Friday, February 15, 2013
Large stop fading
In an earlier post, I spoke about the difficulties of fading moves with a fixed stop and how larger stops such as half the prior bar may be more appropriate. Today's results are preliminary, but show how such a move may be put into action.
My standard 10t stop would have been taken out for trades #2 and #3 but a larger stop above half the fade bar (i.e. 21t above 42t long b5 and 17t above 34t long b10). These stops are effectively twice as large as what I'm normally comfortable with and I would need to find a way to somehow make these smaller.
The good thing about this approach is that during hard trends such as the first few swings today, a larger stop is likely to pay off better while for a tight range, the stops are likely to be smaller giving an overall reasonable risk:reward ratio.