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  • The truth about the stop loss – why only losing traders don’t use stops

    From tradeciety.com

    I understand that this is a controversial topic but I fully stand to my word and after working with hundreds and thousands of traders, the losing traders have one thing in common: they don’t use stops. Of course, there is often more that separates the profitable from the unprofitable traders, but stops are a big thing. Here are the main reasons why trading profitably without a stop loss is impossible: If a trader doesn’t use a stop loss, then he has no money management in his trading. The stop loss distance is used to calculate how many contracts you have to buy or sell in order to achieve a certain position ... (full story)

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Yeah right.

Stop hunting is one of the main jobs of the dealing rooms. Can't remember how many times I got stopped out right before the big move I was expecting. If you spot the trick as other brokers don't show the move which got out your stop, they will tell you it's their liquidity provider. Which is actually a sub-company of theirs.

Just watch any wave C or E on a eliott wave movement and you will see that preceding B and D waves purpose is to take out the SLs before the real move.

Never made money untill i switched to accounts where I deposit exactly as much as I would allow to lose on a trade I spotted. And even in this situation, 7/10 times you get the price moving against you exactly to the last decimal which gets you a margin call and after that retraces with a nice beautiful pinbar which differs from broker to broker, depending where their client`s SLs were placed.
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Mega B.S. Using stop-losses on MetaTrader where brokers can sobeasily widen spreads among other manipulations is pure suicidial behavior.
Well some traders might argue with this suggestion of using stop loss due to some factor such as risk, capital and most importantly strategy, I've seen traders who only apply stop loss during high impact news or market moving events to secure there capital from huge price movements.
Well in my opinion I always always use stop loss mainly for clearity sake ( based in my strategy) when my stop loss gets triggered it tell me more of price behavior and I tend not to keep chasing the same price direction after my stop loss has been triggered. Each trades has a lesson to teach in the process building your learning curve.
I use stop loses but like some of you stated we get stop hunted so i just use wider stops and smaller positions.
I'm sure some traders are succesful at stops, I never was. the bigger problem is over leveraged trading. it is hard enough trying to determine a direction and be profitable, but then when you add stop losses your basicly saying I was wrong if it hits this price. it's like trying to hit a bullet with a bullet.
ex. say you use a 5point stop on nasdaq, one day it's too large and next day it isn't big enough. it's more important to learn to dump lossers on a trade by trade basis.
and for those traders that say stops are for safety, Feb 27 2007 I had 20 contract stop limit that got jumped overnight resulting in a very large loss. learn that markets are not safe and trade accordingly. only safe trading is in cash. trade small enough to forget but big enough to be worth the effort.
If you trade with zero leverage I don't see why you require a stop loss.

If I had 100k in the account, the max I trade is 1 lot.
All this talk about stops - I use them always - they rarely get hit as I'm off the trade long before they get close on the basis of when I know I'm wrong I get out.

Has anyone actually considered reversing this whole psychology around? Pull up a 5 min chart and mark off where the weak traders are, where their stops are likely to be placed and watch the flow of the market.. Quickly you will see how it all works.

Ask yourself this question.

IF I buy this here who will be buying after me? (Opposite for sell)

Point is you need others to come in a buy after you to make the price go up and afford you a profit. And in a proper market (not those bucket shop platforms most use) you actually need someone on the other side to buy while you are selling to take profits or minimise loss.

IF you can't answer that question by seeing a whole bunch of traders who have No Choice but to buy then you are truly speculating and hoping that someone like me isn't going to come and take your stop!
Stop loss should be considered only for emergencies like when your Internet connection gets unexpectedly disconnected.

Always get out before price ever gets close to a stop loss. Winning traders use this method.
Guys, i'm going to share with you an INSIDE SECRET. One of my Best Friends is actually the biggest Fx Broker in my Country, and he personally warned me about this. Actually MANY (ALL) of the Big Banks and Brokers have charts on which they pup-up the so called "Zones" where most of the traders have chosen their StopLoss to be! And before they ENTER the market with their Multy Million trade volumes, they consider how can the move the market close to those zones, in order to get their trades in (Because DONT FORGET, A stoploss, tecnically is really an oposite side trade!) And by doing this, they can Enter the markets with their huge volumes, without creating a market reaction about their entry!!! I do use stop loss levels but i use an EA that makes them invisible for the broker (Because the levels exist only on the script not in their server!). And i also try to avoid round numbers + support/resist levels (Where all people tend to put their stops ) Cheers!
Retail forex = stop losses = losers
stop loss=brokers meal for the day
so, i am doomed
Stop-loss is really a weak and rather stupid approach of the sharks' pool. Better use inverse hedging stop orders with rather tight trailing stops. When triggered by price action coming back your way, very likely for good this time, just double your initial position.
Quoting profitfarmer
so, i am doomed

never doomed , i see your record , problem with new traders stops are a problem because they don,t know where to put them giving the brokers a free meal
Winning traders use stop losses just fine. Losing traders are blaming other than themselves for their unfortunate circumstances. It's actually a sorry sight to see.
It is not a loss until you buy high and sell low. The best way to manage risk in Forex is with lot size and buying with the daily & 4 hour trends using "supply & demand levels."

