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Brian,
First of all, let me tell you how I trade. I use a 100% mechanical system
to trade eMini's. It has one variable and few rules: the direction of the
market must be the same as the direction of the signal and the indicator
must be within a historical range. If it's outside the range, the market
gets very choppy and the indicator kicks out whipsaw trades. I place a
market order after the bond market opens but before the stock market opens.
As soon as I am filled, I immediately place a stop loss order. If the
trade has moved my way at the end of the day, I move my stop and tighten it
by two points. I repeat this every day that the trade moves my way. When
the stop is at 5 points, I don't tighten it any more. The market always
takes me out of the trade; I never have to make that decision. Basically,
I've found that I'm incapable of consistently making good exit decisions
while the market is open. So I don't even try anymore.
For me I want three things in a stop - limiting my loss, maximizing my
profit, and avoiding exiting a trade because of normal market volatility.
I keep a two week moving average of the daily trading range. This tells me
where my stop should be if I want to avoid being stopped out because of
market volatility. I've determined that I'm willing to lose $1500 on a
trade. This is based on how many losing trades in a row I can stand before
I can't trade without injecting new capital. I also know how many losing
trades in a row my system has produced going back to 1966. A trailing stop
turns you into a great trader really fast. <g>
I don't see how you can trade the S&P with a 10K account with initial
margin at over 20K. And trading 3 contracts on a 50K account isn't
possible either. Are you talking about eMinis??
Hope this gives you a starting point.
Regards,
Mike
--
Aboard 35' Edel Cat "Moongate" in New Bern, NC
> From: Brian Keith Voiles <admagic@xxxxxxxx>
> To: realtraders@xxxxxxxxxxxx
> Subject: Stop Placement
> Date: Thursday, August 12, 1999 4:11 PM
>
> Since every broker in America tells their client to place a stop above
> previous resistance or below previous support, I've been struggling with
> that "following the crowd" mentality. I've been using "mental-written"
> stops fairly effectively. But, day before yesterday I found myself up 20
> points and wanting more in the S&P 500. Rather than taking my profits
(or
> some of my profits) and running, I decided to "go for" more. Long story
> short, the whole trend changed and before I knew it I was out 39.9
> points. I didn't pull the plug on the trade while it was still
profitable
> (although that's really hard to do because I was thinking "Well I
could've
> had 20 points, now it's down to 16, 14, 12, 8, etc) because I felt they
> were taking the market up so they could take it down some more. Anyway,
if
> I had a stop placed I would have been stopped out in the first place --
> which ultimately would have been better than what I did lose, but then
> again, I wouldn't have had the "opportunity" to make 20+ points (hand I
> chosen to take my profits when I should have).
>
> I'm looking for advice:
>
> Where do you S&P Traders place your stops? Do you base it soley on a
> percentage of your trading capitol?... equity? If so, what
percentage?....
> I've heard 3 and 5% -- but if you're trading 2 or 3 contracts (like I do
--
> I built my account from $10,000 up to $50,000 in July -- yipee!) at 5%
I'd
> have to place a 3.3 point stop (Risking $833.33 on the trade). In the
S&P
> this is a pretty tight stop based on my limited experience of one-year.
>
> Placing my stop above previous resistance or below previous support
sounds
> absolutely crazy to me -- all the floor traders know where the orders
are,
> and they DO run the stops.
>
> Realizing that ANYTHING CAN HAPPEN in the market, it makes sense to
> actually have stop orders in the market and working.... but I'm
struggling
> with where. George Angell is a brilliant S&P trader and on his "Sniper
> Trading" course and his "Precision" book he says he never puts a stop
order
> in at the desk, but adhere's to his own stops just the same.
>
> Anyway.... all opinions and advice are welcome. Any books I should read,
> people to talk to, advice to pay for? Help!
>
> Warmly,
> Brian Keith Voiles
>
> PS> I love this list!
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