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Trading without stop-losses

  • #41
  • Jun 7, 2010 12:27pm Jun 7, 2010 12:27pm
Quoting actarus
What is the advantage of not using a SL?

I do not get it. I am a newbie, and -so far- I do not see any plus not to use it.

Also I have noticed some previous posts express trading performance in terms of:

1) % of winning trades
2) number of pips.

Again, it may be only because I am a newbie, but -as far as I can understand- the goal is:

a) preserving your money
b) hopefully getting more money.

Problems I notice with performance measured as per 1): nothing is said about risk/reward ratio.

Despite the fact that I am a newbie,...
There are alternatives to trading one position in and one position out. Once you can think multi dimensional, or more than one trade to a position, trading becomes different. It is a whole different thought and reasoning process. If you can think, ok this trade is x pips in the hole, what do I do?
1. take a loss SL
2. How can I bring this trade back to a zero loss. Where do I reenter to zero out this trade?

I am saying this, there are other methods to trading than one position in and one position out. I think in a series of trades over a period of time. I once did a series of trades with the aud/jpy which consisted of about 15 trades over a 3 week period. The total outcome of those trades ended up in profit. If I had done them in the typical thinking of one trade in, one trade out it would have been a series of losses. Anyways, when you get tired of winning for a while, then losing it all back or losing and trying to get it back, there are alternatives. You can learn to countertrade a losing trade back to zero rather than taking a SL. It is a trading skill not recklessness but it does take a whole different thought process and approach to trading.
  • #42
  • Jun 7, 2010 12:53pm Jun 7, 2010 12:53pm
Quote
You can learn to countertrade a losing trade back to zero rather than taking a SL. It is a trading skill not recklessness but it does take a whole different thought process and approach to trading.
Sorry I do not get it.

As far as I can understand, I do not think it is always possible to 'countertrade' a losing trade, if the market keeps on going against you; unless you have an unlimited wealth (not my case, unfortunately).

Of course you may have a great exposure on the market, averaging your position, but -again- this necessarily increases the risk involved and -therefore- even if effective for the majority of the times, may be catastrophic enough for that one time when it does not work.

I do not see other ways of 'countertrading', since -in point of fact- you can not do anything to influence the market.

If there are other ways, I can not see them; but still I do not understand why taking a loss has to be seen in a so bad way, as long as the loss is small.

I would rather take many small losses in a very probably scenario; rather than (in a very unlikely one) taking one catastrophic loss.

My way of figuring my trading is with no-time horizon. I like it, I enjoy doing it even simulating it with no money and trying to finesse my observations out (or challenging them) and, if I want to do that with real money, I have -first- to cut my losses. Because I am on the real game as long as my money are on the table. Moreover since my goal is portfolio optimization, I am not wiling to accept a hug drawdown with one (or few) trade(s).

This is nothing to do with what you read in forums (still many opinions are very valuable to me and precious), it is pure chance. No system is 100% accurate and if n is the number of trades you are in, no matter how accurate your system may be, there is always an n big enough so that you will loose. That is my way of understanding it; that is why I do always use SL (even in simulations).
  • #43
  • Jun 7, 2010 7:04pm Jun 7, 2010 7:04pm
Quote: "As far as I can understand, I do not think it is always possible to 'countertrade' a losing trade, if the market keeps on going against you; unless you have an unlimited wealth (not my case, unfortunately)."

There is one truth that is 100% true: the market always 100% of the time retraces. It is the only truth I found true about Forex and you do not need unlimited wealth to trade it. I usually trade 500-1000 dollars so my wealth is not unlimited. So it is possible to counter trade every trade. (there are some rare exceptions where you do bail out or better yet hedge and wait for the market to return to normal, but they are very rare) However, like anything else in life, it is a skill that must be practiced and mastered.
  • #44
  • Jun 7, 2010 8:12pm Jun 7, 2010 8:12pm
Quoting nanningbob
Quote: "As far as I can understand, I do not think it is always possible to 'countertrade' a losing trade, if the market keeps on going against you; unless you have an unlimited wealth (not my case, unfortunately)."

