Feb 13, 2009 5:25am Feb 13, 2009 5:25am
4:1 stop loss? Sounds a bit much to me. A bit like throwing darts, but hey, if it works for you and it's there for the right reasons then far be it from anyone else (me included) to pass comment.

IMO your stop loss should be placed at the exact point where the trade idea is no longer valid, not placed due to fear. I got brave and creative before with my stop losses, now I never sail far from shore....
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  • #26
  • Feb 13, 2009 5:32am Feb 13, 2009 5:32am
I'll share some interesting research that I have not shared anywhere before: one of the most effective initial stops [for my daily breakout methods] is 2 day atr.

When I trail, I use donchian trails, I usually trail last weeks low and I also use some automated trendline based methods. With some methods my entry is the same as my exit, with some methods it isn't. On some methods I trail by bollinger bands.

IMHO there is no universal rule, stop should always depend on method. Some stops work better on some methods and some better on other. Always do your backtesting to see what method works best on each trading style you use.
  • #27
  • Feb 13, 2009 6:49am Feb 13, 2009 6:49am
If I may, I'd appreciate a chance to chime in. From all of this discussion I haven't heard any one mention exit signals. So here is the question. Does you system have exit signals? If not WHY not? If so figuring a stop should be a fairly simple matter.

(1) First define your exit signal. (2) Now go back a while...5 min chart go back at least two months. (3) Find your largest loss using the exit signal. Now calculate a stop loss just outside of that range and figure your position size from there.

You stop loss should be your "emergency stop gap" until you have a successful trade. A successful trade would be defined as reaching your first target point. If your trade moves against you and produces an exit signal, take your trade off the table and wait for the next entry signal.

If for some reason the market moves very strongly against you before generating an exit signal, your stop will prevent excessive losses as you've defined them using the above method.

Once your trade reaches your first profit target, take 1/2 or 1/3 of your position off in profit and move your stop up to break even. THEN manage your stops from any number of the good advise you have received in this thread.

This method of entry/exit gives you a "double layer" of protection. First your exit signal telling you this trade isn't working out. Second if that fails, your stop loss to keep you from losing more than x% of your account. Your initial stop should be a "fail stop" NOT your exit strategy. AFTER you're in profit and have a zero risk trade you can try the really cool stuff people here are recommending, but NOT befefore.

Just my opinion.
  • #28
  • Feb 13, 2009 7:37am Feb 13, 2009 7:37am
Quoting yyc196
Wow Hacker,

Your SL is 4:1 to your TP, that is a very large range of SL, so what is the reason for such a large SL. Your SL management is telling me that out of 10 trades you must not loss more than 2 trades, else you are going to make heavy loss!!!

yyc
That's why i call myself PipHacker lol
Reason is that i trade on higher timeframe & on volatile pair's like Jpy related sometime's it happened that if my trade is going against me than almost for 85/90 % it didnt hit my SL of -120 Pip's & retraces back and turned out to be a profitable trade or i close it on breakeven(Depend's on Condition's). This SL suit's to my system coz in past my SL of -30, -40 even -50 Pip's easily hits on a volatile pair's like Jpy related but now this rarely hit's, yea i know im totally against MM Rules but I tested my System with this SL , patience and low profit targets for a longer period of time on demo with healthy result's now working v. well on real from last couple of year's
  • #29
  • Feb 14, 2009 6:17am Feb 14, 2009 6:17am
Hi gspajon,

Thanks for the advise, I realise the important of exit when your trade goes wrong, it serve as a warning sign for you to act before the loss get larger and larger.

As mentioned earlier, my way of exit is to use alligator, if the market hit the middle line of the indicator I will exit. I use larger TF for analysis to look out for a trending market and switch to 5m chart for entry and exit.

I always "count the market" using Elliot Wave. If I realised that the market had reached wave 5, I will exit also.

Basically my exit is based on alligator. My emergency stop is 40pips, if the market go against me suddenly, my SL is 40pips.

I like your way of "double layer of protection", I will look into my oersonal system to include this idea.

Thanks

Quoting gspajon
If I may, I'd appreciate a chance to chime in....
  • #30
  • Last Post: Dec 28, 2010 6:50pm Dec 28, 2010 6:50pm
Quoting Dr.Geppynius
using a fixed stoploss is a pretty bad choice.

the stoploss definies your position size, and not the other way.

also adding to losing positions like martingale is a absolute no-go, imho. at least in the current environment. it is about picking decent entries and when the trade does not play out divorce early. by using 10x 20p stops you have the benefit of 9 additional tries compared to a 200p stp. the trade should run after entry, otherwise i am not interested in it and won't let it go under water for a long period.

sticking to sound money...
I think fixed stoploss is a bad choice too but I am having a problem with it and need some help.
I place my stoploss below the low/high of last few candles and calculate position size based on the stoploss range to lose 2% max of the capital on any trade. The position size is calculated based on the stoploss range so if the stoploss range is higher, the position size is smaller and vice versa.
The advantage of this strategy is that it enables me to place the stoploss wherever I like without worrying losing more than 2%. The disadvantage is that if the stop loss range is large, the position size is smaller so profits are smaller. Of course if the stop loss range is small, the position size will large so more profits if the trade wins.
The problem I have with this strategy is that For ex:- although buy/sell signal appears to yield larger profits on Chart (in case of larger trend), in reality the profits are based on the position size which depends on the stoploss range. I am not sure if incorporating variable position size is good thing or not in the long run so any comments from experts are appreciated.
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