Wide stop loss, Dollar cost averaging or doing nothing | Forex Factory

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Wide stop loss, Dollar cost averaging or doing nothing

  • #1
  • First Post: Mar 19, 2019 6:59am Mar 19, 2019 6:59am
Hello trades.
I want to share some ideas which have been discussed for years in FOREX FACTORY, but in vain.
I have been trading with a stop loss for almost 4 years and lost money.
Two weeks ago i decided to forget about using a stop loss and the result was as attached. I traded only micro lots only for testing. The problem is that three trades went in a loss for 100, 200 and 300 pips. They were EURJPY,EURUSD and USDCHF. i dangerously waited for the price to come back again and it did.
I know i was lucky this time, but think about that...You always close the trade with a profit, and most of the trades would be closed in a loss if i had used a stop loss.
My dilemma is what would i do if the price did not decide to return. Who would agree for buy every 200 pips , for example in a losing long trade, till the aggregate trades is at break even? Who would approve for leaving the trade swimming till the price come back again to the entry point? And who would agree for using a wide stop loss, let's says "500 pips" for example? I have been thinking all day long about the three solutions, but all of them is dangerous.
I did not talk about my entry setup and exit rules when i am in a profit because that is not my problem..
Waiting for your appreciated reply.
Thanks
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  • #2
  • Mar 19, 2019 7:59am Mar 19, 2019 7:59am
I don't use stops. I think stops are for losers: brokers sell them because noise takes you randomly out of the market when the order book is thin.

I actually mainly use LONG options on FXE (buy puts and calls), and am considering /6E futures options for this reason. It is "set and manage/forget" the position: if the model goes completely haywire, it is like purchasing insurance so I did not pay the full cost of it anyway. I buy when it is about 30-50 delta - hence not full cost since not delta of 1 like spot. So basically: if my model is completely wrong, yeah it sucks but sometimes it just happens. But when I'm correct, I make about 1 - 3 times the money I put into the option... so the average loss is about 10-50% max of the option capital put in, and gains are around 1-3x.

Everyone who is trying to time the spot exactly (while using stops) is crazy in my book! =D

I do still trade spot to keep in the "flow of the market" mainly, but it is with a much smaller amount of money and with lower leverage usually.
  • #3
  • Mar 19, 2019 8:36am Mar 19, 2019 8:36am
Quoting skillz16
I don't use stops. I think stops are for losers: brokers sell them because noise takes you randomly out of the market when the order book is thin. I actually mainly use LONG options on FXE (buy puts and calls), and am considering /6E futures options for this reason. It is "set and manage/forget" the position: if the model goes completely haywire, it is like purchasing insurance so I did not pay the full cost of it anyway. I buy when it is about 30-50 delta - hence not full cost since not delta of 1 like spot. So basically: if my model is completely...
Hello, Answer me in forex language. I do not know options ideoms..
  • #4
  • Mar 19, 2019 7:24pm Mar 19, 2019 7:24pm
the answer to your problem is very easy: just look for instance in the past of E/U when the trend was very strong and see how you would fare with your 3 scenarios`?
  • #5
  • Mar 19, 2019 8:01pm Mar 19, 2019 8:01pm
Quoting shadikalaji
Hello trades. I want to share some ideas which have been discussed for years in FOREX FACTORY, but in vain. I have been trading with a stop loss for almost 4 years and lost money. Two weeks ago i decided to forget about using a stop loss and the result was as attached. I traded only micro lots only for testing. The problem is that three trades went in a loss for 100, 200 and 300 pips. They were EURJPY,EURUSD and USDCHF. i dangerously waited for the price to come back again and it did. I know i was lucky this time, but think about that...You always...
Dear shadikalaji,

I have traded like that previously, I built up large positions over a large range of pips and needed a % of the retrace to exit with a decent profit. Most did close out, but it only takes just one to go beyond your anticipated limits. My disaster broke 3 of its what I considered normal ranges... That day I understood the meaning of the quote "Just when you think the price can't go any further, it does...." "and it goes to the moon..." hehe I added the moon part

May I suggest the problem may not be with your stop loss (maybe the placement was not ideal, but every strategy and person executing it will have a different opinion where the stop should be placed). The actual problem may be with your entries and correctly identifying the market direction and intentions for the period of time you wish to trade. I am just curious; on a demo, try to place the opposite trade to your signal and hold it for just as long. The question is will that trade reach 100, 200 or even 300 pips?

If it helps, I use a daily % loss limit I can lose before I stop trading for that day (as I trade intra day), ended up using it 2 days ago first time in months and it saved a great deal of my account and makes it easy to recover. IMO SL are useful for me when they are well placed in protected areas. One guy described it as placing the SL behind a mountain as oppose to on a flat field where MM can push price easily. But all of this depends on your trading style, strategy, plan, knowledge, experience, understanding, etc.....

Long story short: Check out your entries, and take extra care if you go down this road with adding to long term loss positions. Price can get away from you to a point where it will not even reach your B/E no matter how many entries you place. Negative swap will then eat your account via 1,000 cuts.