There is one truth that is 100% true: the market always 100% of the time retraces. It is the only truth I found true about Forex and you do not need unlimited wealth to trade it. I usually trade 500-1000 dollars so my wealth is not unlimited. So it is possible to counter trade every trade. (there are some rare exceptions where you...
is it safe to say you subscribe to the TAF approach... always having a bigger stick and skewing the averaging-down process? from all you have said i would bet money this is the case.
Congratulations ScalaFX for coming out of the closet!
  • #45
  • Jun 8, 2010 8:29am Jun 8, 2010 8:29am
Quoting nubcake
is it safe to say you subscribe to the TAF approach... always having a bigger stick and skewing the averaging-down process? from all you have said i would bet money this is the case.
I tried to go through FF and see what you meant by averaging down and I didnt find any specifics but a lot of negative genralities. I guess conceptually they are similar but I have a specific plan called the 2.4.2 recovery system. It has rules and trade management, none of which I could find in any discussions in averaging down. I have specific places I close out a trade for a loss if neccessary and places I add my counter trades too. I will also be adding how to hedge a trade to come back later when the market is more favorable and how to get out. Hedging is kind of a last resort when a trade has gotten bad and the market is not going to do what you need to get out. I call it freezing time. Then days, or even weeks later you come back and undo the damage of the trade. Hedging is a great tool if you know how to use it. You freeze time until you get back to a market you know how to trade or you make other profits to make up the loss of your hedge or reduce the loss. Anyways, I just want to point out there are other things you can use instead of SL. But once again they are skills and wont be learned quickly or over night but they can be learned. People who follow my threads know I am very big on trading small lots versus your balance. Live to trade another day, trade in a way that doesnt blow your account. My earnings are modest.
  • #46
  • Jun 8, 2010 8:50am Jun 8, 2010 8:50am
me thinks i was right. averaging down is frowned upon yes, but there are many ways to skin the cat and if most are getting it wrong then something a little creative is probably not a bad thing. i figured you for a TAF thread follower as your approach bears resemblance to what i have seen in the thread... where averaging-down is regarded as 'rescuing'.

but then again what do i know. according the the regulars there no one knows anything except them and their deity thread starter.

the problem with hedging is that it eats into margin, depending on the size of the positions. the flipside is that you may get the opportunity to unwind the hedge, but then again maybe not.
Congratulations ScalaFX for coming out of the closet!
  • #47
  • Jun 9, 2010 6:02pm Jun 9, 2010 6:02pm
Don't reccommend it... something to think about what happens when your holding a position over weekend when price gaps up or down against you?

Mentally you will never recover when price goes against you several hundred pips...you will keep adding to positions hoping to average down.
  • #48
  • Jun 10, 2010 3:18am Jun 10, 2010 3:18am
without some clever strategy around weekend stop / start then i don't think any intraday trader would be so dumb as to hold a position that long anyway. at some point you have to wind everything up for the week and get out... but if someone is that far invested into a position then it's likely that any form of gap is probably only a ripple in the scheme of things anyway.

then again, i did once forget what day it was until almost closing so dumb things do happen.
Congratulations ScalaFX for coming out of the closet!
  • #49
  • Jun 10, 2010 3:38am Jun 10, 2010 3:38am
the smart idiot would put their equity with the broker, the logical trader would give the broker margin for their positions.
  • #50
  • Jun 10, 2010 5:32am Jun 10, 2010 5:32am
Here are some traders remarks after they got out of the typical thought patterns of trading and didn't assume my system was really something else (like averaging down or martingaling):

"This is my second time around to this thread and have come to like it and be profitable. the first time I never took time to really learn and understand the system so kept skipping around looking for the GRAIL, now I think I have come very close to finding it. forget the poll, I wouldn't think it to be very accurate till someone has spent time learning the system and becoming profitable...KEEP UP THE GOOD WORK!!!!"

"I have made my feelings regarding the poll very clear. Last year I was one of those daft traders who looked at this thread and thought, too complicated, too risky, too long and too slow (if that makes sense). Since going live with NB 4h System in March I have been up in my trades every month and IMHO this system is one of the best (if not the best) in FF."

There are alternatives to typical trading strategies that can be learned and result in profits without making the false assumption that you will wipe out your account. It does work if you are willing to learn. SL are not neccessary, there are places to take losses, yes, but you determine them based on the market movement not a predetermined number.
  • #51
  • Jun 10, 2010 5:56am Jun 10, 2010 5:56am
Trading without a stoploss is suicide. I had learnt that lesson well. Now I trade with stoploss everytime!
  • #52
  • Jun 10, 2010 10:22am Jun 10, 2010 10:22am
Haymaker,

could not agree more.
  • #53
  • Jun 10, 2010 12:08pm Jun 10, 2010 12:08pm
ya know, iv tried using sl many times just so id be correct, like every1 says

i struggled yrs with that

it just dont work to good for me, you should find what works for you

i ended up having to unlearn alot before i traded good, took yrs

i dont use a sl

and because of what every1 says, i dont share my trading either, youl just get attacked

rule#1 in trading fx, never ever post in a public forum that you do not use a stop loss
one of these days
  • #54
  • Jun 10, 2010 1:55pm Jun 10, 2010 1:55pm
Quote
you should find what works for you

Definitely agree with that.

Quote
youl just get attacked

Well, do not feel attacked; just if I can choose to climb a mountain with an emergency rope or without, I go for the first choice, I would say; no matter how skilled I might be and how unlikely falling down would be.

Glad you found your way of trading. I will keep researching and will try to improve my method more and more. It is just I think it is too much of fun and useful not only in trading; nonetheless, semi-naked charts, 30M, daily charts, whatever, I am sure I will use SL: not being able to put an upper bound to my risk (and still having to take into account possible slippage) is simply not for me. I do not accept the risk to loose everything no matter how unlikely it may be, as well as I would not even enter a theatre with no emergency exit.

