How To - -

The purpose of the thread is to know how a particular trader handles a particular scenario. The same picture/scenario is seen by many of us but might be handled differently based on experience, trading system etc. The idea is to know how traders think, apply, execute etc.

Starting with following chart. Chart is copied from stockcharts.com

Question is where do you apply stop loss after?

- Black line?
- Blue line?
- Green line?
- Fibonacchi stop (say 61.8% retrace)?
- ATR stop? ( say 2.1* ATR)

Now let us see how a professional reacts.....he has taken a trade on a breakout which is not working out.....he will say....hmmmm I thought this trade will be a great winner....but market does not want to go in the direction of the breakout.....ok....no issues.....if the market comes back in the range it broke....I need to get out of the trade and re enter again if the necessary.....I will not wait till my stops are hit.....the breakout which I traded is not valid....so I am getting out....I will always get many more opportunities in the market ....thank you market.....see you in the next trade...

The purpose of the thread is to know how a particular trader handles a particular scenario. The same picture/scenario is seen by many of us but might be handled differently based on experience, trading system etc. The idea is to know how traders think, apply, execute etc.

Starting with following chart. Chart is copied from stockcharts.com

Question is where do you apply stop loss after?

- Black line?
- Blue line?
- Green line?
- Fibonacchi stop (say 61.8% retrace)?
- ATR stop? ( say 2.1* ATR)

S-1585, In order for my assumption to be wrong, price needs to come back into the range, and take away the prev swinghigh. So I will be out when this mkt proves me wrong.

I trust price more than anything else, hence don't belive so much on calculated numbers hence for me it rules out the last 3 options in your list.

At the same time, I am prepared with my re-entry approach that if mkt takes my stop, and than falls below the range again, than I am ready to short again below 30.

This is how I will trade it but it is not the only approach. others may still use different approach. Important is this approach fits exactly with my other trading belief about the price action and market behaviour,hence I am comfortable with it.

Hello S-1585,

I would like to make a suggestion. Rather than placing the whole charts in front and checking one's strategy/actions/reactions/emotions during trade in hindsight, we can cut the charts up to exactly where the trade begins and discuss how one would approach the trade and reveal the other half of the chart later to see whose method yielded better results and analyze why. I read it somewhere in the forum that our mind always tries to see what it wants to see on the chart and many a times, it would be the opposite that happens in real-time (that's how at least I got beaten by markets). It's going to demand much work, but it is so much better than hindsight or paper-trading when searching for answers.

Just an opinion of the novice. Please don't mind if it doesn't fit the purpose/meaning intended of the thread.

Regards,

The purpose of the thread is to know how a particular trader handles a particular scenario. The same picture/scenario is seen by many of us but might be handled differently based on experience, trading system etc. The idea is to know how traders think, apply, execute etc.

Starting with following chart. Chart is copied from stockcharts.com

Question is where do you apply stop loss after?

- Black line?
- Blue line?
- Green line?
- Fibonacchi stop (say 61.8% retrace)?
- ATR stop? ( say 2.1* ATR)

I have used this chart to explain a point on Reward/Risk in my thread " Some thoughts on day/swing trading"....I am copying my post here for the purpose of discussion in this thread .......

Different traders will trade this chart differently......Let us see how one can trade this chart.....

1) Entry Point : The chart shows a sideways distribution pattern in a rectangle.....the move has come from the top....so this pattern is likely to be a continuation pattern. Entry points in this trade are as under :

Trader A) Some traders will see the breakdown from the range and wait for market to come up near lower red line as a pull back or test and then seeing that the market does not go into the range it broke previously they will go short near the lower red line but on pullback.....

Trader B) Some traders will say that after such long sideways, market is breaking down so go short right at the point it breaks down without waiting for a pullback.....if the pullback does not come you miss the trade or you have to enter at less advantageous place later in the downtrend....

Trader C) Some traders will say let me short 50% of my position at the time of breakdown....and I will short balance 50% on pullback to the lower red line......but if the market does not give pullback, atleast I am in a good trade with 50% position....and if the market reverses on my first entry, I will loose only on 50% of the position.

2)Now we come to where to keep the stoploss point.....here again different traders ....different gameplans....


Trader X : He is a swing trader.....he will keep the stoploss at the upper red line.....and if the height of the rectangle is x he will say that my target is 2x after the breakdow....so he plays with 2:1 Reward/Risk.....great...

Trader Y : His target is also 2x but he wants to give less room to the stop point.....so he keeps it at the green line......his Reward/Risk will workout to about 2.8:1 or so......

Trader Z : He is the most aggressive......he goes for high R/R trades.....and converts his trades into high RR.....he will think after distributing for such a long time, the market has no business to come back into the rectangle.....so if it comes back in rectangle, my trade setup has failed and I will get out as early as possible. So he keeps his stops at black line or a pivot high just above the lower red line.......But see the effect on his R/R.....he is able to boost his R/R to 8:1 ......but that comes with a trade off ( there is no free lunch here too )he may have more whipsaws and he should be prepared to enter the trade again if necessary after he gets stopped out.....but trader Z can handle that as he gets a huge advantage in his favour.....

But the Reward /Risk of 8:1 gives huge advantage in the game to trader Z......

Which one is correct ? There is nothing right or wrong in trading in absolute terms.......one should choose the style with which one is comfortable.....

The above discussion indicates the way you can tilt the R/R in your favour and be ahead in the game....

Smart_trade

Nihilistic,
I agree to your point of posting the chart without right hand side.
But I differ to your second point of analysis and ranking whose method yield the best.
This is because, only 1 trade can not make you winner or looser, its over the set of trades, over weeks, months and so on.
Furthermore, I would like to understand, how fellow traders think and plan.
Its nothing about who is the best.
While understanding others viewpoint, perhaps you may find out something which is best suited for you also.
Just check the view of Smart_trade and AW10. The way they plan, execute, think is different, and I am not saying they are right or wrong.
Hope you understand.