Monday, December 1, 2008

I need smaller stops

Everything started to fall and I entered my eur/usd short at the top of a bounce. I leave my trade run against me because everything except eur/usd was weak. I even gave it more room at -40 cut out level, but when it started to break to the up side I exit it at the top spike.

I can't do this any more. If I so far have fix my averaging problem, now I have to readjust my exit strategy further. I lose all the bullets on one trade. It doesn't matter if I have good reasons for staying in that trade it doesn't fit in my overall trading plan. I got to have scalp stop losses. In range 5-10 pips mostly up to 15, but not 40. It was hard to get used to trading without averaging but I did. Now I got to get used to small stops. It's just natural way to exit my trades regarding that I mostly have scalp profits. For example today I entered in good scalp manner and had 4 pips profit on that trade immediately. As price started to go against me I changed my plan. I started to look around at other pairs why I should stay with the trade. I found good reasons, no other pair was retracing much, so I kept giving my eur/usd more and more room. Well eur/usd made something that we can call full reversal and other pairs didn't. I lost. I probably have to make a rule that on any individual trade max loss is -20. Maybe better -15, because it will happen from time to time when I don't want to go out, like now up to 40. So maybe better to fix it at 15. The most important thing is to exit majority of losses at 5-8 stop. For me is just easier to concentrate on scalping than any other way of trading. Maybe I should exclusively trade like that. But I still can't let go idea of not taking advantage of trends and cut all my profits in 10 pips area. Maybe I should just use very big tightening of stop, so when I have 8 pips of profit and it looks like there will be much more, trail stop to 5 pips profit an leave it there. So I will get at least 5 and leave that trade alone. Well it will probably all get settled when I start with scalp exits on all my losing trades.

Now two hours later after my 09:33 entry eur/usd is at 2 pips from market at that time, gbp/usd 140 in short direction, eur/jpy 130, usd/jpy 100. I really found wrong pair to short today.

Well I still got to develop that idea of small stops but this is direction that I'm going to take.

-22 full size pips



I couldn't have said it better myself, if your gonna have scalp profits you had better take scalp losses ;))

Have you figured out how much profit you will take before leaving the market each day? It is important for you to know that, because as a scalper, its not like you are looking to hold onto a long trend.

Scalpers take lots of small profits and losses and which ever limit is hit first (daily loss or daily gain) they quit trading.

So with that said are you looking to bad 20 FS pips a day? More? Less?

FX said...

Well good point. Judging by last month I had 38, 10, 10, 14, 10, 7, 10, 61, 9 full size pips on my profitable days. So it's little bit hard to decide. I still didn't give up idea of riding trends, and when I just scalp I don't get 20 full size pips but rather 10.
Until now I usually quit when I noticed that I'm not any more alert and in good mood for trading. I probably should quit @15 FS pips when I don't stumble onto strong trend day. If I somehow get in very strong trend or something like that I should go beyond.

But I think it is good idea to have a figure which I'm aiming that day, and when I get it I can close the shop. Again, I'm not completely clear on it, but I know that I'm really happy with 20 FS pips. It's 40 half size pips, it's big number for scalping.

FX said...

Well I think that I will stick with what I was using so far. I can't push it every day to some number if I don't like the market or I'm not in the mood. Also I really want to have open option of riding a trend. I will stop trading as it's now at 20 full size pips loss if it get hit. On the profit size I will stay with no target for a day that I got to hit but trading with a feel.

I will change now only my max loss on individual position to 20. It's max and I don't intend to give each trade that much room. From now on I will look to cut losses more aggressively.


Did you know there are some scalpers that make 1000 trades a day? that is true scalping in my opinion, they make so many trades that not a single one of them means much to them at all, be it a winner or loser.

You saw my charts this morning, how I walked away happy with +1.7% i understand that just because I have a daily goal does not obligate me to hit it. Its just thanks to my wife that my stupidity was well managed :)

As far as a daily goal for you goes, please listen to yourself...

"I'm not completely clear on it, but I know that I'm really happy with 20 FS pips. It's 40 half size pips, it's big number for scalping."

Do you realize that by saying that you are ALSO saying that 20 FS pips is a lot to LOSE?? You are also admitting that its a big move to catch, so if you just scale your risk, you can meet your goal in far fewer pips. As always, just trying to give you some things to think about.

FX said...

