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The StopLoss...

  • #1
  • First Post: Mar 23, 2009 6:57am Mar 23, 2009 6:57am
Dear All,

I have my stoploss hit two times today, with the price just bouncing right after knocking me out . What I normally do is, as soon as I enter a trade, I put a stoploss as close as possible (as close as the broker allows me to). I would like to know, how do you people choose a stoploss for your trade and also, do you put on trailing stop right from the beginning? or after the trade goes into your favour? also if you set it to any different then the static stoploss?

Thanks for your time,
Regards,
Usman.
If it floats, flies, or f%^ks, rent it, it's cheaper.
  • #2
  • Mar 23, 2009 1:52pm Mar 23, 2009 1:52pm
in todays market, with the hordes of equity and commodity people who have "found" forex, the intraday candle ranges are MUCH bigger than when the books you have read were written, and so your sl MUST be larger also.

your sl will depend completely on the timeframe youre working with but the most successful new traders seem to be working with a minimum of 100 - 150 pips these days on the middle timeframes, more on the longer.

you simply dont have the experience yet to understand WHERE to take a trade that will not retrace on you --- this comes with time, and moving down to the lowest timeframe to get the lowest price. It is also a function of trend, and what time you got into the trade because, while an H4 trade may definitely be UP, you will most likely enter into a period where the LOWER timeframes are retracing and short ---- while your long is correct, you simply got into it way too soon, and have to suffer the drawdown on your way to its take profit area.

DO NOT place as close a sl as possible on entry --- thats inviting yourself to be removed from the play --- if the trade is short, find the highest RESTANCE POINT and set a sl there, to protect your upside, and reverse for upside moves.

i do not trade with a sl, so my information, while technically correct, is NOT based on any experience, and btw, I DONT ADVISE YOU TRY NO SL --- at least for a number of years until you can be sure of your entries and exits and dont need a net while flying high !

others will come along and help --- try their ideas on a DEMO first, and see if it works for you !

enjoy and trade well

mp




Quoting n000b
Dear All,

I have my stoploss hit two times today, with the price just bouncing right after knocking me out . What I normally do is, as soon as I enter a trade, I put a stoploss as close as possible (as close as the broker allows me to). I would like to know, how do you people choose a stoploss for your trade and also, do you put on trailing stop right from the beginning? or after the trade goes into your favour? also if you set it to any different then the static stoploss?

Thanks for your time,
Regards,
Usman.
  • #3
  • Mar 23, 2009 4:55pm Mar 23, 2009 4:55pm
Several well respected technical analysis books suggest that anything inside of 3ATR is market noise so try placing your stop at or beyond this level.

Regardless of how good you think you are always use a stop...now and forever.
  • #4
  • Mar 23, 2009 5:02pm Mar 23, 2009 5:02pm
Quoting philmcgrew
...

Regardless of how good you think you are always use a stop...now and forever.

It's not only about your proess as a Trader, Most {decent} Borkers will Honor a SL Even if {for Whatever Reason} you are Not Online.

{hey phil; good to see you again. perhaps we don't share the same threads as much as we used to.}
  • #5
  • Mar 23, 2009 6:09pm Mar 23, 2009 6:09pm
Would bet a significant amount of money on the fact I could change your opinion --- NOT for newbs of course, but definitely for those who know how to trade.

wander over to a decent institution of financial earnings and ask if they have a stop loss on their long range forex trades ----

i dont think youll like the answer !

enjoy and trade well

mp


Quoting philmcgrew

Regardless of how good you think you are always use a stop...now and forever.
  • #6
  • Mar 23, 2009 6:46pm Mar 23, 2009 6:46pm
Quoting mparker
Would bet a significant amount of money on the fact I could change your opinion --- NOT for newbs of course, but definitely for those who know how to trade.

wander over to a decent institution of financial earnings and ask if they have a stop loss on their long range forex trades ----

i dont think youll like the answer !

enjoy and trade well

mp
Reminds me of an old Wall Street joke I read in an ebook the other day:

What's the difference between a trade and an investment?

Whether you are in or out of the money.


Perhaps not the most rib-tickling of puns but it made me chuckle. Those guys aren't traders, and in general neither do they outperform the market, which if you think about it is pretty pathetic. All the real traders I know of, ever spoken to, and ever read about always, always, always use a stop loss.

