My dear friends,
All of us have read once in a while that there were people out there trading without SL. I was one of them. No matter how many advices I received against it, I simply wouldn't use any kind of SL, until I reached a very important conclusion (for me, at least). May this thread help us understand the psychological reasons behind this behaviour, and may the successful No-SL traders present their arguments, as well.
MY PERSONAL OPINION:
My account is marked with remarkable performance followed by margin calls. After a few of these, I started to consider that maybe the fault wasn't on the system I was using. Before that, I did all kind of devilry: Hedging, Martingale, adding to losing positions to try and exit at breakeven - all of that to avoid having a single losing trade.
After realizing that these techniques were only making me waste my money, I finally understood that it was faster, cheaper and easier to simply exit with a small loss.
It sounds quite reasonable, but I had a psychological block against it. I've tried to analyze this and concluded the following:
Reasons why I wouldn't accept a losing trade:
All of us have read once in a while that there were people out there trading without SL. I was one of them. No matter how many advices I received against it, I simply wouldn't use any kind of SL, until I reached a very important conclusion (for me, at least). May this thread help us understand the psychological reasons behind this behaviour, and may the successful No-SL traders present their arguments, as well.
MY PERSONAL OPINION:
My account is marked with remarkable performance followed by margin calls. After a few of these, I started to consider that maybe the fault wasn't on the system I was using. Before that, I did all kind of devilry: Hedging, Martingale, adding to losing positions to try and exit at breakeven - all of that to avoid having a single losing trade.
After realizing that these techniques were only making me waste my money, I finally understood that it was faster, cheaper and easier to simply exit with a small loss.
It sounds quite reasonable, but I had a psychological block against it. I've tried to analyze this and concluded the following:
Reasons why I wouldn't accept a losing trade:
- "Price will come back... I just missed the perfect entry point." What if it doesn't? How long will you keep telling this lie to yourself? Isn't it easier and less stressing to reconquer a 1% DD than a 20% one?
- "But I followed every single rule of my system..." So what? There is no perfect system. Maybe there is unexpected news moving the market. Exit and prepare to reenter once you get another opportunity.
- "I just can't lose all that I have gained today... I won't be able to recover it, London/US is already closing..." Put it mathematically: Would you rather gain 1% or 20%? Obviously, 20%. On the other hand, why in God's name would you prefer to risk losing 20% if you can simply lose 1%? Loss is unavoidable, you can only control how much you're going to lose. And most important of all: a negative day means absolutely nothing. What's stopping you from gaining ten times tomorrow what you lost today?
- And the most important thing, at least for me... Setting a stop loss is responsibility. I wasn't able to accept responsibility for my losses and wanted to enter trades free of all kinds of responsibility, "just for a quick scalp". Be advised that quick scalps can turn into margin calls pretty quickly if you're not accepting responsibility for your trades.
My personal conclusions:
- You need something to stop you from losing. Be it a hard SL, a mental SL, a gun pointed to your head that shoots after your loss gets bigger than X pips, SOMETHING! Your equity curve's health will be thankful for that...
- It's faster, easier and more profitable to just exit with a small loss and forget about it.
Let's talk about it, guys! I'm sure this thread can be very fruitful for everyone. I respect every single trader out there, so even if you state that I said nothing but crap, I'll be very happy to learn from what you have to say.