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Trading without stop loss

  • #1
  • First Post: Jan 15, 2010 10:07am Jan 15, 2010 10:07am
Hello to you all out their,

I am a newbie of 12 months study of the markets and the most stressfull part of trading is the S/L we are educated to allways include S/L in our trading,money management stratergy.and position sizing.

However can you use limit orders to carry out the same function as S/L as in matched or hedge position trading.

Perhaps all you with greater Knowledge could assist with this stratergy.

Many thanks

BH UK
  • #2
  • Jan 15, 2010 3:25pm Jan 15, 2010 3:25pm
I have tested stop losses on all the trading system I've made http://www.myforexdot.org.uk/FreeTec...ngSystems.html I can tell you that in my experience a stop loss (unless it's really large, like 10 * ATR) degrades the performance of any trading system. That's just a statistical fact. In my opinion you can trade without stop losses if you're not using any leverage.
  • #3
  • Jan 20, 2010 3:29pm Jan 20, 2010 3:29pm
a stop loss (unless it's really large, like 10 * ATR) degrades the performance of any trading system. That's just a statistical fact.

Where did you find this fact? This is the first time I've ever heard anyone say that.
  • #4
  • Jan 21, 2010 3:29pm Jan 21, 2010 3:29pm
Quoting fibonator
a stop loss (unless it's really large, like 10 * ATR) degrades the performance of any trading system. That's just a statistical fact.

Where did you find this fact? This is the first time I've ever heard anyone say that.

OK I'm going to tone it down. I can't prove it's an absolute 'fact' but what I can tell you is I have tested hundreds of systems and on every single occasion a tight stop loss degrades the performance of the system, I have always found that to be the case. I cannot prove it is a fact since it's impossible for me to test every system possible trading system that could exist, but it really does appear to be the case based on the ones I have tested.

If you're trying to set your maximum loss to say, 2% of your account, and you find that doing so leaves you with a very tight stop loss then in almost every case I would say the best course of action would be to reduce your leverage and increase the stop loss. Less leverage, wider stop losses. Not what most traders want to hear, not the type of trading the bucket houses promote, but it does seem to work the best. That is my advice, take it or leave it.
  • #5
  • Jan 21, 2010 3:51pm Jan 21, 2010 3:51pm
Quoting Davidee
Less leverage, wider stop losses.
Bingo. That's what works for me.
Many share my views with me. But I don't share them with them...
  • #6
  • Jan 21, 2010 4:00pm Jan 21, 2010 4:00pm
Here's the formula for determining lot size:

Expected cash loss from trade / market move which would cause this loss

Your expected cash loss from trade is determined by the percent of your account which you are willing to lose on a trade. If you are willing to risk 2% of a $100,000 account, this is $2,000. Then you divide by the distance to your stop loss, let's say 40 pips.

$2,000
divided by
.0040

equals $500,000. This means you should purchase $500,000 worth of currency.

.....

In other words, you first determine the distance to your stop loss (based on technical analysis) and then divide that distance by the amount of cash you're willing to risk on the trade.

Think it through and it will make some sense.

.....

This means that you can trade larger sizes with lower risk opportunities. Also, if you are trading a high risk opportunity, you will not trade very many contracts or lots.
  • #7
  • Jan 21, 2010 4:30pm Jan 21, 2010 4:30pm
Quoting Davidee
I can tell you that in my experience a stop loss (unless it's really large, like 10 * ATR) degrades the performance of any trading system. That's just a statistical fact.
I have to disagree with this. Its true to say that a stop loss will generally reduce a systems win rate, but the expectancy of every single system that I trade has been improved by the addition of a stop, and I have the statistics to prove it.

You'd also expect that to be the case due to the kurtosis is the distribution of returns.
  • #8
  • Jan 21, 2010 4:45pm Jan 21, 2010 4:45pm
Quoting Davidee
I have tested stop losses on all the trading system I've made http://www.myforexdot.org.uk/FreeTec...ngSystems.html I can tell you that in my experience a stop loss (unless it's really large, like 10 * ATR) degrades the performance of any trading system. That's just a statistical fact. In my opinion you can trade without stop losses if you're not using any leverage.
In my experience and in the systems I've tested, stop loss are life savers and really improved the performance during the backtests (on 1mn, 5 mn timeframes).
I'm more of a trend-trader and that might explain our different results.
But scalping is also greatly improved with tight stop loss & tight take profit.
  • #9
  • Jan 21, 2010 4:49pm Jan 21, 2010 4:49pm
Quoting Davidee
OK I'm going to tone it down. I can't prove it's an absolute 'fact' but what I can tell you is I have tested hundreds of systems and on every single occasion a tight stop loss degrades the performance of the system, I have always found that to be the case. I cannot prove it is a fact since it's impossible for me to test every system possible trading system that could exist, but it really does appear to be the case based on the ones I have tested.
Well I've also tested hundreds of systems and thousands of variations of systems (different moving average length, bollinger bands, atr, cci, divergence, etc) and stop losses are always better than the exit parameters I used or that came with the system.
That being said, stop losses won't make or break a trader or a trading system. There are other parameters that are far more important !