Big banks don't use stop losses, they inventory the losing positions until they become profitable. To be successful you want to trade like the banks and use multiple accounts so you can hedge. Once I learned that even 500 pip drawdowns almost always reverse into profitability, I stopped taking losses.

Having one percent of my account locked on a losing position for weeks or months will not hurt me overall as I can still trade the opposite position.

There are rare times when the news is so dramatic that it's best to take the hit, even Brexit had a 50 percent retracement against the USD. That was as bad as it gets and just proves positions should be closed before such drama... Go on vacation.

If you have to use a stop-loss that means your position it too large and your profit targets are too small. Catching a big trend and letting it ride 200-500+ pips is the key to trading without a stop.

If you must use a stop loss, I'd recommend the margin level be the stop. Otherwise, inventory the position and continue to trade and book profits--LIKE THE BANKS!
Use a stop loss and let your broker know. Brokers like to know everything you do so they can have targets. Traders target their TP and brokers target traders' SL. A target for a target.
I must be the only one that totally agrees with the article. I think most of you missed the main argument that without a Stop, proper calculation of risk is impossible. Your risk is based on potential loss in a trade, which is determined by your stop loss. As for hidden stops - I use to use them until one day my computer crashed, and of course a hidden stop only works while your computer is running. Maybe my stops are correctly placed, since I never seem to have problems getting stopped out except when my trade decision is wrong, and then I am glad I placed a stop loss.
I see a Stop loss as you dont believe in the trade you have taken and if thats so why did you take it and you should only be trading in a way that your account should still be safe if it goes wrong . and a lot of brokers charge you a fee for a stop loss
I agreed with some comments and disagreed with others. My understand is the use of Stop Loss is purely to protect my money. In case my analysis is wrong or something unexpected happens in the market I don't have to put up with a big loss or even a margin call. The first thing I define when I see a trade opportunity is my SL. Also to avoid the SL hunters I never trade the News and I rather pay commission than go for the spread.. One thing I know for sure: No matter if the broker has robots to chase SL but if the market moves in your favor there is nothing they can do about.
1. Never enter the market without knowing where the SL as well as the TP are ...
2. Don't forget to put them in ...
Do gapping markets protect stop losses with your platform?
  • Post #24
  • Quote
  • Edited at 1:33am Oct 6, 2017 12:53am | Edited at 1:33am
Quoting AnniLi
Do gapping markets protect stop losses with your platform?
Yes ... SL might be executed at "worse" price than intended, but it will at least protect us from further deterioration. While the TP will be executed as is ... 😂
Stop loss = "death by a thousand cuts"
(but probably just 20 or fewer)
A mathematical risk-reward ratio is a great theory that does not work as most people understand it. You can set a stop loss at 1-day ATR of say 90 pips and then a profit target of 180 pips. The problem is that you may often be correct in the direction but the pair goes 120 against you then 300 in your direction and you are stopped out. Rarely are you going to guess the exact time a trend is going to break out as you hope, often you are eventually correct if you stay in the position.

The Risk reward ratio (stop-loss strategy) will not work because of the bank manipulation to create buying or selling pressure. Banks buy and sell their massive orders against the direction of the pressure they created... When they need to sell, the banks create buyers. When they need to buy, they make traders sell. (whipsaw)

You must be patient and follow the supply and demand levels created by the banks.
Your risk should be what you are using for the position, that means risk management by lot size instead of stop-loss.

I had a disaster USD/CAD position fall 600 pips recently, in 5 days.
Now THAT loss position is profitable 3 weeks later because I bought the opposite side to catch 180 pips when the opposite trend hit my position. (hedged) When that trend reversed, I bought another lot to cost average which altogether recovered my "disaster" very quickly into profit. If I used a stop then I would have booked a loss. The big drop did not hurt me because my lot size accounted for less than 2 percent of my account.

Barring an Earth-shattering disaster, major pairs rarely continue in one trend direction without eventually recovering in less than a few weeks to months. Buying at the top or bottom of a huge long trend run is the biggest risk. Look at bigger time frames to see if there is supply or demand to support your position. (daily/weekly)

Hedging through a separate account and cost averaging once the trend is back in your favor makes it possible to avoid using stop losses altogether. Just don't get your money trapped a big position, use small lots sizes compared to your account.

I'll book profits around positions that are stuck for weeks, then eventually the stuck positions will return in my favor. Just stay liquid by trading small lot sizes compared to your account size. NO STOP LOSS!
Quoting leonardicus
A mathematical risk-reward ratio is a great theory that does not work as most people understand it. You can set a stop loss at 1-day ATR of say 90 pips and then a profit target of 180 pips. The problem is that you may often be correct in the direction but the pair goes 120 against you then 300 in your direction and you are stopped out. Rarely are you going to guess the exact time a trend is going to break out as you hope, often you are eventually correct if you stay in the position. The Risk reward ratio (stop-loss strategy) will not work because...
How did you calculate your 2% just from the lot-size without knowing the lowest limit of the trade?
Are you just assuming that the market won't go lower/higher than a certain pips, say 1000 pips or more?
In other words, if your stop-loss amounts to $100 on 10 mini lots, for example, (-100 pips) then your proper trade size should be a lot size risking $100 with no stop, only a profit target.

