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Trading without stop-losses

  • #61
  • Jun 10, 2010 9:34pm Jun 10, 2010 9:34pm
Quoting actarus
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?
I'd risk 50% providing the probabilities and reward are appropriate. After all, I risk 50% of my capital on dozens of trades, so I must have a price to risk it on a single trade. I haven't seen such a situation yet though .
  • #62
  • Edited 9:51pm Jun 10, 2010 9:36pm | Edited 9:51pm
Quote
Some trades I have gone -600 and still ended with a profit. It is not guess work or chance, it is a trading skill.
Sorry but I can not agree. It is really likely you are much more skilled than I am (and I mean it), also because I do not think I am skilled at all; still, I do not think it is a skill to have 600 pips down, even if you are aiming for thousands up.

The idea is very simple: I think you will all agree with me that market is not predictable. You can follow the market, you can try your best to understand where the pressure is going and to have an insight in reversal, before the majority; I am sure you can be very skilled in that.

To say that you can predict something which is so unsteady in nature, for obvious reasons, is out of question. Weather is governed by simple rules and still we have no insight on large time scales. You can have a general idea, based on averages and other factors, but if I asked the best scientist what the weather will be like in one month from now, he will have to blindly guess.

Now: how can you be so sure the 600 pips will go back? If ready to accept even a greater loss, what were you aiming for? 10k pips? I am afraid I can not follow your reasoning.

I easily trust you when you say that without SL your chances to win are much greater than those to loose; but few loosing times (still possible) suffice to blow your account. It would be like playing in a roulette with 35 reds and one black; BUT if the black is sorted you will have to pay more than 36 times what you get when a red is sorted. Of course you are a 'winner' in the sense of chance of winning, in the long run, I am afraid, this approach leads to a disaster.

Also, difficult for me to understand why you would let run 600 pips down. Would not it better to be on the other side of the market? Let us put it straight: if you are down 50 pips (let's say) on a particular time scale, why would not you accept you are wrong and take the other side? Still 550 pips to go, right?

If the answer is you can not know it, then I doubt you can be sure 600 pips will be back in black from a deep red. How can you be sure about that?

Anybody has his/her own style, but 600 pips down to me mean only one thing: you were wrong on that trading and you do not want to accept it; let us hope the market will come back to save me. Probably the majority of times it will, especially with currencies, but nothing (to me) has zero percent chance. If you can find a zero chance, you can build an arbitrage on it. I do not think you can; you can just balance different chances (hopefully in an efficient way to make a profit).

My two cents.

Jest, I understand your reasoning. I could not open a position without a SL, but that is me. Still, even pushing it further, I would put a catastrophic stop, just in case (where catastrophic is nonetheless well before a margin call).

Mr J, I understand that it is possible to blow an account even with risk management, slowly and that is what I am worried about, to be frank, for myself; that is why I will demo many trades and I will use very low leverages, trying to learn before being kicked out of the game. Again, to be frank, I am far to be sure about that.

If you risk 50% on a move, though, I do not think there is a reward appropriate for that; because -again- nothing is certain.
  • #63
  • Jun 10, 2010 9:40pm Jun 10, 2010 9:40pm
thats exactly how i see it
why put more in the account than your using

Quoting jest1081
dont understand stop loss when margin call is already an automated stoploss for us.
one of these days
  • #64
  • Jun 10, 2010 9:53pm Jun 10, 2010 9:53pm
the way to go is let trades get 600 in profit, not -600

every1 is so worried about some big draw down, they dont figure out how to reverse that

have a big draw up
one of these days
  • #65
  • Jun 10, 2010 9:54pm Jun 10, 2010 9:54pm
Quote
why put more in the account than your using
trend_chaser, if you put it that way, it makes sense to me to wait for the margin call (in the very worst case) or to close a position well in advance.

I am not that disciplined, probably. I could not do that; but I think I see what you are saying.
  • #66
  • Jun 10, 2010 10:07pm Jun 10, 2010 10:07pm
Quoting actarus
I do not think it is a skill to have 600 pips down, even if you are aiming for thousands up
Depends on the strategy and timeframe. If euro rises to 2480, many position trades will suffer a drawdown of 600 pips, yet many will continue to hold.

