did not set stop loss

Hello

I tested a few orders in demo account.

I only set take profit.Did not set any stop loss. The loss went up to about 50% of margin used at some point but 8-10 hours later, the orders closed at TP level.

If stop loss was set , would not closed at TP level.

But of course we risk the total margin used if no SL was set.

A trader friend asked me to set stop loss level greater then take profit level.

Stop loss =150 pips . Take profit =50 pips.

please advice.

many thanks.

Reset the demo account to a higher amount. Trade using no more than 2% of account. Practice trading and get to know your TP and SL until you know how to use them instinctively. Practice, practice and practice until you fully know how to use them and when to use them.

Your error is that you were trading too many lots.

Don't be greedy

Sadly the 3:1 stop loss ratio has never worked for me. You do end up having more wins, but you need at least 3 wins for every loss just to break even. And in the long run that's usually what ends up happening. You win a bunch and then a couple of losses wipe the gains out.

I've found it pays to at least shoot for 1:1. Not to hard if you aim at the daily charts with accurate lines of support and resistance.

Large stop losses are good but the perfect forumla for me at least seems that you should be able to at least break even from one loss after 2 winning trades.

I'll tell you the harsh truth I guess. Unless we're talking about a system where things like tp and sl are defined at least mostly by the system, for more or less discretional trading it's really just a matter of how good you are at reading and understanding the market, and of course - proper money management. I for example noticed that my discretionary calls about the market have improved with experience so I've now started testing a demo account for 3 months to see how good they've really become and wheather I can really avoid large drawdawns. The advantages of trading discretionary with wide SLs or no SLs except manual closes in special cases are of course the huge profit potential, but without the experience and patience this form of trading could easily be lethal to your account. Foir system trading I try to keep my average win larger than loss as even good systems by themselves (r:r of 1:1) don't offer a big advantage I believe.

It's quite unfortunate that many traders do not know this secret and what is that ? with a good and strict account management system , i mean not overtrading your account, not trading too large lot sizes in relation to your account size, wide stop losses or no stop losses at all are a great route to successful trading.i pity trades who use small stop losses, what is the probability that in 7 out of 10 trades , they will not be wiped out ?

while following this, when you are under a loosing situation and the trend appears powerfully against you, hedge such immediately if you are sure the market will reverse later and take some profit in that direction and if you are sure the market will never return to the initial open price, then accept the losses not that one stupid stop loss will be the one throwing you out of the market.

This has been my approach since the beginning of this year and my account has always been growing fatter despite the ups and downs of every day's moves.

I used to set wide stops - thinking it was needed in order for me to catch a trend. It's darn tough to adhere to a proper MM strategy and use a 75PIP Stop.
This post turned my thoughts around. It is in the context of hedging - but think about it in a SL manner.
http://www.forexfactory.com/showpost...62&postcount=5

Think about what this may means to a breakout strategy. Instead of a 75PIP SL - use a 15PIP - i can bet on the the same break 4 times; use a 20 PIP SL- i can try the break 3 times; before I have lost what one 75SL would have cost me.

And when it breaks. Why in the world do I want to limit how far it goes. Putting in a 30 - 50 pip take profit.

The original poster to this thread. Your setup to take an unlimited loss - and a limited profit . Think about what you are doing.

Don't get hung up on win %. Take small losses and let winners ride. Who gives a crap if you only win 3 out 10. if those 3 are big wins your laughing all the way to the bank.

Folks, how many times do you have to hear it?

This Business will Always incurr Losses!

Your Job is to manage them wisely.

This Business will Always incurr Wins!

Your Job is to manage them wisely.

If anyone says they have a method that Wins 100% of the time
AND
Always Leaves me enough Margin to Take other Trades... I dunno bunny...

If you Learn to Manage errors (losing Trades), you Learn to Trade.

Excellent post Mrgreen, very insightful, and many thanks for the link!

Draw down potential is proportional to the size of your stop loss (where no stop loss equals infinite draw down potential), altho win/loss ratio is inversely proportional. This leads people to aim for high win/loss not realizing that it will increase their draw down... until they start getting hit by it.

I've never been profitable running with a big stop loss. When I stopped trying conventional stop placements and starting using tight and well-timed 15 or 20 pip SLs, I started being profitable regardless of how often I was right or wrong about the market.

Today I'm right about the direction of the market about 50% of the time, but only right on the timing about another 50%, which means I'm between 25% and 33% correct in both timing and direction. Yet w/ an average loss of 17 pips and an average gain of nearly 80... it doesn't matter. Personally, my goal of a trade is not to make fantastic pips... but to get my risk down to near 0 pips. If I can do that I consider the trade successful... win or lose. I love when I can set my SL to breakeven and walk away from the trade for a while.

Van Tharp, in his book "Trade your Way to Financial Freedom" has some good risk/reward exercises that people should go thru. Would you rather take a $1000 loss today, or a 50% chance of a $2500 loss tomorrow? The $1000 sure loss is the way to go, because over enough time that variable loss will amount to a bigger risk.

It's all designed to prove a point, that human nature prefers variable and uncertain risk and fixed and certain profits... but that a profitable trader usually prefers certain and fixed risk and uncertain profits. In short, you need to be impatient with your losses and cut them without delay... but you need to let your winners keep going way further than you're probably comfortable with.

You can't shortcut this by trying to compromise with the market. "Oh it's just 10 pips" or "Oh it's just 5 pips" doesn't make your risk any smaller, your risk will always be the maximum risk you allow... and the market will always hit that point whenever it feels like it. Whether you aim for 1000 pips or whether you aim for 10, the risk is always what you define it to be before the trade starts.

This is why I don't think you can really define risk to reward ratio before a trade starts. Sure you can define your risk, but if you're really letting your winners run... how can you define reward until the trade is closed? You can't, and I think this confuses a lot of people. "Oh I only take high R:R trades!" is nonsense... you can't know that before the trade starts.

To get a better idea of where you need to put your stops and targets you should test with historical data. This won't give you the holy grail but it will give you a better feeling for what works and what doesn't. This also has the added benefit of being able to do hundreds of trades right NOW instead of waiting for them to set up on the demo account charts.