3 mini lots that would lose $100 on -333 Pips and make $30 on 100 pips.

It sounds inverted but the REAL risk-reward ratio is in probabilities, NOT pips. The probability of 100 pips in your favor is 3-1 to the probability of 333 against you!

Stop losses are "death by 1000 cuts."
Quoting 4for4
{quote} How did you calculate your 2% just from the lot-size without knowing the lowest limit of the trade? Are you just assuming that the market won't go lower/higher than a certain pips, say 1000 pips or more?
If my account is $10,000 then I would not buy lots with a margin requirement of more than $200. What is the PROBABILITY of it going 1,000 pips against me before it goes 200 pips for me? It is 5-1... Risk reward ratios should be done with probabilities NOT pips.
Quoting leonardicus
A mathematical risk-reward ratio is a great theory that does not work as most people understand it. You can set a stop loss at 1-day ATR of say 90 pips and then a profit target of 180 pips. The problem is that you may often be correct in the direction but the pair goes 120 against you then 300 in your direction and you are stopped out. Rarely are you going to guess the exact time a trend is going to break out as you hope, often you are eventually correct if you stay in the position. The Risk reward ratio (stop-loss strategy) will not work because...
Lets assume for a moment that you are human and capable of making mistakes in your trading analysis to where you bought EURUSD in September of 2014.

Are you saying that its better to hedge and fade a position for 2200 pips of draw down over the course of 3 years? Rather than placing a stop loss and exiting a bad trade and then putting that capital towards a more profitable position?
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Quoting 4for4
1. Never enter the market without knowing where the SL as well as the TP are ... 2. Don't forget to put them in ...
Technically, what I stated is a stop-loss. I would risk the margin requirement amount, say $20 per mini-lot on EUR/USD. As long as you have deep liquidity you can go beyond the $20 but I'd never have a stop of less than the margin requirement. If my TP is 100 pips, for example, then that is a 2-1 risk reward ratio in my favor.
Quoting leonardicus
In other words, if your stop-loss amounts to $100 on 10 mini lots, for example, (-100 pips) then your proper trade size should be a lot size risking $100 with no stop, only a profit target. 3 mini lots that would lose $100 on -333 Pips and make $30 on 100 pips. It sounds inverted but the REAL risk-reward ratio is in probabilities, NOT pips. The probability of 100 pips in your favor is 3-1 to the probability of 333 against you! Stop losses are "death by 1000 cuts."
I'm sorry, but I think the calculations are incorrect ...
$100 on 10 mini-lots = 10 pips only (on EUR, GBP, AUD, NZD) ...
$100 on 3 mini-lots (0.3 lots) = 33 pips ...
100 pips on 3 mini-lots = $300 ...

Anyway, thanks for the reply ... just something to think about ... 🙏
Quoting albern
{quote} Lets assume for a moment that you are human and capable of making mistakes in your trading analysis to where you bought EURUSD in September of 2014. Are you saying that its better to hedge and fade a position for 2200 pips of draw down over the course of 3 years? Rather than placing a stop loss and exiting a bad trade and then putting that capital towards a more profitable position? {image}
Why wouldn't I have bought the opposite side and made many other winning trades on other pairs?

That quote is for stocks, NOT currency pairs. Of course, you use stops on equities...

If you understand probability enhancers such as using price action and supply & demand, then it's VERY low probability of getting into a 2,000 pip drawdown over 3 years. As I stated, the relative position is very small and I use my brain. If I have 10 mini-lots with a TP of 200 pips, then my risk-reward probability is 1-1. If TP is 50 pips to make $50, then my RR is 4-1.

I usually go for 200+ pips and give my margin level space to increase 2.5 times while also hedging...
Quoting 4for4
{quote} I'm sorry, but I think the calculations are incorrect ... $100 on 10 mini-lots = 10 pips only (on EUR, GBP, AUD, NZD) ... $100 on 3 mini-lots (0.3 lots) = 33 pips ... 100 pips on 3 mini-lots = $300 ... Anyway, thanks for the reply ... just something to think about ... 🙏
I said, "for example." It evens out with any per-pip ratio, this is not relevant to the fact that RR works with probability NOT pips... You missed the forest for the trees.
Quoting leonardicus
{quote} I said, "for example." It evens out with any per-pip ratio, this is not relevant to the fact that RR works with probability NOT pips... You missed the forest for the trees.
Yes, RRR works with Win-Rate ...
@1R, we break even @ 50% Win-Rate ...
@3R, we break even @ 25% Win-Rate ...
You're a very confusing person.

You say that you meant stocks and not currency pairs. Yet you say use the word pip which is a forex term. Stocks/Futures use the term points, also in your quote you give an example of hedging and fading USDCAD and never use the word stock or name any stocks as examples.