Just my two cents.
  • #55
  • Jun 10, 2010 2:09pm Jun 10, 2010 2:09pm
not only do i not use a sl, i go days without looking at my chart
iv went a whole week




Quoting actarus
Definitely agree with that.



Well, do not feel attacked; just if I can choose to climb a mountain with an emergency rope or without, I go for the first choice, I would say; no matter how skilled I might be and how unlikely falling down would be.

Glad you found your way of trading. I will keep researching and will try to improve my method more and more. It is just I think it is too much of fun and useful not only in trading; nonetheless, semi-naked charts, 30M, daily charts, whatever, I am sure I will use SL: not being able to put an upper...
one of these days
  • #56
  • Jun 10, 2010 7:15pm Jun 10, 2010 7:15pm
A few years ago there were some rogue traders in several banks that hit the headline news.

Here in Australia, some rogue traders lost around 7million dollars in (NAB) National Australia Bank. I think it was 2008 (not 100% sure of date and how much lost, but it was headline news).

Yesterday, as I was watching SBS (international news) they showed a bank rogue trader in France who lost Billions of dollars. I think it has been 5 years and they were discussing his court case and sentence. I felt he was a scapegoat because there would have been a superior above him that would allow how much he can trade for the bank, but he was the only one being charged and no higher rank in the bank are not even being charged.

I'm sure some of you may know what I'm talking about, some of you maybe not. They are true headlines around the world and not just some tales.

Hmmmm... I was just wondering if these rogue traders were using stops?... more likely not.

Personally (in my humble opinion), trading without stops is like driving a car without seat-belts. I don't care even if you are a formula one driver with extensive skills, talents and years of experience... when you crash without wearing a seat-belt, you are as good as dead.

Let's throw into the argument that one can trade without stops. That trading without stops are skills that can be mastered and those who proclaims it here do posses such abilities.

In my humble opinion, don't you guys realize that you don't have full control of the market. That the market is like a drunk driver, at full throttle and driving out of control. You see, even if you are the world's best formula one driver, any drunk driver on the road can ram their car to you while you are driving.

You may have full control of your skills and talents (I don't deny that). But the truth is that beyond your talents and skills are greater things which you do not have any control of.
  • #57
  • Jun 10, 2010 8:11pm Jun 10, 2010 8:11pm
dont understand stop loss when margin call is already an automated stoploss for us.
  • #58
  • Jun 10, 2010 8:59pm Jun 10, 2010 8:59pm
CrucialPoint,

I could not agree more. [OT: by the way, thanks for the great journal and insights].

jest1081: when margin call rings, I am afraid is a little bit too late; do not you think? Generally it would be at least a 50% loss in one trade; now if the goal is to maximize your profits (at least that is mine, even in demoing) why on Earth would you accept a -50% in just one move?

In my case it would be even worse, since with Dukascopy they hedge against you, until your have money; basically without SL, you would exit your trade with a nil final balance.

Reassuring? And what for?

Again, I am definitely a newbie and still trying to solve the puzzle (at least marginally), but no SL is not for me: one of the few things I am sure about.
  • #59
  • Jun 10, 2010 9:15pm Jun 10, 2010 9:15pm
I guess I should clarify my position some. Not using a SL does not mean I dont close out losing trades. It is just I give my self so much room in trading I basically dont need them. I always find a retrace to reduce or eliminate my deficit. My SL is not based on a certain number but what I think the market will give me back when it retraces. Most of the time I get a small profit or breakeven. Other times a small loss. On rare occasions I take a hit but I trade small enough not to destroy my account. The only time I have take an across the board loss is if I find myself caught in a super news story (NFA is not a a super news story) For example an interest rate change, I know I am on the wrong side of the trade and I know it is going to run for a while. I dont fight those and take the loss. I have a defined spot I take a loss but it is based on what i understand the fundamentals are on a trade. If I am trading today and I see a buy situation on a euro I will take the trade but in todays climate I will not stay with the trade long on a euro buy. The market is just too negative on that one. Not using SL loses doesnt mean we never close out a losing trade. We just handle each one individually based on our knowledge of the fundamentals or market conditions. I am not afraid to close a losing trade, when you get to that point in trading you can do that and why you need to do it, then you are ready. If you cant close a losing trade and know the difference of why you need to close or continue with it then you need to use SL. It is a trading skill. I may close a trade after -30 because I just know it is a bad trade and I dont want to deal with it. Some trades I have gone -600 and still ended with a profit. It is not guess work or chance, it is a trading skill.
  • #60
  • Edited 10:28pm Jun 10, 2010 9:17pm | Edited 10:28pm
Quoting actarus
CrucialPoint,

I could not agree more. [OT: by the way, thanks for the great journal and insights].

jest1081: when margin call rings, I am afraid is a little bit too late; do not you think? Generally it would be at least a 50% loss in one trade; now if the goal is to maximize your profits (at least that is mine, even in demoing) why on Earth would you accept a -50% in just one move?

In my case it would be even worse, since with Dukascopy they hedge against you, until your have money; basically without SL, you would exit your trade with...
why place equity with the broker when all the broker require is margin and margin for maintainence.
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