Quote
To say that you can predict something which is so unsteady in nature, for obvious reasons, is out of question. Weather is governed by simple rules and still we have no insight on large time scale.

Consider another perspective: summer is hot, winter is cold.

Quote
but few loosing times (still possible) suffice to blow your account.

Not having a stop doesn't mean he won't cut his losses at some point, it just means that the stop is dynamic and discretionary. He could keep it inside his head, or place the order and adjust it as he sees fit.

Quote
Mr J, I understand that it is possible to blow an account even with risk management, slowly and that is what I am worried about, to be frank; that is why I will demo many trades and I will use very low leverages, trying to learn before being kicked out of the game.

There's nothing wrong with that, as clearly risk management is key to longterm survival.

Quote
If you risk 50% on a move, though, I do not think there is a reward appropriate for that; because -again- nothing is certain.

Certainty isn't needed. If someone offered me 10:1 on a coinflip, I'd sure as hell risk 50% of my capital.
  • #67
  • Jun 10, 2010 10:08pm Jun 10, 2010 10:08pm
its hard to explain, since we all see things diferent

patience, discipline, perspective, is the best i can do

now when a trades going against you, your waiting to get into profit, and get urself out of a uncomfy situation
that means ur probably taking a small profit, especially compared to the draw down, i used to trade like this, it doesnt work

its better to take a loss, and re enter when its clear, than to wait it out
no since holding onto some dumb trades

you also need to learn to hold on for bigger profits, makes it worth ur while

basically, you need to do the opposite what u been doing, if ur not profitable i mean, i dont mean reverse ur signals, but your perspective

it dont have to be hard

far as the sl goes, i look at the swings to exit, since the swings arent there yet, and i realy suck at predicting, i wait n see what happens, i like to take losses at support and resistance, it usually is close to my entry, sometimes


Quoting actarus
trend_chaser, if you put it that way, it makes sense to me to wait for the margin call (in the very worst case) or to close a position well in advance.

I am not that disciplined, probably. I could not do that; but I think I see what you are saying.
one of these days
  • #68
  • Jun 10, 2010 10:27pm Jun 10, 2010 10:27pm
Quoting actarus
Sorry but I can not agree. It is really likely you are much more skilled than I am (and I mean it), also because I do not think I am skilled at all; still, I do not think it is a skill to have 600 pips down, even if you are aiming for thousands up.

The idea is very simple: I think you will all agree with me that market is not predictable. You can follow the market, you can try your best to understand where the pressure is going and to have an insight in reversal, before the majority; I am sure you can be very skilled in that.

To say that...
Because I have found one thing that is always true about Forex, What goes down will go up and what goes up will go down. It is the only truth about Forex I believe is always true. When I recover I dont need the full return of 600 pips only about 20-25% to BE which is a given except under extreme circumstances. When I have extreme circumstances I take my losses one step at a time and recover the rest. When you counter trade the extremes or price exhaustion turn around is never far away. I am a counter trader the starts when a run is almost or is done. I know the retrace is coming, most of the time I get it with the first trade but sometimes it takes a second and on rare occasions a third. If I get to a fourth the first one is closed and I take a loss. I usually do that 1-3 times a month, however by then I have made a lot more profit than the 1-3 losses I have taken. Countertrading takes a totally different mindset than trend trading. Some people can grasp it, some cant but I have found it a lot easier to trade than trying to follow the trend.
  • #69
  • Edited 10:58pm Jun 10, 2010 10:32pm | Edited 10:58pm
nanningbob,

I truly believe it is true; but I also believe the possibility that I go bankrupted before the reversal is not zero.

Trendchaser, thanks for the explanation; indeed I think it is not easy and counter-intuitive, but I am following what you are saying and I do agree on the most part; still training in progress for me (I wish it will be fruitful).

Quote
Certainty isn't needed. If someone offered me 10:1 on a coinflip, I'd sure as hell risk 50% of my capital.
Are you sure? If I were the market, I would bet against you on these chances, because from your answer I infer (tell me if I am wrong) that you believe that you would be profitable; therefore you will keep on betting (right?). That is at least what a trader does: he keeps on trading (I guess).

With a 50% per move? No way you can handle it, if on the other side there is a capital which is unbounded (if referred to yours). No matter how wealthy you may be. 50% is not acceptable in any possible scenario, when you keep on playing that game.