Also in your post you're adovacting not using a stop loss and yet you're now telling me that of course you use a stop loss in equities. (Again after you boast about your endeavor to hedge/fade USDCAD)

Quoting leonardicus
{quote} That quote is for stocks, NOT currency pairs. Of course, you use stops on equities...
Quoting leonardicus
. You can set a stop loss at 1-day ATR of say 90 pips and then a profit target of 180 pips.
Quoting leonardicus
I had a disaster USD/CAD position fall 600 pips recently, in 5 days.
Quoting leonardicus
Hedging through a separate account and cost averaging once the trend is back in your favor makes it possible to avoid using stop losses altogether.
Quoting 4for4
{quote} Yes, RRR works with Win-Rate ... @1R, we break even @ 50% Win-Rate ... @3R, we break even @ 25% Win-Rate ...
My last reply then I'm walking away from this site for at least a week.

The subject from 4for4 is your holy grail. 3R and all you need is a 25% winrate for account BE. If your current way of trading can't give you at least a 25% win rate then either find a new system/methodology or quit trading.

Here is a bit of logic, let's say your trading account balance is 300k. Would you leave your trades open and leaving yourself vulnerable to a margin call? Probably not, why do the same with that 3k account?
Leonardicus you're talking out of both sides of your mouth. It doesn't mean that you're not a successful trader, bit you haven't articulated yourself clearly in this thread.

My position on stop losses is that there is a time and place for everything. If you are trading on margin you should probably have ,at a minimum, a very large stop loss to avoid disaster should the worst case scenario occur.

I personally disagree with the notion of placing tight stops just below the swing low of your trade. A week of trading on a practice account should show how foolish this is, as the market simply doesn't allow for this. Unfortunately this is the exact advice that many educators provide. It basically requires you to snipe the market and we all know that this is an impossibility.

Companies like tradeciety love to write articles that promote the use of stop losses, but they never explain PRACTICAL usage of a stop loss. This is the problem.
The truth about the stop loss – why only losing traders don’t use stops:

Maybe that is true. But is completely irrelevant because the interesting question is if a trader becomes profitable when he uses a stop loss.

My guess is that being profitable has no coincidence with a stop loss. Whether you use it or not.
Im trading for 8 years now. I read "everything" about Forex trading and realized that 95% articles are for fooling traders. Don't believe everything you read or hear, Give time to yourself and it will come to you. Trading with leverage without stop loss?! please be serious.,
have plenty saving account in many different currency, move around the money and watch the bank give you interest. no contract, no pair. no sl, no tp
Quoting JT4xPro
The truth about the stop loss – why only losing traders don’t use stops: Maybe that is true. But is completely irrelevant because the interesting question is if a trader becomes profitable when he uses a stop loss. My guess is that being profitable has no coincidence with a stop loss. Whether you use it or not.
Actually I think stop losses are essential. (to me anyway)
(Assume the traders are all Long)
Looking at where traders have their stops and are forced to sell.
Where other traders can be squeezed by seeing the profit go back down to zero and are forced to sell.
You are seeing groups of people who have to sell for whatever reason. Also others quite happy to help give this a nudge by selling as well. Who do you think profits with all that selling?

You think like that and trade like that then you are on the same side as the Bank traders albeit with a slightly smaller edge...
Using a stop-loss is a guarantee for a loss! I only became profitable when I stopped using stop losses and in the case of adverse movements I can now hedge until a favourable time with a non-fifo account which takes care of the solvency issues....
Quoting Guest
Yeah right. Stop hunting is one of the main jobs of the dealing rooms. Can't remember how many times I got stopped out right before the big move I was expecting. If you spot the trick as other brokers don't show the move which got out your stop, they will tell you it's their liquidity provider. Which is actually a sub-company of theirs. Just watch any wave C or E on a eliott wave movement and you will see that preceding B and D waves purpose is to take out the SLs before the real move. Never made money untill i switched to accounts where I deposit exactly as much as I would allow to lose on a trade I spotted. And even in this situation, 7/10 times you get the price moving against you exactly to the last decimal which gets you a margin call and after that retraces with a nice beautiful pinbar which differs from broker to broker, depending where their client`s SLs were placed.

And they usually suggest a 'tight stop loss' --lmfao
abandon the SL idea, flip directions instead...
Quoting 4for4
{quote} Yes, RRR works with Win-Rate ... @1R, we break even @ 50% Win-Rate ... @3R, we break even @ 25% Win-Rate ...
RR does not work when using PIPS, if you have a stop of 90 pips and a target of 180 then you may think you have a 2-1 risk. YOU DON'T... Probability is 2-1 against you that 90 will get hit before 180 is hit. You will need to be correct 66 percent of the time to break even if you use RR stops using PIPS.

