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<DIV>I have listened to this long enough. If you place any faith at all
in<BR>mathematics and/or statistics you realize that trades, like many
other<BR>things in human behavior, are not serially correlated. The idea
of an<BR>outside idea taking nothing more than a trade-by-trade listing and
telling<BR>you when to trade more contracts based only on the trade-by-trade
listing is<BR>ABSURD. The assumption you are making, if you buy into all
of that, is that<BR>trades from any system, good or bad, real or imaginary, can
be (without<BR>knowing ANYTHING about the methodology) thrown into this magical
money<BR>management scheme and "POOF" you have a great
system.......Think about it.<BR> </DIV></BODY></HTML>
</x-html>From ???@??? Sun Aug 16 05:12:43 1998
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Date: Sun, 16 Aug 1998 13:01:08 +0100
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From: "Simon Townshend" <UKTrading@xxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Re: Enter on Stops ?
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Hi Philip,
I will have a go at giving you some guidelines. Please remember though that
what I do, or anyone else does, simply will not work for YOU. That is why
people purchase systems, books etc and are always disappointed. (Of course
many books and courses are written because that is the ONLY way that the
authors earn an income!! but that is another story!) However when
developing your own methodology, other peoples activities just might give
you an idea that YOU can develop for your trading.
1. You never know that a retracement is a retracement and not a trend
reversal until after the event. Therefore if you enter at market or on a
limit you will be on the move in both cases. If you enter on a stop in the
direction of the trend and the retracement turns out to be a retracement you
are suddenly in on the move with the trend. If the retracement turns out to
be a reversal your order is generally left alone which is what you want
(unless occasionally you get picked up on a spike but that is part of the
game!). I am afraid I can not get my head round all of the methods of
measuring retracements and all of that. I have tried, but at the end of the
day I found that the only consistent way to determine if a retracement is a
retracement or a reversal is just to let the market tell me and pick me up
if appropriate and save me the expense if not.
2. I do not enter on breakouts. If the retracement is so shallow that my
stop would be outside the previous swing high or low I pass up on the trade.
Why? Where do you think everyone else's stops are? Whether they are
entering or taking a loss at that point all of the stops are clustering
above or below those points. That is often what drives the breakouts. I do
not like slippage and that is a sure place to get it. (I know locals that
actually do the opposite for this reason. As the swing high is approached
they are buying, when the stops are hit they are selling into them, whether
the move continues or fails they have made some loot!).
3. If you enter on a stop the market is going your way as you enter.
Usually it is 50+ points past your entry by the time you get your protective
stop in. Even if not when I take trades I am looking for a move instantly
and will trail a 110 pt stop as soon as there is 1 tic of profit so my
maximum risk (exc slippage) is 100pts. If we have gone 50pts to the good as
the stop goes in my risk is already down to 50pts. Do I get stopped out
with such close stops? Yes about 50% of the time I am out for a small loss
or small profit. About 50% of the time I catch a move leading to 100, 200,
400 + points profit. In summary if you enter in the right place on a stop
you can use very tight stops. If you are looking to enter on a limit you
must risk much more as you are entering as the market is moving against you
and hoping (for a very valid reason no doubt) that it will turn before you
get uncomfortable.
4. If the bars are volatile, again I do not want to play. I know I miss
big moves but (a) I do not want to take such large risks and (b) the
slippage is wicked when the market is moving in 50pt+ increments.
I hope that helps a bit.
Good luck
Simon
-----Original Message-----
From: Nixon(MLS) <mbjp57@xxxxxxxxxxxxxx>
To: UKTrading@xxxxxxxxxxxxx <UKTrading@xxxxxxxxxxxxx>; RealTraders
Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: 15 August 1998 19:47
Subject: Re: Enter on Stops ?
>Hi Simon, I too wait for a conformation of a move starting whether that be
>a retracement or trend change either way I will wait for one of a number of
>patterns to set up before entering at the market. I can see that entering
>a breakout would require stops to enter but anything but market would be
>too fussy for me. If you have the time I would be interested to hear more
>of how you get confirmation of a retracement and why a stop is the best way
>in and indeed how you manage to keep what to me are very tight stoplosses.
>(Perhaps you are trading of one/two minute charts?) I use a five minute
>chart but sometimes go to a 3 minute if the volatility gets too high (based
>on a 20 period xma of bar size/range). Stops for me are usually 150/250
>points. Less than that would be nice and cheap!!
>
>regards
>
>Philip
>
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