Thanks for your input Davidee, it's always nice to talk to another system tester.
  • #10
  • Jan 15, 2015 4:44am Jan 15, 2015 4:44am
Where are those fake 'real' traders who trade without stoplosses.I dare you to trade without stoploss again.With EuroChf falling 3000+ pips r.i.p to your forex accounts.i wish swissy rally got you naked with no SL . lol .it would be a lesson well learnt
  • #11
  • Jan 15, 2015 9:34am Jan 15, 2015 9:34am
I admit trading without stoploss can get up to 20% permonth..i used to trade without sl about 2 years and on late november last year my account blown..huhu since i already got my investment money back, i have not regret at all..but after that disaster happened to me, now im always use sl..abit harder to get profit but 5% permonth is quite impressive..now the problem is consistency..advice from me, pls use sl/manual sl..last time just lucky time for me
FXerha
  • #12
  • Jan 15, 2015 9:34am Jan 15, 2015 9:34am
Ok, however i.m.o if there is no close order set, there is nothing to force being executed on an outstanding position, meaning after a nose dive, it will contimue following the trend during the corrective levels where it can either be closed manually at beter level or even ride for profit again. This seems a better alternative against order being stopped with HUGE slippage blowing accounts. what do you think, better exposed in underwear pence down then fully naked and burned,..
Trade what you see not what you think,..happy trading
  • #13
  • Jan 15, 2015 10:48am Jan 15, 2015 10:48am
Quoting Pattrader
Ok, however i.m.o if there is no close order set, there is nothing to force being executed on an outstanding position, meaning after a nose dive, it will contimue following the trend during the corrective levels where it can either be closed manually at beter level or even ride for profit again. This seems a better alternative against order being stopped with HUGE slippage blowing accounts. what do you think, better exposed in underwear pence down then fully naked and burned,..
What if you're account balance is not enough to cover the margin anymore. You will get margin call and your positions will still be closed.

Cheers,
FxTurtle
Fear prevent possibilities, and so does Greed
  • #14
  • Jan 15, 2015 11:31am Jan 15, 2015 11:31am
I.m.o margin is needed for execution of orders (open/close) not for already open position ( no matter the level), might even be hedged against during corrective entrancements reducing losses, do need some reserve in a spare account however.
Trade what you see not what you think,..happy trading
  • #15
  • Jan 15, 2015 12:11pm Jan 15, 2015 12:11pm
Quoting Pattrader
I.m.o margin is needed for execution of orders (open/close) not for already open position ( no matter the level), might even be hedged against during corrective entrancements reducing losses, do need some reserve in a spare account however.
You are saying you do not need margin for current open positions? You must be new. Go study, chop chop.
Fear prevent possibilities, and so does Greed
  • #16
  • Jan 15, 2015 3:47pm Jan 15, 2015 3:47pm
Very true, very new, seems fx positions are handled just a little different compared to stocks i.e. Today proofed vital lessons where leveraged accounts and brokers wiped out. Reduced leverage reduces risk, in these circumstances there seem to be no concrete solutions available if trades turn against you during a steep uncontrolled nose dive. SL are overshot by far, if broker offers guaranteed SL might be a last resort, however always available nor a feature while trading MT4. All in all fxLife is not just another walk in the park. Surviving such washouts when not short in the markets. any other options without hedging.
Trade what you see not what you think,..happy trading
  • #17
  • Jan 16, 2015 12:58am Jan 16, 2015 12:58am
Quoting ericnyamu
Where are those fake 'real' traders who trade without stoplosses.I dare you to trade without stoploss again.With EuroChf falling 3000+ pips r.i.p to your forex accounts.i wish swissy rally got you naked with no SL . lol .it would be a lesson well learnt
I traded without a hard stop. I made money. The trick is that you have to be able manage your position sizes. This has got to be the worst problem at the factory. Stop trying to get rich by friday and if you have a system that lets winners run and cuts losers fast, over a period of time, you will be profitable.
If you are good at something, never do it for free--Joker
  • #18
  • Jan 16, 2015 1:51pm Jan 16, 2015 1:51pm
This is a no brainer, trading without Stop loss is like playing russian roulette. Take the recent unexpected move by the swiss national bank and the resulting volatility of the swiss franc, it blew nearly everyone out of the water. The point being, if you were one of those traders who wanted to swim in the shark infested waters, without the benefit of a S/L, then you would be stuck with a massive DD and a nil balance in your account..
  • #19
  • Edited 11:05pm Jan 16, 2015 3:45pm | Edited 11:05pm
Quoting Forexnuts
This is a no brainer, trading without Stop loss is like playing russian roulette. Take the recent unexpected move by the swiss national bank and the resulting volatility of the swiss franc, it blew nearly everyone out of the water. The point being, if you were one of those traders who wanted to swim in the shark infested waters, without the benefit of a S/L, then you would be stuck with a massive DD and a nil balance in your account..
This. I was thinking the same examples. Stopless can save you from things like that.
Had to be me. Someone else might have gotten it wrong.
  • #20
  • Jan 18, 2015 8:33am Jan 18, 2015 8:33am
Never trade without it.
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