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Pro traders who do not use SL, What about Black Swans?

  • #41
  • Oct 29, 2018 6:58am Oct 29, 2018 6:58am
Quoting Ray9
Hello Traders, I have a question for pro traders who do NOT use stop loss in their trading. They are usually into consistent profits especially with their PRO MM. However, I never understands what their protection against significant events, For example 9/11 attacks, Tsunami, War or SNB EURCHF drop back to 2015 (more than 3000 pips)! Are you using still hard stop like %20 of your account? or any other way of MM? and Please this thread is not to discuss whether or not to use a stop loss for trading. Thank you. ...
total wrong question.
there is no pro trader who dont use stoploss, only maybe pro traders who call themself pro trader but are only still beginners.

when you dont use a SL (and hedging for the beginners is also a SL) you cant calculate your risk, when you cant calculate your risk at all. then you are not really a trader, you are a gambler.
  • #42
  • Oct 29, 2018 8:27am Oct 29, 2018 8:27am
Not only don't use a stoploss, try your strategy with no takeprofit either. I'm personally seeing a benefit to this as I'm placing the same trades on live and demo, but unlike the live, I'm using no takeprofit on the demo and, I like it so far. So no stoploss and no takeprofit either may be something to try. Obviously you want to try the noSLTP on demo first.
  • #43
  • Oct 29, 2018 9:36am Oct 29, 2018 9:36am
Quoting Ray9
Hello Traders, I have a question for pro traders who do NOT use stop loss in their trading. They are usually into consistent profits especially with their PRO MM. However, I never understands what their protection against significant events, For example 9/11 attacks, Tsunami, War or SNB EURCHF drop back to 2015 (more than 3000 pips)! Are you using still hard stop like %20 of your account? or any other way of MM? and Please this thread is not to discuss whether or not to use a stop loss for trading. Thank you. ...

All professional trading & investment organisations have a risk management function of some sort because they don't want the firm to go broke on the outcome of a single event or trade.

It can be any combination of stop loss systems, hedging, VAR (value at risk) analysis or many other statistical variants. But they do not conduct business without risk management tools in place, it's a fundamental part of the operation.

But they still can & do go bust because enormous black swan events take them by surprise, things their risk models suggested should/could/would not happen, but they did. How badly such an event hits a firm all depends on how aggressive a money management strategy the firm adopts, together with how statistically robust their risk models are.

It's not so unlike a bank's lending policy. A conservative bank only makes small, low risk, well secured loans and can probably ride out anything, at the cost of smaller profits along the way. An aggressive lender may make bigger profits when things are OK but could be wiped if things go really sour.

The point is, what are you trying to maximise: the odds of long term survival vs. maximising current profitability?
It's all risk management, just a matter of where you position yourself along that spectrum, whether pro or amateur.
  • #44
  • Oct 29, 2018 10:00am Oct 29, 2018 10:00am
Obsession with placing stop losses is a bit unusual...If you are scared of black swans stop loss will not save you from those, only thing that will save you is low leverage and making sure you can survive a spike like that...If market drops 1-2k pips in 1 second no stop loss will be triggered...It all comes down to knowing your trading strategy and depending on market conditions adding to position or closing it.
  • #45
  • Oct 29, 2018 10:06am Oct 29, 2018 10:06am
What good is a stoploss if it's not honored by the broker during such events? I remember reading posts from a few people complaining that their stoploss was ignored during such events and their accounts blew up.

You pretty much have to be a professional in the industry, a city trader, if you're going to use stoploss because that's how the professionals generate the liquidity they need (by hunting your stops). So you'll hear all day from the professionals about the importance of stoploss but that's because: (1) they know where to place theirs, and (2) they know where you're likely to place yours.
  • #46
  • Oct 30, 2018 12:01am Oct 30, 2018 12:01am
Quoting 4xNewGuy
{quote} I already mentioned it in my previous post. I'm willing to risk 10% on a trading day.
And how much do you normally risk on a trading day? The question will forever remain.
"The fun is in the hunt. Not the kill."
  • #47
  • Oct 30, 2018 1:20am Oct 30, 2018 1:20am
Some pro traders use a negative risk reward.
Example: Stop Loss - 90 pips , Take Profit - 30 pips.

