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You are asking the right question.......concerning stop placement.
Ultimately, you have to ask yourself.....does this work? For example.....today I had two trades where my entries turned out to be very bad.....however, my stop placement (above the swing high) was good. Yes....I took some major heat, yes, I was almost stopped out both times. But...... both trades were winners +10 each on the YM.
You have to know how much room to give the market to "breath." You also have to know your personal risk tolerance based on your account size. All this coupled with a reasonable risk/ reward
There is no short cut on this. You have to determine what works for you. What is your risk tolerance? What is too much? What is too little. Does it make sense with market volitility? Remember....the market doesn't care about your risk tolerance.
You want to put your stop where it won't get hit by noise. I'm with Jeff, I like to put it away from a swing high/low. To keep my risk low I try to enter around these swing high/lows instead of waiting for a breakout. The risk is lower that way. I go for a 1:1 ratio and then when I'm consistent with that I will start adding a 2nd contract for maybe 1.5 target : stop ratio.
Specifically for the 5min ORB I had my stop under the 1st 5min bar. It's not a good R:R but I'm going on my testing showing this has worked over the past month. My testing showed it did not work earlier in the year so this could stop working at any time. An ORB is a valid concept, but the OR period and the target & stop are things that will change with time.
I'm considering going for 5 ticks instead of 4 (I'm trading it on ES). Today it came within 1 tick of my target and I thought "oh no I should have used a 3 tick target" but I let it ride and price blew through my target and continued higher. But I'm not greedy, I'm happy with 4 ticks. I would like to get a better R:R ratio but if this has a high win rate then it's ok.
Let me know what you think about this Jeff. It's working for me.
In the last 32 trading days (current contract) the opening 5 minute trade has worked 27 times. That's a little over 84% of the time. The other 5 times that the trade did not work.....it did work at the opposite end of the first 5 minute bar.
So even the losers were able to redeem themselves if you stopped and reversed.
So are there any characteristics that a winning day has that a losing day does not have?
What I am finding is on winning days I get a signal from the Enhanced JeffsDots on the losing days I did not. So.....I am considering adding the Enhanced JeffsDots as a filter.
I have not released the Enhanced JeffsDots publicly. But I have described how it works previously for you ambitious programmers.
Great post Jeff. In the past I've always tried to find ways to prevent losers but I must admit than in many cases I end up like the Yale students.
Since I don't have JeffsDotsEnhanced, I will see if I can find some price or volume clues. If you're getting a dot, that means price is moving to that direction. Should be able to see it in the chart right? Let's take a look at the last 6 days and then look at a few failures before that. My analysis is written on the images.
My findings:
- If we look for additional confirmations we can potentially increase the win rate at the expense of possibly missing some good trades
- Volume Stop is not useful for the ORB. The reason is the open bar is higher volume and that will always trigger a VStop signal in the direction of the close of the 1st bar
- Volume Spike is not reliable by itself
- HVC is not reliable near the open
- PSO could possibly give an hint as to the direction
- the price movement leading up to the open could give a hint as well
- The direction of CL could give a hint
- The win rate is already 87%, do we really need to do better?
My conclusion: Works fine as is - trade like a rat. Now that I'm trading this I'll be studying it more clearly, especially the relation with Euro & CL which are all correlated.
really appreciate your analysis. May I ask you, please, for the future, to drive your comments in the charts with some arrows to the specific subjects involved ?
Your comments are clear and substantial but for people like me, beginners, could be very useful can exactly focus any subject involved in the analyzed part of the chart.
The point, after giving a look to all pages of this valuable thread, and also to the other threads, is the most difficult, as I can understand, to avoid the remaing part of wrong signals,
but this could signify to reach the excellence (giving as consolidated the very best manual operation capability buy / sell / cancelling an order buy / selling the same price entered and so on, with extreme good and professional picking of time, etc ....): this could be a very hard challenge or the Holy Grail ?
Thanks so much for your efforts and of all the people here involved, I am sure that all this brain-storming will generate success, as normally happens
when the human brains are involved together for a good target.
I'm glad you found that useful, it was fun doing it.
I usually do put arrows but in this case every comment was focused on the breakout of the 9:35 bar, so I felt arrows weren't needed. The 9:35 bar is the one with the vertical line.
