Help needed in deciding the stop losses in day trading

Hi Friends,

Its nice to find such a beautiful forum here.

I have been doing intraday trading since from march 2009 and lost alot of money and could able to discover my self and my personal traits.Eventhough now i could able to control all my emotions to the maximum extent andstarted making a little profits stop losses were the things that were killing all my weeks earnings in a single day.

I hope experienced traders have already faced this problem in deciding stop losses and might have been come out with a logical solutions.So i request our beautifulu brains to share their thoughts and strategies so that novice traders like me can use them and earn some money to make a living.

And i request all the traders to participate and ashare their ideas

Thanks in advance

Stoploss is a friendly devil....a necessary evil in trading...we dont like it but we need it.

A choppy and non-trending markets hit our stoplosses the most...so stay away from such periods...we dont have to trade every tick in the market.Trade only when you visibly can makeout a strong trend developing...it has much lesser chances of getting our stoploss hit.

Keep your stoploss at a reasonable distance from the current market action and at some important chart points such as pivot high/pivot low so that the trade has better chance of success.

Lastly a message that will keep your trading account healthy and that is " Never trade without a stoploss no matter how much you hate it "

Best Wishes,

Smart_trade

Thanks Mr.Smart trader,

Thanks for the reply


I love your views on that i do agree with what you said but i most of the times do the scalp trading to take a little profit so that i cant afford to take big losses by playing around pivot points as usually the ranege from support to resistance is higer in more volitaile stocks.

I will be very glad if any one has idea of keeping stop losses in scalping coz i find that is the useful method to get the money with the lesser losses when we have control and mind set only place i am loosing my edge is decidenig these stops.Your ideas are welcome in that regard.

Mathematically a 1:2 to 2.5 is good enough . So for every 10 loosing trades you would need 5 winners to break even. Good enough for scalpers I think, since u don.t use chart based pivots.

Hey capricorn...


Thanks for that but have you seen in my thread??????i have been talking about the fixing the stoplosses in scalp trading can you lend me any idea how to do the same in case of scalping.


Thanks

Exactly what I have said, if for a random entry u can risk Rs 1 , have a target of Rs 2-2.50.

Rs 1 is your stop.

EG. for 100 shares of Rs 100 each if you can risk Rs 200 your stop would be Rs 98.

Exit target would be 104-105.

Please note this has nothing to do with charts.

Hi capricorn,

Thanks for the reply as you said the stop would be around 98 for the share that have been bought for Rs 100 let me express my concern about this as a scalper i wont aim for the target of 4 to 5 rs i will only aim for only rs 1 or some thing as my trade life would last in minutes only in that case i dont think loosing 200 Rs for a profit of 100 Rs is not good coz i need to exceute another 3 winning trades if at all i wannna be in profit.

So please consider this scenario and help me out in finding any strategies.Because in my experience until and unless the market is extremely good being a scalper only giving me the results of course we need to have a much mind control for that but unfortunately i have this only in short selling please share your views regarding the same.


Thanks in advance

stoploss depends on how much risk you are willing to take, how much amount you can afford to loose, eg. buying 100 shares of 250/share, if you are afford to loose 500 then your stoploss should be 244.90, some time it reaches 245 and not 244.90

Well thanks for that Mr.rpdoss,


but i my concern is instead of hypothesis are there any technical formulas or strategies that can help us with.

Thanks

I am no expert at trading but there's a little thing I learnt about stop losses that I feel some may find useful:

Stop loss should be placed where the price can't reach that easily. Going by that placing a SL 20% away would help as long as you are willing to take the loss. It most probably wont be hit anytime soon if you are getting into some good companies. However our movite (at least most of us) is to minimize the loss and make sure it is not hit un-necessarily. Now this is a trade-off the close you put the stop loss the sooner it would be triggered. However, the probability doesn't increase linearly e.g. placing the stop at 101 or 100 would mean the same thing but placing one at 99.4 and 100 is not. There are certain areas in the chart where the prices move fluidly and some other which is called congestion zone the prices tend to stall, whether going from one side to the other. Placing a stop on the other side would drastically reduce the chances of Thitting the stop. Also know as support/resistance zone. There are available on almost all timeframes.

Here the key is that you have to get into a good position. No point going long below a support breakdown and expecting the SL not to be hit. Once you get in then the question is where to place SL. While placing a stop 2% away, 5% away might work money management wise, that doesn't work if your 2% works out to 101.5 (example) because if it goes down to 101.5 it will hit the round figure of 100 as well. So in such cases placing a stop at 99.6 or 99.4 is a better idea.

In certain cases the round figure is not available in which case using pivots and support/resistances should work.

Remember, our first goal is to make sure that the stop is not hit and the next is to make sure that the chosen stop adheres to our MM rules. In certain cases we know there is a good support some distance away but the stop so far would rack up huge losses in which case you can cut down on position size.

While for a newbie all this might sound too advanced you need to understand the psychology behind trading/traders/investors, after all the charts are just representation of human psychology. There would be no charts if only machines traded.

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