How they deal with black swans I`m interested myself.
I guess the high win hitrate simply pays of for once in a while loses.
The truth is hidden from you
  • #48
  • Oct 30, 2018 2:17am Oct 30, 2018 2:17am
The easiest way to counter black swan is to put in 10% of your whole capital inside your broker's and trade the maximum leverage from it. This way, when you do encounter one black swan event, your account will go margin called. Even if you owe your broker the negative balance, i dont think they will chase you for the amount owed because:-

1) you can blame the broker for not honoring your stoploss, you must always set a maximum stoploss for your account, say 200 pips while your tp and sl is only 10 pips but the black swan slipped you 1k pips.
2) the broker is a big one like fxcm, oanda, icmarkets etc and they don't care about your small loss
3) you are not staying in the same country as the broker's firm, say for example, you are staying in Asia and your broker is based in UK/australia (they are not going to send FBI to catch you, who are we kidding)

Another way is to not trade the exotic pairs, i personally don't trade the swiss because it's hard to trade af and also because of the peg. Yen and gbp pairs are unpredictable sometimes but they seldom go over 100-200 pips in a second.
  • #49
  • Oct 30, 2018 4:43am Oct 30, 2018 4:43am
Quoting Redbaron81
Obsession with placing stop losses is a bit unusual...If you are scared of black swans stop loss will not save you from those, only thing that will save you is low leverage and making sure you can survive a spike like that...If market drops 1-2k pips in 1 second no stop loss will be triggered...It all comes down to knowing your trading strategy and depending on market conditions adding to position or closing it.

Absolutely. A defining characteristic of a black swan event is a sudden huge move with no liquidity. Your broker will trade at the first available dealing price on your stop which could be a long way away from the level you set. This is slippage at its extreme worst.

There are several reasons why professional traders, even with their superior skill, still typically risk only tiny amounts of their avaliable account on any given trade, and this is one of them: you have to expect and be able to absorb the worst the market can throw at you and still be alive and kicking afterwards. Worst case scenario planning is one important element of good money management/risk control.
  • #50
  • Oct 30, 2018 4:48am Oct 30, 2018 4:48am
dont listen to the sour bullshit on forums. most dont make it, so they make assumptions that others dont.

1) your definition of "pro traders" do not trade the same way, these retail bloks on the forums trade.

2) they do have sl's but not definite per se.

3) they have other instruments on hand to maneuver out of sticky situations if needed.
  • #51
  • Oct 30, 2018 8:10am Oct 30, 2018 8:10am
Quoting Oldtraderman
{quote} Absolutely. A defining characteristic of a black swan event is a sudden huge move with no liquidity. Your broker will trade at the first available dealing price on your stop which could be a long way away from the level you set. This is slippage at its extreme worst. There are several reasons why professional traders, even with their superior skill, still typically risk only tiny amounts of their avaliable account on any given trade, and this is one of them: you have to expect and be able to absorb the worst the market can throw at you and...
not complete true, if you want reduce this risk, simple use options (or other instruments) to secure your forex trades... you have to invest some from your wins in the fee.... but you are save for this problem....
there are always ways, if someone know about or want to get it, thats the question....... trading without SL is pure 100% gambling, nothing more, maybe this are pro gambler, but never ever such a person is a trader when he cant calculate the risk (because trading is all about calculating your risk)...
  • #52
  • Oct 30, 2018 9:36am Oct 30, 2018 9:36am
Quoting Ray9
{quote} It is wise to pick one of these brokers, Thanks I hold my positions from 1 to 3 weeks in average, and I manage them daily especially during scheduled news release. My concern is with unscheduled events. But by looking at this daily chart, I can see abnormal EURCHF was ranging within JUST 250 pips for over 250 days (1 year). So it was definitely a NO pair to pick for trading at least for me. and perhaps traders who remembers trading that time, if there were Fundamental that backing the abnormal drop that is about to happen? In other words,...
Well such "early signs" that become more or less obvious after the fact are part of what defines a black swan event!

