I went long 3285 S&P futures here. I am looking for a relief bounce. Stop shown above at 3261. Plan on adjusting stop to breakeven if/when price gets above 3310
Trade closed: stop reached:
Stopped at breakeven at 3285 ("Plan on adjusting stop to breakeven if/when price gets above 3310")
1) Tight stops usually result in unnecessary losses. This means you're better off holding smaller positions and widening your stops on trades. After doing this as long as I have, I've consistently come up with this conclusion, as have many professional traders I speak to and learned from.
2) While I didn't lose money on this trade (due to my stop adjustment to breakeven at 3285), it's better to let trades breath more. Let price trade. We don't know how erratic markets will be - a break below our level usually does not signal that your trade is invalid. It simply means our level was tighter than it should have been/our size is too big. My point is this, yes I would have gotten stopped out either way (since my stop was at 3260 and the low of the day was 3259), but in general, I strongly believe you should assume trades will fake-out against you before going in your expected direction.
3) I went long SPY call options at the close yesterday in addition to my futures position. I did this because I had a feeling I could be right in my analysis but still get stopped out due to heightened market volatility. It's easier for me to hold options than it is to hold futures positions. This is mainly because having stops on options is challenging unless they're just "money stops" (for example, buy a $1000 options at $10 per contract and you set a stop at $8 because you don't want to lose more than $200 per contract). So while I'm still profitable on this trade, it could have been executed better.
Bottom line: Figure out a way to hold positions more to allow insignificant market volatility to run its course. Had I traded this better, I would have simply established wider stops and initiated a smaller futures position, and I would not have adjusted stops until market meets target or gets 70% to target with a trailing stop.