There is absolutely no good reason to my mind not to use one, aside from perhaps paranoia about stop hunting, and I don't find that to be a particularly good reason either. I do have an open mind though, although I find it hard to imagine what benefits could possibly outweigh the precarious situation you put your account in when you do not use one. If you know the point in advance where you do not want to be in the trade (which I firmly believe you should before entering), even if it is an emergency stop and you cut your losses well before the vast majority of the time, then why not use one?
  • #7
  • Edited 10:19pm Mar 23, 2009 7:23pm | Edited 10:19pm
Quoting birdt


Perhaps not the most rib-tickling of puns but it made me chuckle. Those guys aren't traders, and in general neither do they outperform the market, which if you think about it is pretty pathetic. All the real traders I know of, ever spoken to, and ever read about always, always, always use a stop loss.

I think you might have a large problem hitting the institutional trading rooms and announcing that these people are NOT traders --- heck, their bonus alone would knock all the "real" traders you know into a tizzy, myself included !

Now, I love discussion, but I also insist that only facts be used --- the institutions arrange their payouts to their investors to be as small as possible, sticking to the 10% per year model as well as they can, yet they produce billions of dollars in revenue for themselves, NOT their retail investors ! Aside from being so stupid as to NOT get out of the real estate market at the right time, which makes them as stupid as you claim, these institutions produce so much money that its completely unfathomable when looked at as a whole !

There is absolutely no good reason to my mind not to use one, aside from perhaps paranoia about stop hunting, and I don't find that to be a particularly good reason either. I do have an open mind though, although I find it hard to imagine what benefits could possibly outweigh the precarious situation you put your account in when you do not use one.

First, allow me to state that this is WHAT I DO, what institutions do and what a number of owners and partners in institutions do (I am one of the later ilk) AND I DO NOT ADVISE ANYONE ELSE TO FOLLOW MY LEAD !

THAT settled, allow that i have extremely large trades floating around all night long (based on EDT) and yes, the amounts are extremely attractive to stop running --- add to an H4 trade that the retrace before a profit can be VERY large depending on the day and time, and placing a 250 pip stop loss is pretty much placing NO STOP LOSS, so why should i bother ?

Add to the fact that I have proven repeatedly to know where the market is going, to the pip and over a long period of time, and there is NO need for a stop loss.

Ok, let us assume that while i sleep, serious news hits the bombay markets, and my LONGS (which i knew the exact tp to) are useless as the price has just dropped 400 pips. Financial ruin, mass panic, suicide perhaps ---- NAH, in a few days the price will come right back to where it was and then continue up to my tp point because i was trading with the trend !

I state and re-state, this is not for newbs with or without small accounts, and it certainly is not everyones cup of tea, but for me, for institutions and for many a retail trader out there its the dirty little secret you never hear about, cause brokers LOVE stop losses ---- its like choco candy to them, as they lick their lips and then grab the proverbial "candy from a baby !"

If you know the point in advance where you do not want to be in the trade (which I firmly believe you should before entering), even if it is an emergency stop and you cut your losses well before the vast majority of the time, then why not use one?

I dont understand this question --- it i dont like a trade i dont take the trade, but invariably a trade is moving in SOME direction that i can profit from, and so i do take as many trades per day as i feel like, often stopping for caviar, a decent backrub from the McGiver sisters and some Krunne 98 to wash everything down with.

I would venture that the "point where i do not want to be in a trade" is, for me, anything below the tp point once it has been hit, and hopefully when the whole world reverses at that point, i will have exited the trade and collected my money and am now on park place !

Its certainly not for everyone, and i never advise others to try it, but at a certain point in your trading life it becomes no longer needed for safety, as the safety is built into the experience --- DONT follow my lead and dont even think about it. Its just how i do things and have for years and years and years.

enjoy and trade well

mp
  • #8
  • Mar 24, 2009 7:34pm Mar 24, 2009 7:34pm
Stop loss depends on your strategy. Most of us hate to lose. Don't think of a stop as a loss, instead think of it as a pause. Exit the trade at your stop price to put the trade on "pause". Let price run. When it turns around and comes back your way, you can reenter around where you hit "pause".

Think what happened last week with the FOMC. If you didn't hit pause, you could have been wiped out. By using "pause", you could have reentered the USDJPY. The other majors are still far from the "pause" points.