Cheers.
"Know thyself."
  • #53
  • Oct 30, 2018 4:29pm Oct 30, 2018 4:29pm
Im not sure what pro trader wouldnt use a stop loss.
How would your software risk management accurately calculate risk for you, without a stop loss?

UNLESS are you talking about how instituions dont have a stop loss?

Hedging (via conplicated options set ups) is the only other way you or a bank wouldnt use a stop loss. But as a simple directional retail trader ALWAYS use a stop loss.

re black swan events: thats why you should only hold 25% max at your broker.
  • #54
  • Edited 10:46pm Oct 30, 2018 4:52pm | Edited 10:46pm
Quoting Ray9
Hello Traders, I have a question for pro traders who do NOT use stop loss in their trading. They are usually into consistent profits especially with their PRO MM. However, I never understands what their protection against significant events, For example 9/11 attacks, Tsunami, War or SNB EURCHF drop back to 2015 (more than 3000 pips)! Are you using still hard stop like %20 of your account? or any other way of MM? and Please this thread is not to discuss whether or not to use a stop loss for trading. Thank you. ...
I don't know of any broker that guarantees stop loss so black swan may skip over your stop.

That said, I don't usually have hard stops, either time or price. I usually have mental time or price stops written in my journal and just cover when the price or time is wrong. I will put in 200 pip stops if I am travelling and don't want to close.

So in my case, rarely using stops, if I have a position on and it goes heavy against me, margin call is my stop loss. And if the trade goes heavy in my favor, I cash out quickly because of whipsaw.

Best protection against black swan is to keep account small by constantly taking profits out. Withdrawals are also needed to pays bills and keep the lights on
Ecclesiastes 1:9
  • #55
  • Oct 30, 2018 4:56pm Oct 30, 2018 4:56pm
Quoting Ray9
Hello Traders, I have a question for pro traders who do NOT use stop loss in their trading. They are usually into consistent profits especially with their PRO MM. However, I never understands what their protection against significant events, For example 9/11 attacks, Tsunami, War or SNB EURCHF drop back to 2015 (more than 3000 pips)! Are you using still hard stop like %20 of your account? or any other way of MM? and Please this thread is not to discuss whether or not to use a stop loss for trading. Thank you. ...
I am not a pro trader. I usually do not use stops. I have been through a few black swans.

Stops do not protect you against this. If there are no orders at your price, you will get filled at the next available price.

Quoting dukas_trader
{quote} total wrong question. there is no pro trader who dont use stoploss, only maybe pro traders who call themself pro trader but are only still beginners. when you dont use a SL (and hedging for the beginners is also a SL) you cant calculate your risk, when you cant calculate your risk at all. then you are not really a trader, you are a gambler.
Every trader, pro or otherwise, is a gambler. Risk analysis on spreadsheets is one thing, in real life, it is something quite different.
If you are good at something, never do it for free--Joker
  • #56
  • Oct 30, 2018 5:39pm Oct 30, 2018 5:39pm
Quoting Ray9
Hello Traders, I have a question for pro traders who do NOT use stop loss in their trading. They are usually into consistent profits especially with their PRO MM. However, I never understands what their protection against significant events, For example 9/11 attacks, Tsunami, War or SNB EURCHF drop back to 2015 (more than 3000 pips)! Are you using still hard stop like %20 of your account? or any other way of MM? and Please this thread is not to discuss whether or not to use a stop loss for trading. Thank you. ...
1) EURCHF - people that were long EURCHF or short EURCHF downside volatility before the peg blow-up are all out of the market, and that is well deserved unfortunately. That trade not only made very little sense at the time from a macro perspective but it also had the most horrendous risk:reward profile - anyone with experience and market structure understanding would have avoided it. On top of that, no SL would have saved you as nothing has traded in the market through most of that drop as liquidity evaporated.