Kind Regards,
Tzamo
"Work hard, put in the effort, and follow your dreams..." -Me
  • #6
  • Mar 19, 2019 11:10pm Mar 19, 2019 11:10pm
Quoting tzamo
{quote} Dear shadikalaji, I have traded like that previously, I built up large positions over a large range of pips and needed a % of the retrace to exit with a decent profit. Most did close out, but it only takes just one to go beyond your anticipated limits. My disaster broke 3 of its what I considered normal ranges... That day I understood the meaning of the quote "Just when you think the price can't go any further, it does...." "and it goes to the moon..." hehe I added the moon part May I suggest the problem may not be with your stop...
Hello tzamo,
1)My account is a free swap account, and i even do not pay commissions on Wednesdays because i have chosen only 12 pairs that i can not pay for them any tax, commission, or swap. Also the spread on them is fixed.
2)Regarding entry points and stop losses (using the old way): You can watch the youtube videos about HeikenAshi bars in "Nikos Mermigas" channel, and you will know that my strategy is so strong but the problem is in the stop loss issue its self.
3)In order to know why i do not want to use stop losses any more, watch"Joseph Nemeth" at youtube and you will start thinking like me.
After all these points, i need your help to decide about the losing trades.
Best regards
Shadi
  • #7
  • Mar 19, 2019 11:17pm Mar 19, 2019 11:17pm
Quoting yonnie
the answer to your problem is very easy: just look for instance in the past of E/U when the trend was very strong and see how you would fare with your 3 scenarios`?
Hi Yonnie, you are right. That's way i make this discussion.
This is the first week for me after deciding not to use a stop loss and all the trades were closed at profit. If i would use it, 50% of them would be in a loss.
Only three trades went against me, i waited for the price to come back and it did. I know i was lucky, but i need to decide.
  • #8
  • Mar 20, 2019 3:47pm Mar 20, 2019 3:47pm
if you trade one of these 3 methods, you will always have small positions to be able to handle big drawdowns.....that means your profits are always small compared to your DD.......of the 3 methods the 500 pip SL will be the best solution: at least you will not blow up your account.......averaging down is the worst way to trade: you will get a margin call one day..........you said you get stopped out a lot - is your entry right and/or is your SL too small?.........what would happen if you place your order close to where you normally have your SL?...........hope you find your way out.
  • #9
  • Mar 20, 2019 3:50pm Mar 20, 2019 3:50pm
Quoting skillz16
I don't use stops. I think stops are for losers: brokers sell them because noise takes you randomly out of the market when the order book is thin. I actually mainly use LONG options on FXE (buy puts and calls), and am considering /6E futures options for this reason. It is "set and manage/forget" the position: if the model goes completely haywire, it is like purchasing insurance so I did not pay the full cost of it anyway. I buy when it is about 30-50 delta - hence not full cost since not delta of 1 like spot. So basically: if my model is completely...
Jeez, man, these guys don’t know what Deltas are. If you’re long an option you do have a stoploss: the cost of the contract. But FXE can be tough, the Bid-Ask can be wide. I’ve rarely gotten filled at the midpoint. Low open interest makes that worse. Regarding 6E, it’s not bad, better than FXE. Favorable taxation, too.
  • #10
  • Mar 20, 2019 3:56pm Mar 20, 2019 3:56pm
Quoting shadikalaji
{quote} Hi Yonnie, you are right. That's way i make this discussion. This is the first week for me after deciding not to use a stop loss and all the trades were closed at profit. If i would use it, 50% of them would be in a loss. Only three trades went against me, i waited for the price to come back and it did. I know i was lucky, but i need to decide.
In this way you are delaying your loss. And when your loss comes it will be margin call. It doesn't matter if your sl will be 100 or 500 or 1000 pips. At the end you'll lose, if you don't have any edge. If you don't believe me, start coding, you'll see the truth.
  • #11
  • Mar 20, 2019 9:05pm Mar 20, 2019 9:05pm
Quoting shadikalaji
Hello trades. I want to share some ideas which have been discussed for years in FOREX FACTORY, but in vain. I have been trading with a stop loss for almost 4 years and lost money. Two weeks ago i decided to forget about using a stop loss and the result was as attached. I traded only micro lots only for testing. The problem is that three trades went in a loss for 100, 200 and 300 pips. They were EURJPY,EURUSD and USDCHF. i dangerously waited for the price to come back again and it did. I know i was lucky this time, but think about that...You always...
I don't understand what your question is? You put a stop loss in exactly for the reason you suggest- price might not come back. Nano lots are fine, but if you're down 300 pips on a standard lot, that's painful. Yeah, price can revert over days or weeks or longer, but then you're in a situation where you're using all of your margin for waiting out a losing position.
  • #12
  • Mar 21, 2019 7:51pm Mar 21, 2019 7:51pm
Quoting shadikalaji
Hello trades. I want to share some ideas which have been discussed for years in FOREX FACTORY, but in vain. I have been trading with a stop loss for almost 4 years and lost money. Two weeks ago i decided to forget about using a stop loss and the result was as attached. I traded only micro lots only for testing. The problem is that three trades went in a loss for 100, 200 and 300 pips. They were EURJPY,EURUSD and USDCHF. i dangerously waited for the price to come back again and it did. I know i was lucky this time, but think about that...You always...
We already discuss this shadi. Major banks provides liquidity through forex brokers, they let us play in this market by moving prices. Check Monthly chart, priceaction does follow monthly chart and start/end trend. I think You need to study Swing trades, technical trading: draw some lines and trade on chart;

