I think Stops vary depending on the approach and of course the reservoir of reserves. The conditions of the Market at any given time dictate the way you approach Stops as well. Every method seems to have it's drawbacks.
The thing with the thirty minute Chart is that you have to allow room for the trade to "work" so your Stops are normally looser. That's another reason why it's probably best to use the thirty minute in conjunction with faster charts to try to Enter optimally, reducing the possibility of getting twacked right off the bat.
Simple rules include not loosening your Stop once you decide on one. That is, if you spent the time to decide that your Sell Stop is at 1415 then don't move it to 1412 later on. Some people believe in two sets of Stops. Initial and Trailing. They start the Trade with an Initial Stop of 920, wherever, then decide that they will Trail 1120 points from the Highest/Lowest Price Bar. That way the amount of loss can be controlled in the event of a weak Entry.
One person I know of uses a percentage of the 5 Day Range. Another developed a Excel Type Program that spits out ranges based to a large degree on Fib Numbers. (In other words, he inputs Highs and Lows and the program tells him likely ranges of motion, so he picks one....adds perhaps a half a point, and that's his first Stop). Some people use SMA's with a little slippage. An easy Trailing Stop might be to look at the last 4 5-minute bars and trail it at the Highest point plus a tick.
Myself, I rarely use them....probably a very foolish thing. But my reason is that I try to time my Entries well. What I mean by that, is that if the Market goes against me at first I check everything and try to decide whether the move is False, a fake-out. Also, I try to take some of the Trade off the table as soon as I get a small gain, a point or two, so I have a cushion.
When I do use them I try to place them in oddball places, like 1414.90 instead of 1415 even. Or 1414.75 if it's a mini trade.
I see the 8:30 Report blew the doors off again....
One last thing if you use Fib, I was told once by a pit trader that they like to just inch past fib numbers because that's where Stops are usually placed aplenty. So keep that in mind.
Sorry I cannot tell you anything more concrete; it's just that the individual has to be comfortable with the Stop. I think the key issue is knowing where your Stop should be before you even Enter.
Side note, I know a guy who always places his Stop before he enters. That's because one day in November 3 years ago he had a trade on and left to walk his dog, forgetting to place a stop. He trades fairly large, 10 to 100 contracts a clip. Lost a million dollars that afternoon. He was able to get over that. Me, I don't think I could. |