Part of the problem is the immediate draw down you see right after you enter the trade. It's really damaging to one's confidence. If you learn to read the charts, then you can prevent that from happening more times than not.
  • #9
  • Mar 24, 2009 8:15pm Mar 24, 2009 8:15pm
considered a good strategy, assuming you already had a decent stop loss in place, is to place a "buy stop" at the point you exited, thus AUTOMATICALLY getting back into the trade at the same price you exited and in the correct direction this time !

its part of any decent traders repitoire !

mp
  • #10
  • Mar 24, 2009 9:48pm Mar 24, 2009 9:48pm
Just put the sl 1pip above-below the nearest sup-res, and IF is hitted and IF pressure is good (situations where you enter long on a double-top or short on a double-bottom), reverse position as soon as sl is hitted and get back your loss, sometime maybe most of the time (of course depend on where you enter and where u put your sl) an hitted sl is a very good thing, just put them in places that have some sense.
  • #11
  • Mar 25, 2009 8:19am Mar 25, 2009 8:19am
Thank you all for your comments. I actually will be starting with a very low initial deposit, so I guess there is no other option but to have a stoploss in place, and I think equally important is to work more on my entering a trade timing.
If it floats, flies, or f%^ks, rent it, it's cheaper.
  • #12
  • Edited 10:55am Mar 25, 2009 10:38am | Edited 10:55am
Quoting n000b
Thank you all for your comments. I actually will be starting with a very low initial deposit, so I guess there is no other option but to have a stoploss in place, and I think equally important is to work more on my entering a trade timing.
Do you have a micro account? It's important that you determine where your stop should be, then determine your lot size. Most new folks incorrectly base their stop size based on what they feel they can risk. This results in stops that are too tight and get hit way too often.
1) Use your analysis to determine where your stop should be; Phil's suggestion of 3 X ATR is a good distance to look at, along with the last swing hi/lo.
2) Use your MM method to determine how much of your account you are willing to risk. For a noob, I'd suggest 0.5% per trade. The market is going nowhere,; It'll be here next week. It's not imperative that you make your entire fortune today.
3) Now determine the lot size that your risk will allow.

Remember, stop placement is determined first. Otherwise, your stop will be to close and get hit over and over and over. Lower risk is achieved by smaller lot size and good entries, not tighter stops.
  • #13
  • Sep 10, 2020 5:58am Sep 10, 2020 5:58am
Stop loss is mainly important for new traders. They can control their losses with the stop loss at the beginning with their low knowledge.
  • #14
  • Sep 10, 2020 6:51am Sep 10, 2020 6:51am
Stop loss will help you to control the amount of the risk. It is very helpful for new traders.
  • #15
  • Oct 23, 2020 4:33am Oct 23, 2020 4:33am
The stop loss helps a new trader to control his loss. It is very helpful for the new traders.
  • #16
  • Oct 24, 2020 10:51am Oct 24, 2020 10:51am
If money management is right in trading, then stop loss can be done. However, stop loss has to be used to maintain the risk. It should be traded in such a way that hitting stop loss creates new possibilities. However, new traders should use stop loss. This protects against many unexpected losses.
  • #17
  • Oct 25, 2020 4:33am Oct 25, 2020 4:33am
In fact, the size of the stop-loss is a reflection of the amount that the trader is willing to risk in an open transaction. Ideally, the recommended risk level should be 2-5% of the deposit for each transaction.
For example, a trader's deposit is $5000. The trader has set the maximum risk level of 5%. Accordingly, the loss on a trade should not exceed 5000 x 0.05 = 250 dollars.
Next, you should evaluate the dependence between the size of the stop-loss, the price of one pip and the position volume. The trader has calculated that when opening a position at a given point, the Stop Loss will be placed 50 points from the entry point. The price of one point will be 250:50 = $5. Taking into account that at the position size of 1 standard lot price of 1 point is $10, we get the recommended position volume of 0.5 lot.
The above example is optimal and doesn't take into account such a psychological factor as greed. Unfortunately, many traders, in pursuit of profit, trade the whole lot with a deposit of 1000 dollars. Accordingly, we aren't talking about any risk management or calculations here.
  • #18
  • Oct 25, 2020 7:43am Oct 25, 2020 7:43am
Stop loss is important if you are a short term trader. Otherwise if the trade goes against it will wipe out the account. But using the stop loss is not an any task.
  • #19
  • Oct 25, 2020 8:01am Oct 25, 2020 8:01am
Quoting HisaoFujioka
Stop loss is important if you are a short term trader. Otherwise if the trade goes against it will wipe out the account. But using the stop loss is not an any task.
That's why as a short term trader I always use stop loss. I don't keep open my trade for overnight. Using stop loss is an art. We need to have good idea of support and resistance levels and how price behave in that area.
  • #20
  • Oct 25, 2020 8:57am Oct 25, 2020 8:57am
For me initial capital is very important: i think that if trader has a big account and use low leverage or little size, SL it's not so important.
SL is fundamental with high leverege or big size on little accounts
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