Monthly chart no stop loss (1 standard lot gives you approx $15k to 30k)
Daily chart no stop loss 0.10 (earn you approx $1.5k to $3k)

If price goes against your open position and develop an opposite trend so you HEDGE & trade/collect profit in trend and forget about losing trade until price comes back to it.

Hope this helps.
  • #13
  • Aug 31, 2021 10:11am Aug 31, 2021 10:11am
Dollar-cost averaging is used by business executives who need to cut expenses and by individuals who are trying to save money or manage their budgets.
  • #14
  • Sep 24, 2021 3:44pm Sep 24, 2021 3:44pm
stop loss is necessary, even if you win 40% of your trades with a win:loss ratio of 2:1 you will still be in profit ultimately
  • #15
  • Edited 9:53pm Sep 24, 2021 8:21pm | Edited 9:53pm
Quoting shadikalaji
… My account is a free swap account …
If you don’t want to use stop-loss, trade “without” margin. Buy one position at a time when the market drops substantially … (buy-and-hold approach)
If your account = $1000, buy a 0.01-lot position.
For a $10000 account, trade 0.1-lot.
If you have a $100,000 account, play 1-lot at a time …

So the answer to the thread’s title is “do nothing” …
Market is not random but unpredictable
  • #16
  • Sep 24, 2021 9:32pm Sep 24, 2021 9:32pm
Aussie and Boulder both trade without stop loss, you can search their posts and discover the finer details if they are mentioned there.

I do not trade without stop loss, but if i did, I would wait for the big moves to happen (these happen 11% of the time) and then i would scalp the range once price starts to congest
life is a reflection of what we allow ourselves to see
  • #17
  • Sep 25, 2021 2:32am Sep 25, 2021 2:32am
Quoting Maropeng
stop loss is necessary, even if you win 40% of your trades with a win:loss ratio of 2:1 you will still be in profit ultimately
Exactly! It's about risk to reward ratio. I don't think not having a SL sounds fundamentally sound, but if it works for you then great! It sounds like OP never backtested their system and didn't demo trade. You should backtest to find out if your strategy, including SL, works. You can make thousands of backtest trades in a fraction of the time it takes to make even half that amount of trades in demo or live.
  • #18
  • Sep 25, 2021 4:38am Sep 25, 2021 4:38am
To trade without SL you must be 100% out of emotions and 24/7 in front of the charts. Sorry but that`s not for me and may be for the most of the traders. When you advising to not use SL will be good to explain the whole story to not get the newbies into misunderstood.
  • #19
  • Last Post: Edited Sep 26, 2021 5:04am Sep 25, 2021 5:36pm | Edited Sep 26, 2021 5:04am
Quoting shadikalaji
Hello trades. I want to share some ideas which have been discussed for years in FOREX FACTORY, but in vain. I have been trading with a stop loss for almost 4 years and lost money. Two weeks ago i decided to forget about using a stop loss and the result was as attached. I traded only micro lots only for testing. The problem is that three trades went in a loss for 100, 200 and 300 pips. They were EURJPY,EURUSD and USDCHF. i dangerously waited for the price to come back again and it did. I know i was lucky this time, but think about that...You always...


Price action most of the time exhibits regression to the mean characteristics, i.e. if you wait long enough you'll see your opening price again. So you'll almost always have the opportunity to close a trade in profit. But the problem is how much underwater you can tolerate to be before price comes back. At some point the open loss on a trade that trends against you will grow and grow and grow until you blow your account. It inevitably will happen if you trade long enough so you are doomed to failure if you trade without a stop.

Sure, until that fateful day you are consistently making money as you are always closing trades at a profit. So it looks great until it completely unravels one day and your account is gone. Whether you average down or not - aka martingdale - doesn't really change this picture, you'll still experience profitable trading almost all the time until the day you get blown away.

You simply have to have a stop if you want to avoid being taken out by the big bad trade that is inevitably in your future. The closer the stop the more you erode your win % but the less you lose each time. Where the "right" place for the stop for you is depends largely on a mix of: the characteristics of the market(s) you trade; your position sizing relative to the size of your account; and your personal tolerance to risk.

You can trade profitably with a tight stop, a moderate one, or a really, really wide one. What you get is a rather different pattern of returns in each case in terms of win %, average win vs average loss size, and amount and duration of drawdown suffered. Which you pick is largely a matter of your personal psyche but in all cases a stop you must have or you are inevitably going to wind up broke. Trading is ultimately about risk control and no stop is no risk control at all. It won't end well.
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