You cannot rely on being correct in you guess of the price direction, you must rely on pure probability. You can enhance probability in your favor with price action and chart analysis--BUT, it is only to put probability more in your favor.
Quoting beastwork
Leonardicus you're talking out of both sides of your mouth. It doesn't mean that you're not a successful trader, bit you haven't articulated yourself clearly in this thread. My position on stop losses is that there is a time and place for everything. If you are trading on margin you should probably have ,at a minimum, a very large stop loss to avoid disaster should the worst case scenario occur. I personally disagree with the notion of placing tight stops just below the swing low of your trade. A week of trading on a practice account should show...
Your reading comprehension is the problem, not my comment.
I will make it simple for you and outline what I said;
-The minimum stop loss is through the margin requirement. $20 on EUR/USD mini-lot for example.
-Risk is controlled through position size, NOT through buying HIGH and selling low... As you suggest.
-RR ratio is through probabilities NOT price interest point... If $20 (margin requirement per mini-lot) is the risk, then a 100 PIP target would be 2-1 in your favor. (for example) Statistical probability is 2-1 that price will go 100 pips in your favor before 200 pips against you. If your stop is 100 and goal is 200, for example, probability is 2-1 against you. Basic statistics.
-Stop loss is short term thinking, look at weekly charts to see that it's VERY rare that price does not retrace even very large trend runs. The worst of drawdowns on a single position is less than 3-4 percent of my account. Probability demonstrates that it's highly probable price eventually retraces in currency pairs. (weekly charts show it)

Sorry, I can't make it any more simple for you. If you cannot comprehend then what is the point of trying to insult me to hide your inability to understand?

"Those who have eyes, let them see."
Quoting albern
You're a very confusing person. You say that you meant stocks and not currency pairs. Yet you say use the word pip which is a forex term. Stocks/Futures use the term points, also in your quote you give an example of hedging and fading USDCAD and never use the word stock or name any stocks as examples. Also in your post you're adovacting not using a stop loss and yet you're now telling me that of course you use a stop loss in equities. (Again after you boast about your endeavor to hedge/fade USDCAD) {quote} {quote} {quote} {quote}
Your reply is so off that there is no point for me to try and correct it. If you cannot comprehend correctly then the problem is not mine.
If you are one that adopts the "no stop loss" philosophy, couldn't you achieve the same result by either placing lines on your chart for your personal SL and TP without letting the brokers knowing your intent? There is some inherent risk there as well in that you would need to constantly monitoring your trade. Also, there is a risk in a quick/large move against you, but if you can gut that out and wait for it to come back, then you're still in the game....yes, yes, I know about margin calls. I'm just wondering about alternatives.
Quoting leonardicus
{quote} RR does not work when using PIPS, if you have a stop of 90 pips and a target of 180 then you may think you have a 2-1 risk. YOU DON'T... Probability is 2-1 against you that 90 will get hit before 180 is hit. You will need to be correct 66 percent of the time to break even if you use RR stops using PIPS. You cannot rely on being correct in you guess of the price direction, you must rely on pure probability. You can enhance probability in your favor with price action and chart analysis--BUT, it is only to put probability more in your favor....
When the direction is correct, the 180pips-TP is a lot easier to reach than the 90pips-SL ...
The purpose of using SL is to protect our account (the forest) ... Never try to bet the whole farm just to save a cow ...
leonardicus, you are one of the few that understands stop losses. Thank you for taking the time to write so much here. But you still need to place a stop loss way out there just incase you lose your internet or power as I did recently for 2 days.
  •  Guest
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Stop loss cannot be hunt if the positioning of it is in the proper place. below a strong support or above a strong resistant. It is an insurance that if the support or resistance broke out you will be stop out because of change in the direction of the currency pair. Buy cheap at a support, sell expensive at a resistant. This is a pro advice to newbies.
Quoting Guest
Stop loss cannot be hunt if the positioning of it is in the proper place. below a strong support or above a strong resistant. It is an insurance that if the support or resistance broke out you will be stop out because of change in the direction of the currency pair. Buy cheap at a support, sell expensive at a resistant. This is a pro advice to newbies.
Stop-loss hunting is a myth, what is happening is the banks are creating a demand for what they want to sell. Their orders are so massive that it would move the market too much if they just placed an order. Banks will use a small part of their orders to move price up, for example, then traders chase price and create demand... Then the banks sell into that demand. The reverse is true for when they want to buy.

You are giving your money away if you use a hard stop loss... If your stop loss would be $100, for example, then trade that position size using $100. You can get out when the margin requirement level is hit, if you are panicky, but you cannot be profitable unless you can ride the ups and downs of market manipulation by large banks. They are not attacking traders, they just have such large orders that they need to create the demand for their trades.
Quoting JumpJack
leonardicus, you are one of the few that understands stop losses. Thank you for taking the time to write so much here. But you still need to place a stop loss way out there just incase you lose your internet or power as I did recently for 2 days.
You are trading with too large a percentage of your account if you are worried about power outages. I will share my private message response to you.