2) Sometimes you have no choice. I do trade a lot of EM currencies that are much less liquid than G10 and follow certain trading hours. For example, it is not very smart to leave 50mio USDZAR stop loss in the market during Asian hours unless it is very far away from the spot price - otherwise you are very likely to get hit as it is too big, and you'd get an enormous slippage on it as well.

Now to get to the point on how it can be done and how it worked for me through the years:

 

  1. Don't try to scalp the market for +/- 10 pips
  2. Have a decent capital that allows you to trade without or with very little leverage
  3. Size your trades better, stop over-sizing and risking too much per trade, always play defense and have space to maneuver (yes, which at times includes adding to "losers" if it makes sense and if it is in line with the plan)
  4. Stop thinking of your entry and exit levels once they are executed - it is not relevant if you are in the money or out of the money on a trade. The only relevant question is whether it is time to cut, hold or add to your position, regardless of what realized P&L would be like.
  5. Have a mental stoploss that is either a function of time, an event or price action (e.g. break of a level, price reacting to events differently than you would've expected etc.)
  6. I am not a big fan of hard stops, because: Somehow stops tend to be taken out before the real move takes place and there is a lot of fake breaks that constantly happen. That's why I prefer to bet on discretion when assessing whether to stop out or not (and I do stop out, very often). I do think hard stops can be good, especially until the time you become confident in your a) experience of going through it 1000s of times b) emotional control and discipline
  7. Think from the perspective of your entire "book" rather than from a single trade perspective - know what's your level of risk and apx. how much you could lose in a given day. If you can survive at least 3x that number, you are fine.
  8. Try to understand market correlations and what other assets (stocks, bonds, CDS) you can use to hedge out in case there is a problem

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  • #57
  • Oct 30, 2018 5:42pm Oct 30, 2018 5:42pm
I think it's ok not to use SL if your leverage is just 1:1 - 5:1
  • #58
  • Oct 30, 2018 5:51pm Oct 30, 2018 5:51pm
I wouldn't even touch any CHF pairs before, the Swiss defend their currency like no other, like it's war. It just depends on your strategy and you just have to backtest and see if yours is compatible with such moves. My strategies weren't before but now it is so I'm looking at all CHF pairs.
  • #59
  • Oct 30, 2018 6:03pm Oct 30, 2018 6:03pm
Quoting dukas_trader
{quote} total wrong question. there is no pro trader who dont use stoploss, only maybe pro traders who call themself pro trader but are only still beginners. when you dont use a SL (and hedging for the beginners is also a SL) you cant calculate your risk, when you cant calculate your risk at all. then you are not really a trader, you are a gambler.

i do not use a stoploss perhaps your comments are wrong in all arguments , i am no beginner i am not a gambler , i would like to think i am a good trader , read the books and nearly all the the writers of these books are xbrokers or worked for them insisting you have a stoploss , stoploss easy money for brokers thats why they tell you to have one
people leave, but this thread will go on for ever
  • #60
  • Oct 30, 2018 6:12pm Oct 30, 2018 6:12pm
Quoting Ray9
Hello Traders, I have a question for pro traders who do NOT use stop loss in their trading. They are usually into consistent profits especially with their PRO MM. However, I never understands what their protection against significant events, For example 9/11 attacks, Tsunami, War or SNB EURCHF drop back to 2015 (more than 3000 pips)! Are you using still hard stop like %20 of your account? or any other way of MM? and Please this thread is not to discuss whether or not to use a stop loss for trading. Thank you. ...
hi mate when you have a seven fig account compared to a $500 or $1000 account people with a $500 account get picked off by the broker when you have a stoploss ,

i am not saying dont use one for small accounts but it does give the advantage to your brokers lunch money , new people should note how many times a stoploss gets hit
people leave, but this thread will go on for ever
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