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    « Trading Week Outlook: Aug. 15 - Aug. 19 | Main | Unprecedented Volatility »

    August 17, 2011

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    Hi,
    I'm a day trader, trading index futures.I use 5-min candlecharts for identifying setups, and 1-min charts for my entry triggers.

    I enter into 2-part positions, with a Stop-loss of 7 to 10 points. The typical profit target is 12 to 20 points for the first part and 25 to 30 points for the second part.

    I mostly get the entries right and almost never get stopped out right away. When I do get stopped out, the price has usually moved 8 or 12 points in my favour (which is about 1.5x times my stop) and then reversed to take me out. So I find that overall, I am hardly making any money at all despite making good entries, and almost all my trades initially being in profits.

    So when the price has moved in my direction (but not yet reached my 1st target) I face this gut-wrenching dilemma:

    1. Should I aggressively move the stoploss to breakeven before it technically makes sense to do so, so that I don’t “let a winning position turn into a loser”?

    OR

    2. Should I trail my stop behind the significant candles (which makes sense technically) but risk getting stopped out for a full loss despite having been in profits of upto 1.5x times my stop?

    OR

    3. Seeing the way many of my trades pan out, should I turn into a scalper and pocket 8-10 points on almost every trade, without gloating over the money I could have made had I waited for the eventual targets?

    Please help. Thanks.

    I often find that when I place my stop loss just below the support line say, the price seems to form a candle with a long tail wig to take me out. Is the broker able to see my stop and is playing games with me? This happens even when my stop oss is several pips away from the support line.

    @Pravin: Thank you for reading the Traders’ Library blog, and for your question about stop losses. It was our pleasure to bring you an answer from trading expert Dr. John Keppler, which you can find on the blog at http://blog.traderslibrary.com/traders-library/2011/09/stop-loss-dilemma-your-questions-answered.html. I hope that this information is helpful to you, and welcome any further questions you might have about trading. I will do my very best to work with our authors and experts to get them answered for you.

    Thank you so much,
    Courtney Jenkins, Editor
    Traders' Library & Marketplace Books
    cjenkins@marketplacebooks.com

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