I have been trading since 2003. I became "wise" by losing a lot of money in trading, being a sucker by buying worthless trading programs or advice and listening to people that did not have my best interest in-mind... and just being impulsive, impatient and arrogant until I was broken of those characteristics by the market. The most important part of trading is learning how to manage your physiology and emotional responses to trading. I found Rande Howell through YouTube, he was the best to help me finally get my psychology right. Mark Douglas was the guy that finally brought me into the right perspective of psychology and risk reward/probabilities. I discovered that indicators (MACD, etc) are total BS, they lag. You have to learn to read charts and identify where the major banks have their orders. I use the daily, 4 and 1 hour charts for trading decisions. Rely on the daily chart for seeing trends, trade WITH the trend... I used to use 15 minute charts but finally learned that is way too small a time frame to identify trends and supply/demand levels. Supply & Demand levels are VERY accurate relative to everything else. Once you learn to identity where the banks have their orders then it's spooky how accurate you can be. Never chase price, learn to see where the buy or sell orders are located, be patient and anticipate. (supply & demand) You can basically get all the education you need for free through YouTube and websites. That is something I did not have when I started trading. Last, as I stated on that thread, your dollar risk level is what you trade with instead of using a stop-loss. If the loss goes beyond the margin requirement level then you can decide to just get out but if you trade with trend probability is on your side to eventually be profitable. It should be very rare to need to sell out for a loss if you use a small percentage of your account on each position. You are only selling to get out of margin requirement increase levels, but you only trade with your dollar risk amount. Risk reward is by probability NOT pips... That's how I knew the writer of that stop-loss article is giving bad advice, actually the opposite of what works in risk/reward ratio.
Margin-Requirement is about 100pips regardless of lot-size ... ($1000 for a $100,000 contract) ...
Margin-Call @ 80% of Margin Requirement ... Margin-Cut @ 20% of Margin Requirement ...
That's the automatic stop-loss whether we put it in or not, and 80pips is just a small feat for the market ...
Learn to control what we can and let go what we can't ...
Thanks leonardicus for your insights. After many years of trading and working for Banks and CFD brokers I can vouch that you know what you're talking about. The only traders I ever saw making money at the CFD brokers I worked for were not using stops but averaging in to markets, The big mistake most of them made though was leveraging too high so eventually a big sustained news driven move ( one I remember was Fukushima tsunami) Wiped them out.
From my years of trading and broking I can say, high leverage and stops are the killers of any account.
Quoting Aussi
stop loss=brokers meal for the day
I Agree the best way of trading is just when u buy or sell something on forex just be at your desk or just saw your profit or lose on mobile and place order without stop loss . it just like playing open cards blackjack when dealer see your cards .
Stop loses Best Usage : 1.internet disconnect 2 . if your broker closed by FSA . my personal experience
Quoting 4for4
{quote} When the direction is correct, the 180pips-TP is a lot easier to reach than the 90pips-SL ... The purpose of using SL is to protect our account (the forest) ... Never try to bet the whole farm just to save a cow ...
You never know if trend direction is correct, it is another lagging indicator. Going with the most recent trend direction is ONLY a probability enhancer. The most powerful probability enhancer is being able to identify where the banks have their orders. You can never assume you are correct, statistics will always prove that it's 2-1 in your favor to hit 90 before 180... either way you bet.

I'd rely on pure statistics and bet on the side of my probability enhancers. If my margin requirement is $500 then I consider that my risk. a $250 profit target is 2-1 odds in my favor compared to my risk... Nothing is 100 percent but statistics and understanding how banks operate provides the edge. Once I figured this out, my account went from sideways to a steady increase.
Quoting leonardicus
{quote} You are trading with too large a percentage of your account if you are worried about power outages. I will share my private message response to you. I have been trading since 2003. I became "wise" by losing a lot of money in trading, being a sucker by buying worthless trading programs or advice and listening to people that did not have my best interest in-mind... and just being impulsive, impatient and arrogant until I was broken of those characteristics by the market. The most important part of trading is learning how to manage...
Very interesting reading your comments, and I do understand what you are saying regards stops. May I ask who you suggest explains S&D well? I’ve heard of Sam sneiden, alfonso just curious as to whether there was anyone else you may suggest

Many thanks
Quoting leonardicus
{quote} You never know if trend direction is correct, it is another lagging indicator. Going with the most recent trend direction is ONLY a probability enhancer. The most powerful probability enhancer is being able to identify where the banks have their orders. You can never assume you are correct, statistics will always prove that it's 2-1 in your favor to hit 90 before 180... either way you bet. I'd rely on pure statistics and bet on the side of my probability enhancers. If my margin requirement is $500 then I consider that my risk. a $250 profit...
Hi,
Can you explain the maths for this approach?
Quoting leonardicus
{quote} Your reading comprehension is the problem, not my comment. I will make it simple for you and outline what I said.
I comprehend what you've written just fine. But you have contradicted yourself, which is what I was originally pointing out. Don't ask me to show you the contradictions because I don't care enough to do so. I understand statistics and probability just fine without your little summary, Sir. For the record I never said you were wrong, I actually agree with what you're saying. The issue is that you haven't been clear in your comments.

