Thanks for the reply Meme! Busy now but will read when I get a...

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Captain Goodvybes

3,255 Posts.

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01/09/15

10:12

Post #: 15910907
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Originally posted by MemeFx ↑

Goodvibes

I'm not familiar with your trading style, but there are a number of reasons this stuff happens and a number of ways of dealing with it.

If you are setting your stops at "obvious points" there will often be volatitliy introduced by other stops going off. Frequently these points are points of support and resistance, so buy and sell stops will take it both directions. In my early trading days, the Hang Seng futures used to drive me crazy, I'd sometimes get 40+ points positive slippage on sell-on-stop orders - esp around handles. But it could go either way.

To deal with it you can:
- pad the stop. ILU used to be a classic. If you thought your stop should have been $10, then you should expect NOT to get out at $10 - because of the reasons I gave above. So if technically, you're thinking $10, you should pad the handle down to some other value outside what the stops might send it to. No hard/fast rules, you might go for a stop of 9.92. Way easier on the head, and a truer reflection on reality. Helps if you are familiar with the stock.

- set volatility stops rather than price stops. Calculate the average movement expected and set the stop outside that level. Size accordingly.

- set the stop at the point where you know the trade is wrong rather than just "tight" stops for tightness sake. (FWIW, these should be one and the same, but there are always exceptions). There's never a guarantee that you'll get out at the stop, and SP going thru the stop can be (emotionally) harder to exit.

- Use a pattern based stop. eg candles or VSA - 0nly exit when a technical pattern says "going down". Position sizing will have to be volty based.

- If you are padding the stops, don't forget to position size accordingly too. You can mix/match...you might decide your stop is at 10 - and attempt to get out at that price, but position size for an exit of 9.92 for instance...just in case.

So many cats, so much skin...

MFx

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Thanks for the reply Meme! Busy now but will read when I get a moment
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