Hard stops vs trailing stops vs taking what the market gives

Hey guys,

I decided to experiment with futures a month ago. I'm using NT8 (Web) and I really like trading from the charts along with their ATM feature. I have both a live and demo account, but because I'm still feeling my way along, I've only traded through the demo. Anyway, I'm struggling to determine how to handle risk management. At first I used a 6 tick sl and an 8 tick tp and my account was green after my 1st week. Then one night I read about configuring a trailing sl and I thought it was an awesome idea. I think I first set the profit target to 5 with a 2 tick stop loss. After a handful of trades, I was soon in the red. Since then, I've tinkered with various R:R and such, and while a tsl has been beneficial at times, currently, and overall, my losses have been greater than my profits.

Additionally, as I gain experience, I am trying to determine if I am going to just take a 2 point profit and look for the next trade, or am I going to look for larger moves (With a greater hold time and possibly large drawdowns). So, just looking for some opinions from seasoned traders here. BTW, my intention is to just make a couple of intraday trades per day, not to necessarily help pay the bills, but it sure would be nice to

 

ES I assume?

 

Setting stops is an art and not as simple as a fixed amount or an R:R ratio.

Here are the things to consider.

• Instruments vary in their retraces.
• Time of day makes a difference.
• Volume High or low can lead to increased volitility.
• Stops design can have several "levels".
  1. Time based, it should produce or not with a time period.
  2. S/R based, it should not break too far above or below. A test is not a break.
  3. Volume based, but a single order spike is not the same as sustained volume.
  4. Trailing based on a MA or last candle.
  5. Combinations of all of the above.

But to give you something simple to work with consider

1. using a candle based approach, 4 ticks below the previous trending candle
2. The price movement is independent of your PL. Let that sink in!!!!
3. A meta stop. I.e. where you make your stop active, not where the actual stop is placed.
4. you final daily PL goal pursuit can set your stops too.
5. Have several types of stops based on all of the above. Not simple one and go, fits all.
6. Lastly, you have to be willing to risk something to make some profit. Consider what is more likely to be hit first, a tight stop, or a tight profit taker.

Best of luck and enjoy.

 

Trailing stop to BE is nice.
Maybe 2ATR stop then once price is 2ATR away from entry then move stop to BE and TP at 4, 6 or 8 ATR but you need volatility otherwise you’ll never make any money and preferably you need to backtest.

 

Thank you for taking the time to reply guys!

llan, yes, ES, sorry, I meant to add that

Badness, I agree 100% that stop losses are an art! Your well-crafted post is like a 4-course meal, I have to dig into it to fully appreciate it and digest it. Right off the bat, some of its going over my head. #3 for example, I don't understand a meta stop or how a SL can be active, but not at the place I placed it, I'm not sure if I'm even reading that correctly

And #6 is brilliant and one that I agree with very much so. You see, when I first dipped my toes into "Trading" back in '18, I started playing with biotechs, first played with shares, and then buying calls. It was a learning experience, but one I would never return to. I then got into selling puts on a variety of stocks, but mainly biotechs. I killed it for the better part of a year, the proceeds greatly helped me fortify my account, which in turned increased my downpayment I used to buy a house. Primarily, I was selling the $7.5 puts for .75. So I was making 10% on each contract, and I would do 10 -15 of these a month (It was on the CVM ticker and was trading around $12 continuously) So I was laying out a good chunk of change in order to make this happen (And quite honestly, I didn't really consider the risks at the time, I never thought the price on anything could collapse so quickly, violently) At the end of this trend, I eventually had to get out as the SP began to creep down to my short strike, but I suffered only a minimal amount. To continue, at one point, towards the end of '21, I started losing these trades left and right, but instead of backing off, I continued, and before I finally threw in the towel a year later, I lost more $ than I care to calculate. With that being said, I am still gun shy with regards to putting too much on the line, hence the reason I am greatly interested in stop losses

Sekiyo, how I interpret your advice is, I take the current ATR and double it, and use that as my SL? So, right now ES on the 15m tf the ATR is 5.25. So that means my SL should be 10.5 points? (42 ticks?)

 

20% (~10pts) of the daily ATR would be my maximum stop.
It's going to depends on your setup. I like to target 20% Risk and 80% Reward of the move.

Maybe 1ATR is enough. The quantities were just examples.
As I said you need to test it for yourself and see

 

This is the notion that the decision to exit and the actual time-price to exit are separate.

For instance, on a long, if you want to exit after, the low is below EMA21, then that is the decision. The actual exit could be to set at EMA21 as a Lmt, or on a green bar or after 3 bars from the decision bar, or simply, +3 ticks from the close of bar, or say 90% or less of the maximum low water mark (MAE). The idea is to save a bit of loss, but STILL GET OUT.

Hope that helps.