It appears I'm not the only one that feels this way. Perhaps instead of lashing out you should take a moment to reflect.

"Have I been as clear as I wanted to be?"
"Have I effectively communicated my thoughts to my audience?" etc.

In your case I would say no. Don't be upset that you're being critiqued. Take it as a gift and use it to better yourself.
Quoting beastwork
{quote} I comprehend what you've written just fine. But you have contradicted yourself, which is what I was originally pointing out. Don't ask me to show you the contradictions because I don't care enough to do so. I understand statistics and probability just fine without your little summary, Sir. For the record I never said you were wrong, I actually agree with what you're saying. The issue is that you haven't been clear in your comments. It appears I'm not the only one that feels this way. Perhaps instead of lashing out you should take a moment...
I did not contradict myself, you failed to comprehend. The market IS full of contradictions, paradoxes, and irrationality... There are often exceptions to rules, such as when to use a stop loss or not. I prefer using stop losses to lock in profit rather than to lock in a loss. If I use a stop loss, it is for the margin requirement dollar amount.

I will take your advice but recommend YOU also heed your own advice.
Quoting maverick2017
{quote} Hi, Can you explain the maths for this approach?
The math is self-explanatory; If you open a position using two percent of your account and the margin requirement is $250 (for example) then use that as a maximum risk. (If you have a psychological fixation on buy-high, sell low stops loss)

If your risk is $250 and you choose a target profit is $100, the simple probability is 2.5-1 in your favor. Probabilities always change so use probability enhancers based upon chart patterns to improve odds. There is a bigger RR ratio, that is based on your winners & losers overall and that is why you trade with 1-2% per position you take.

Trade one mini-lot per position, if you have to. Risk $25 to get $10 seems inverted but in terms of probability is 2.5-1 in your favor.
Quoting leonardicus
{quote} The math is self-explanatory; If you open a position using two percent of your account and the margin requirement is $250 (for example) then use that as a maximum risk. (If you have a psychological fixation on buy-high, sell low stops loss) If your risk is $250 and you choose a target profit is $100, the simple probability is 2.5-1 in your favor. Probabilities always change so use probability enhancers based upon chart patterns to improve odds. There is a bigger RR ratio, that is based on your winners & losers overall and that is why...
So, the equation is margin:target?
One shall.focus on WINRATE . This is the true Edge wich transform everything.
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Quoting andoseg2
One shall.focus on WINRATE . This is the true Edge wich transform everything.
Winrate won't mean much if winning trades are +5 and losing trades are -100 :-)
If I traded an account from which I was prepared to lose all the money (account containing maybe 2 to 5% of my trading capital) then I might not use a stop loss . I have done that for fun to see how quickly I could build the account. It was 'interesting'.

In my normal trading I use a stop loss to protect the account should I not be able to close my position for some reason such as illness, unhappy love affair, DSL outage, prison, death, alien invasion, all that sort of thing.

In normal trading my stop loss rarely gets triggered because I close the position if my 'trade idea' is no longer valid for some reason.

Trading without a stop loss is foolish if you value the contents of your account. Any trade idea should include an adverse price level beyond which your trade idea becomes invalid. This is the place for your stop loss, it may be 5 pips or 500 pips depending on your trade idea.

I'm sort of surprised there's even a discussion about this; it doesn't get any more basic.

"The market can remain irrational longer than you can remain solvent."
is an excellent quote well worth remembering, (W. Buffet I think.)
Quoting digit1288
If you trade with zero leverage I don't see why you require a stop loss. If I had 100k in the account, the max I trade is 1 lot.

interesting. You will not make much of an income that way. BUT you should be able to withstand ANY trade that goes against you. BUT then again, while it runs negative will you dare to trade another lot? Not likely so will be a long wait for profit perhaps.
the problem with not having a stop is traders NOT willing to admit their entry was not correct. Always wanting/needing to be right is very dangerous. Markets will not go the way you think from time to time. Protect. JUST be smart about where you place the stop and how much you do risk. TRADING is about managing risk. If you are NOT willing to risk a loss then do not trade. Before each trade I decide how much I will be willing to risk fro the potential profit I see available. I check what i think is the probability with my system that i get my reward and not my potential loss BUT if it goes against me i just look for the next trade. KNOWING your trade history of success to loss is very important. If you are only at 50:50 that is not good. If you are at 66/34 win/loss that is ok sort of. If you are at 90% win, 10% loss that is workable and THEN you can believe you will start to earn a living as a trader.

