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Do you believe in set and forget to eliminate trading psychology

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Hi all,

Do you set your stops/limits on trades and then let them play out?  My only real issue with this is that i don't know if my stops/limits are in sensible places in the first place so there is a tendency to monitor it.  What about waiting for a series of signals from tech indicators to close instead, again you've got to be disciplined and do it when said signals arise.

Thanks,

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If there is a change that invalidates the signal, its probably a good idea to close the trade. i.e. emergency rate cut, jet plane shot down, elections/polling noise...... etc etc

But if you find yourself closing trades early, i.e. closing at a loss, before the trade would have gone your way. Then you need to sit back and leave that trade alone!

As for setting the stop. Check out the ATR, if you are not a multiple of that, you will get stopped out by market noise. You can also monitor drawdown when you are backtesting.

Closing a trade based on a technical indicator, is very valid. You can set alerts on the platform for most of them. 

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Thanks for that.  This morning i closed a trade because it went below my entry after being higher for some time, i took to mean it would continue to fall and then it didn't so was the wrong decision, however i made up for that loss later today.  Other times may not be but the point is i interfered and that was the wrong decision it turns out.  I don't use ATR but i will read about it.  The simple phrase let you profits run and cut your losers is very easy to say but very difficult to execute.

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Also assuming you're in profit by more than your risk what about setting the stop so its always a set % below the current price, e.g. you're only willing to lose 20% from where the price currently is.  I guess that's equivalent to a trailing stop.  

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14 hours ago, u0362565 said:

Hi all,

Do you set your stops/limits on trades and then let them play out?  My only real issue with this is that i don't know if my stops/limits are in sensible places in the first place so there is a tendency to monitor it.  What about waiting for a series of signals from tech indicators to close instead, again you've got to be disciplined and do it when said signals arise.

Thanks,

 

I would says so, unless you are dealing with short time frames and large sums of money and you are able to be glued to the screen 100% of the time and give it your full attention.

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I do - I try to get to breakeven asap and then the pressure is off

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There is a bit of debate about moving stops up to lock in profit (or reduce the risk of loss). Generally I am in favour though. But be careful not to increase it to much, else you will get stopped out by noise.

 

On 23/10/2020 at 14:55, u0362565 said:

Thanks for that.  This morning i closed a trade because it went below my entry after being higher for some time, i took to mean it would continue to fall and then it didn't so was the wrong decision, however i made up for that loss later today.  Other times may not be but the point is i interfered and that was the wrong decision it turns out.  I don't use ATR but i will read about it.  The simple phrase let you profits run and cut your losers is very easy to say but very difficult to execute.

Classic. We have all been there. Check out some of the forum posts on backtesting, this should give you an indication on the amount of volatility in your strategy.

What kind of risk/reward were you running? What timescale were you looking at, and what was the ATR when you put on the trade? (You can add ATR as an indicator, and read it straight off the chart).

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Yeah in answer to your original question. Yes. that’s the entire aim of my trading algos. That way they trade on a perceived pattern. Rightly or wrongly. It’s then my job to optimise the pattern through testing etc. 

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Thanks all, good to know. I also sometimes will set a r/r ratio and a larger position size initially. Then I will keep the same r/r but pull everything in to reduce the position size if the market isn't moving as far as I perhaps thought it would. I think this is technically ok to do although I feel it screws a little with the idea that your profit should be more than your risk if you deem the risk to be that set originally unless you treat every trade independently. I did this yesterday and took a profit but then the market kept moving my way so could have left orig pos size. Ah well best not to let greed or any other emotions interfere, there will be more opportunities.

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You have to take what the market gives you, as that is impossible to know in advance you have to have a target and / or risk management strategy for trailing a stop - that's up to you to decide and fathom out what suits you

Using a larger position and then dumping part of it at specific target points is perfectly fine and it can turn a losing position into a winning one to a certain extent 

Take the chart below - This is a PERFECT swing trade run and I can confirm that I'm on moves like this all the time in my other accounts

At the green line you would NOT have known that a trend was starting - BUT as a trader the set-up was typical of the start of a trend, so you take the trade

Stop 1pt under the swing low point (green line), then you let the position just run, moving your stop to the last swing low point until stopped out

As you can see the red line would have stopped you out - you would have got back in around the red line too, for the last sections

Look at the points that resulted in - having set targets would not have got that result, which is why you need to have a set-up/method and stick to it (you can pyramid on EVERY swing low point too) 

Obviously the below ONLY happens when the market trends - it goes skew-wiff in sideways markets

The main USA markets are skewed naturally to the upside  - just take a look back from 2009 low to see how true this is and how much one could have stripped from the market using a set and forgot with a tiny tweak every now and then

the chart below is the daily Nasdaq100

Every night I run a SCAN on my charting software that looks for Elliott Wave, Waves 2 - that scan picks up markets displaying the below formation to the green line - this formation is Gann's Secondary Reaction

Kingfisher Plc had a pretty good run too of late as it works on stocks too

To confirm a swing low the market HAS to CLOSE above the prior swing HIGH - then and only then do you move your stop to the most recently confirmed swing low point less 1pt and so on until stopped

From a risk point of view on the Nasdaq100 this would have been 160pts and would have taken 2 attempts to enter, being stopped out on the 1st attempt - if placing stop under the reaction low point at the GREEN line it would have cost you 210pts in risk to make 2947 points

This is a R:R of 14R using the 210pts as initial risk

All you have to do is test EVERY EW 2 or Gann secondary reaction you find, so will work like this and others won't - BUT the ones that DO outweigh the others

The one thing you should see is that WHEN the market does as expected after the 1st entry bar it does NOT retrace backwards to the high of the entry so as another safeguard you can shove your stop to breakeven virtually straight away or just below the high of the entry bar - up to you

Then IF you're stopped its a very early indication that a trend might not be in play etc

I'm willing to bet most people don't make 14R from a trade too

The below set-up will only be achieved by the ultra patient and disciplined as most people can't simply wait 

My 15 son traded this in his child trust fund this year

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 Thanks THT, love the insight into how people make trading decisions. Always makes me realise I have a lot to learn.

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I have a mix of both, So I have my algo putting trades on completely autonomously through the IG Index API on my server that is completely unmonitored other than network connectivity etc...then I monitor it most of the day through the IG App. That way it takes out the emotions of the trade, I monitor the overall health of the market and then I can close positions early if I feel they are running the wrong way or if they are in profit and won't go higher. 

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