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In a message dated 98-05-30 16:03:59 EDT, t-bondtrader@xxxxxxxxxxxxx writes:
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Finally had to join this strand!
If day trading - I emphasize that, since that is all that I do, on the
Bonds - stops have nothing to do with your account size or risk/reward ratio
per se. It has all to do with the market. If you believe in and trade
using Fibonacci retracements, the answer is simple. Once you are in a
trade (because your system/signal/whatever tell you to be in it, then you
must give it a chance to succeed - or prove its failure to you.
Consequently, your stop should be below the .618 retracement from the
high/low of the day and that's it! You enter the trade, then, as soon as
the market starts to retrace you put up the retracement tool and watch. If
it stalls at .382 it is a strong continuation signal; if it goes to .500
then there may be a chance that it might not go as far as you were hoping.
If it goes beyond .618 the is probably ain't a retracement, more a reversal.
Your were wrong, so bale out. Look for the next opportunity.
If you can't stand a .618 retracement then you shouldn't be in the trade at
all. No market maker is going to take the market lower than that figure
just to run stops (it is simply too expensive) - if it goes that far, it has
most probably reversed.
What position traders do, I haven't a clue. I have to earn daily bread to
put on the table. Etc. etc.
Stops are there to protect capital, not hope you are right and it fits your
risk/reward ratio. The latter is a whole different ball game - different
subject.
You won't get stopped out, if you haven't advertised where they are - but
that, of course, depends very largely on what instrument you trade.
Thereby hangs a tale - coming along, nicely, thank you...
Best wishes all
Bill Eykyn
>>
Bill,
Great post on stops. One of the best I have seen
Terry Quinn
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