BUT please, for all new traders, start with demo. Stick with a system and tweak only to improve your win rate. Start with $200 in demo and trade a % of your equity. I started by trading 1 lot/$1000 equity. Traded the demo from $200 to $20,000 three times (after several times losing of course first). ONCE i had proven to myself that i could do that in demo 3 times (each time only took 1-3 months) THEN i opened live account with $200 and did the same. NO professional ever starts their profession without practicing first. Get the system that works for you figured out before ever trying to go live. THEN when you have that, you can use stops as needed because you will know how brokers and banks know about those levels as well. AND when you have a loss you will know how to manage it successfully.
Pipps, no one here cares about your trading history or your philosophy. You have missed the whole point here. The point here is trade like the banks. Go back and read from the beginning, then go somewhere else please. If you want to teach start your won thread.
1) trade with money you CANNOT afford to lose
2) don't use stop losses

see how fast you learn ... or not (most don't)
Stoplosses don't have to be used all the time or any at all for that matter, and I have the trading account to prove it...ever wonder why there are funds called 'Hedge' funds...Do you think citibank uses a Stoploss, and don't tell me that they have deeper pockets because everything is scalable thanks to a thing called leverage...that's why most of you lose because of the crap they teach online....95% of retailers lose because 95% of retailer get the same education...there's a world of trading y'all know nothing about...bad news is there's no system to be bought or guru to follow but it's up to you to seek find and consolidate the 'FUNDAMENTALS OF TRADING, HOW, WHY, WHEN AND HOW FAR'..find out these and the markets are your oyster....oh and before they tell you it's impossible to find, let me tell you that it's not, and then you don't have to spend years lurking on FF searching for that holy grail system...
Quoting JumpJack
Pipps, no one here cares about your trading history or your philosophy. You have missed the whole point here. The point here is trade like the banks. Go back and read from the beginning, then go somewhere else please. If you want to teach start your won thread.

Wow JumpJack. You must have had a bad day. Hope tomorrow is better for you. BTW i do not teach, never asked for students and would not want them, especially with your attitude.
O K - thnx,. never mind my comments. yes having bad day. wont do that again.
Quoting pipps
{quote} interesting. You will not make much of an income that way. BUT you should be able to withstand ANY trade that goes against you. BUT then again, while it runs negative will you dare to trade another lot? Not likely so will be a long wait for profit perhaps.
Depends on his/hers objective and what they view as a good return/income ?

Leverage is the killer which is why regulators are looking to reduce it as too many are losing treating it like gambling.

Stop losses or take profits there is no hard and fast rule.
Some people prefer to trade without both.

Banks lose money but they are well capitalised.
Take a lesson from them . Keep yourself in the game.
What an old school BS story, trying to drum up business me thinks.
Users name above, funny it is!

Stop loss? What's that?
Quoting maverick2017
{quote} So, the equation is margin:target?
I had an EUR/GBP position that was down 200 pips a few weeks ago, just sold it for a 50 pip profit... Only sold it now because I was tired of looking at it for a month. Still, it was only 1 percent of my account and I made $500 instead of losing money. I also had a profitable position on the opposite side. Rarely use stops to lock in a loss, Use stops to lock in profit!
I have a similar method to trade. But my risk management is not good. 200 pips was only 1% of account?
Quoting leonardicus
It is not a loss until you buy high and sell low. The best way to manage risk in Forex is with lot size and buying with the daily & 4 hour trends using "supply & demand levels." Big banks don't use stop losses, they inventory the losing positions until they become profitable. To be successful you want to trade like the banks and use multiple accounts so you can hedge. Once I learned that even 500 pip drawdowns almost always reverse into profitability, I stopped taking losses. Having one percent of my account locked on a losing...
Good point.
Quoting albern
{quote} My last reply then I'm walking away from this site for at least a week. The subject from 4for4 is your holy grail. 3R and all you need is a 25% winrate for account BE. If your current way of trading can't give you at least a 25% win rate then either find a new system/methodology or quit trading. Here is a bit of logic, let's say your trading account balance is 300k. Would you leave your trades open and leaving yourself vulnerable to a margin call? Probably not, why do the same with that 3k account?
The problem is that combining reward ratio and efficiency of forex trading system is often easier said than done. The fact remains that reward ratio and efficiency of a forex trading system are almost inversely related.

This practically means that a system with promising reward ratio will rarely possess encouraging winning ratio.
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Ideal StopLoss and TakeProfit depends on your trading strategy and enrty point. If you trading is automatic use Metatrader optimization of Wealthlab etc. If you trade manualy you can optimize SL and TP using TradeSimOpt.
leonardicus thank you for your excellent information. After many years of forex trading I have come to the same conclusions. Having a stoploss is is not the way forward, although many believe that it is and also it is the teaching that you read everywhere. I can only endorse what you have shared.
I also recommend anyone starting to use real money and accept the funds that you have in your live trading account as your ultimate risk in the market, and trade accordingly. So start with a small account size and see it as the cost of learning....tread your own path and open the eyes of your understanding
Watch this prop trader without stop loss..live...
www.twitch.tv/am_trading
@allinazi
My stoploss is mental now, ive gotten sick of getting stabbed with a 5 pip run above a high or low then going 80+ pips in the original direction

My new approach is if i see a 5m candle close above or below my zones i close my position and move on because when you have a strategy or system and you see something out of the ordinary why would you want to be in that position anymore anyway?
This has been treating me well so far.

The only requirement of a mental stop loss is having enough brain power and not being a monkey and following your rules knowing it will keep you in the market to trade another day
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  • Posted: Oct 5, 2017 8:17am
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