I like placing my stop loss below the lowest point of the cycle on trending charts http://j.mp/AtForexCenter

Have you looked at stop-limits? Also, FWIW, I don't trust stop losses, I've been screwed by too many gaps as well as selling during capitulation resulting in being the wrong side of the super long wick. If I want to protect my position, I buy a put.

For your situation, have you considered having a conditional OCO?

I am not quite sure what kind of answers you are expecting, Marko.. I mean if there was one optimal strategy to deal with stops, it would have been long implemented..

Idea of a soft stops brings two things to my mind - entry point is far from "true" stop and position is probably bigger than ideal. If none of this is true, then there is no point to deal w soft stops. So, if entry point is not good, do less, the game of soft stops, IMHO, just leads to underperformance..

I suggest to either place a firm stop loss a few pips below your threshold (or above it in case you are short the pair). You may instead have a mental stop loss, set up a price alert and manually exit the position accordingly.

Thanks,

Nikolay, I'm just seeking ideas to choppy volatile markets, where one larger order can cause several stop loss hits (even lot of unneeded). For volatile markets like ES there are no point I think.

Mohamed,

Mental stop loss would be ideal (as usually know that this trade is a lost case) but it seems that I don't have enough discipline to close it immediately but probably have enough discipline to start a "smart exit method" at that point.. Just a psychology thing and does not sound professional but what can I do..

We developed a dynamic sell stop using standard deviation measurements connected to probability measurements specific to the security. The probability factor is the proverbial point of no return. Simply stated it is the price from which reasonable recovery in a reasonable time frame is an unreasonable expectation. Means change daily which anchors the measurement. The stop floats according to the variance measured as of any chosen time. Stops need to be meaningful in order to avoid the whipsaw effect of what is often normal range volatility. An effective stop in risk management terms cannot be an arbitrary percentage loss or attrition number based upon nothing more than what someone is willing to give up on the position. People do so and it is hardly altogether wrong and better than nothing. The stop has utility regarding entry as well which supports risk management. If the mandatory safety stop is elevated into the upper range of the statistical preference bands and tails, we may pass by the trade. If taken, at least we know that the trade risk is elevated. If we take a stop out at a price above the dynamic stop price we know that we are acting protectively outside the system as designed. Hence we know that we are risking a premature exit based upon arbitrary tolerance rather than statistical probability constructed for the expressed purpose of identifying the "drop dead" exit. The long Treasury was a good example this afternoon. Clearance for the long trade popped up late in the afternoon. However, the stop was a considerable distance from the entry at market. We declined the trade as outside the policy risk parameters. We could be right but the risk reward set up was more than a little uncomfortable.

Marko,

It sounds to me like you are looking for a way to avoid having to take a loss in a losing position.If you're not disciplined enough to take a hard stop,what makes you think that it will be easier with a smart exit strategy when the loss will probably be even larger? Loss aversion is one of the common causes of trading failures. Taking losses are a normal part of any trading system and should be viewed as part of the probability curve of many trades.In my own experience earlier on, I have found that whenever I avoided taking a loss by not executing the hard stop, it only caused me to lose even more money than before.You should examine the volatility of whatever you're trading to allow for enough "wiggle room" so that you're not constantly getting whipsawed.Just my opinion!

I missed Andrew Ahern's note earlier regarding stop limits. Stop limits are highly problematic. If risk management is the objective, whenever a trigger price or flash point is hit the meaning is clear; execute immediately with no hesitation whatsoever. Using a stop limit often fails to result in the execution. Gaps can happen as do trading halts. However, the forgoing are exceptions to the largely prevailing flow. Exposure to gaps and halts in some markets can be mitigated by allowing stop to expire at the end of each session. Intraday halts can be managed by cancellation. No plan covers everything but over the years I have observed more bad outcomes from stop limits than any alternative tactic.

Larry, are you talking intraday? If so, I totally agree. Instant execution is well worth the cost of the spread. I, however, trade very speculative instruments and hold for weeks or months at a time, which is why I also mentioned puts.

Like anything in life, it really depends on what you're trying to do.

Nicely stated. Tactics and strategy must fit the scheme or otherwise useless. Stops are daily entries since the stop is a dynamic number that regularly changes. Computations are run daily after adding the session close price data. Have not entered a GTC order for any reason in forever. Have used options for hedging purposes occasionally. In fact, currently using puts to protect a long US Treasury 30 year bond position that itself is a safety trade hedge. Using the options is relatively rare. The protection or insurance is commonly too expensive to justify.

Don't send your stop order to the broker until you are actually ready to exit.Send an order only when it is time to exit, not before. Brokers love to hunt stop orders they can see in their order book.

Let me tell you the secret algo? It's trading and trading since the beginning of time has involved some gut. Its either hard or soft or good luck busting your brain box. Its there and it is hard. I explain mine on nasdog.com, blog has been very accurate and I just do long term but most US markets. The same algo spans across the time spectrum. By the time you call,,,really? you broker, the market is so far past your stop but good luck, maybe you have Goldman? That's facetious.

http://www.onestepremoved.com/false-entry/?utm_source=OneStepRemoved.com+Trading+Strategies&utm_campaign=b893b0da23-False+entry+signals&utm_medium=email&utm_term=0_6cab771538-b893b0da23-416458561

Like gambling you can't time the market. I just placed one with a $1.00 leash and at the open their was a uncommon spike downward which lasted 10 minutes and triggered my limit stop loss. I thought setting the $1.00 leash would prevent this as I have not seen such a spike in the past. So now I have lost opportunity in the ranges of $2/s or with leash, $1/s as of today. Oh well, I at least mad 23.45% on this protective measure.

Appreciate Alan's comment. Seat of the pants trading or the gut holds a legitimate place in the trading world. In fact, formalized rigid algos cannot fully displace the human touch applying experience and instinct. Computed markers are developed here in order to define the risk management guidance in the form of a price. The formula applies risk tolerance principles. Sometimes the instincts pull us toward acting. However, the system stop is part of the discipline. If defied, we are defying the product of experience and instinct which was applied to develop the system in the first place. Acting by instinct is acceptable. Acting upon emotion is not. The stop supports maintaining discipline rather than succumbing to emotion.