We got to put in perspective that I have certain style of trading that I developed over the years. I'm not good for 100 trades a day nor 1000. Also I'm not inclined like you to have 5 pips stop and be able to pull 8 losers in a row and than make up all in last trade. It's completely different way of trading. I trade certain way and got to optimize my parameters with that style in mind.


haha, yeah i know, i didn't mean for you to have 100 or even a thousand trades either, its just what comes to mind when I hear "Scalper"

Well, just keep working forward like you have been, you have made great progress in understanding and application these last few months! Proud of you for that.

Mike said...

I don't mean to be critical here, just an observation, but you seem to be changing your parameters from day to day. One time you want to go for big pips, next for a few pips. You will not know before what kind of move is going to happen- directional and fast or moving in smaller steps. One way to deal with stop placing could be SAR. Put it on your charts and see where your trades would have been stopped. It isn't perfect but the stop moves as the price progresses and you don't second guess yourself from bar to bar. If your entries are correct, SAR will keep you in trade for most of the move.

FX said...

You are right Mike, yesterday I was thinking about the same thing. When I get bad day, I'm always changing something. It's probably my way of coping with stress or something.

I made a poor choice to stay with the trade, being unprepared for a loss. I count on that trade will never come back so much. It did. I wanted that usual illusion trade that is guarantied winner. Loss can happen in any trade, with any stop.

Jules said...

Don't lose heart, FX. You win some days, and you lose some days. All of us start out making good decisions occasionally, and bad decisions more frequently than we takes many years of practice to start making more good decisions than bad.

Re scalping - I tend to see it the way that Orion Machine sees it, that it's about going in and out of the market many times aiming to take a few pips here a pips there and losing less than what you gain. If you scalp, your stop loss will not likely be even at support and resistance coz they might be too far away - you just have to run if the trade is not immediately profitable. With forex, it's difficult to do coz spreads will immediately cost you pips the moment you place your trade.

Your tone tells me scalping makes you excitable...and that's not exactly a good state to be in if you're looking to improve your trading skill. You hardly have time to observe what you're doing and what the charts are saying and most importantly, what went through your mind when you were doing what you were doing - all the information that you need for post trading review.

You can't scalp if you're not 100% focused. The level of concentration required is so high you'll be drained by the time you're done. If you scalp before going to work, you 'll tend to watch the time; if you scalp after work, you'll mostly be too tired to maintain full concentration and it'll be quite a feat to do real scalping (yes, like making 100 trades).

If you're looking for more than a few pips' gain, maybe trade a higher timeframe and set a stop that's not so tight? It's simply not realistic to set a stop of a few pips while aiming for a 2-figure gain....I couldn't have agreed more with Orion Machine that if you're taking scalp losses then you'll have to accept scalp profits.

In real scalping, you hardly get to ride a trend, FX, coz you have to bail once the momentum starts waning. The only way to minimize exposure to risk while riding or waiting to ride a trend is to size down. Trading standard size full lots (or even half size for that matter...if by half size you mean half of 100k units?) while increasing your stop loss will definitely cost you more when your trade goes against you; if you trade mini or micro lots, you can afford to have a wider stop, which will allow you to stay in trade long enough for a definite trend to develop.

I'm just brainstorming...I'm sure other more experienced traders have better insights and suggestions..but ultimately, it's up to you to figure out what works for you. If you've done things a certain way for a long time and you're not satisfied with the outcome ie. if it's not yielding consistent results, you have nothing to lose by exploring alternatives right?

FX said...

Again very interesting comment by you Jules. I don't know how would I call my trading when the trades last usually 1min - 6min. I call that scalping, but it's isn't really correct. I don't have problem with spread because I think that 0.9 on eur/usd is very good spread even for very small moves.
The main thing is that after I got rid of averaging and moving stops with rule of no bigger loss for a day than 40 pips cumulative, I begin to have 40 pips losses on my first trade that goes bad. Well I simply have to get rid of that now. My losses should be at least in a range of my average wins and that is 5-15 pips. On a trades where I leave loss to run I just make bad mental/emotional decision which is similar to averaging before. I got to clean my act and just accept that any trade can go against me. There is no point in saving it when it's going, now it proves as bad when I try to save it with 40 pips stop like before with averaging and 200 pips risk. It's just tightening discipline to get used to "normal" trading. So that I don't have a need for some kind of interventions.