Do you think a series of 10 losses in a row would be 'impossible' on a large number of sorting? Of course not: after that you would remain with less than 1/1000 of your initial wealth and 10 losses in a row is not the worst which may happen.

Anyhow with such a huge expected reward the truth is you will be out of the game, probably, satisfied, at a certain point if you are not extremely unlucky. Still this has many premises which are not true in the market, otherwise we all would go with the old Kelly's criterion, right?

The other more important thing is: this is gambling. Nothing bad about that, but the real difference in gambling (to my understanding) is not the risk or other factors involved. I thought about that: the difference is there is a point of satisfaction. You want the big win and straight and then retire from the game. My interest for trading is related to the fact that I enjoy it. It does not mean I will be sorry if I get something out of it, it means my temporal horizon does not have a priori constraints. Under this hypothesis, I would go bankrupted probably even with a 10:1 ratio, if 50% is at a stake every time.

The truth is it is highly possible I will go bankrupted in any case, but because I do not have an edge with a 10:1 ratio. Should I find a good edge, I hope I will try my best not to ruin it, with my greed.

Happy trading to you.
  • #70
  • Jun 10, 2010 11:05pm Jun 10, 2010 11:05pm
it's funny how a bunch of new traders who are unprofitable are arguing with someone who is profitable and has thousands of posts and trades.

there is still lots to explore before you put the nail in the coffin.
Congratulations ScalaFX for coming out of the closet!
  • #71
  • Jun 10, 2010 11:28pm Jun 10, 2010 11:28pm
Quote
Jest, I understand your reasoning. I could not open a position without a SL, but that is me. Still, even pushing it further, I would put a catastrophic stop, just in case (where catastrophic is nonetheless well before a margin call).

you dont understand, a margin call should not be a catastrophic event. .
  • #72
  • Jun 10, 2010 11:31pm Jun 10, 2010 11:31pm
nubcake,

I totally respect others' opinion and I wish I can be a profitable trader myself; nevertheless, I think there is still room for my opinion.

If I do not agree with someone or I believe that the risk involved is too high, no matter what your performance may or may not be, I think I can express myself. To me too much risk implies you are putting your method at a stake.

What I do believe is that if you are not a brilliant trader and still learning (this exemplifies my case): money management, SL, and any trickery on Earth will not stop me to go bankrupt if the time needed to learn will arrive after the end of the money at stake.

That said, unless the contrary is proofed, I do believe that if you risk way too much, no matter how good you are, there is a possibility that you will go bankrupt and if your horizon is not limited then this chance is not that remote, indeed.

Still learning from all of you, but this does not imply I am unable to have different opinions if something is not logically sound to me. Contemplating a big loss in one shot does not make sense to me, especially if you are very profitable in expectation.

Also, this does not imply I would not do the same; probably with a lack of discipline I would wait even more than 600 pips, but I would refer to that as a mistake and am still convinced of that, especially -once again- if the system is very profitable in expectation.

Jest, probably that depends on the broker. In my case, if I remember well the contract, I get a call if I have a >50% loss. I would define it as a catastrophic event, but I am sure it depends on the specific broker.

Just my humble two cents.
  • #73
  • Jun 10, 2010 11:40pm Jun 10, 2010 11:40pm
one will never go bankrupt if he never left his equity under the brokers care.
  • #74
  • Edited 12:03am Jun 11, 2010 12:00am | Edited 12:03am
Quoting actarus
nubcake,

I totally respect others' opinion and I wish I can be a profitable trader myself; nevertheless, I think there is still room for my opinion.

If I do not agree with someone or I believe that the risk involved is too high, no matter what your performance may or may not be, I think I can express myself. To me too much risk implies you are putting your method at a stake.

What I do believe is that if you are not a brilliant trader and still learning (this exemplifies my case): money management, SL, and any trickery on Earth will not stop me...
you make the assumption that there is lots at risk with a large drawdown. not necessarily. if you bet your entire margin on a direction and you get a 600 pip drawdown then it's more than likely that you were margin called somewhere around -100 for example.... so for someone to cop a 600 pip drawdown suggests that the position is not making much of a dent in any capacity.

here's a puzzle for you to solve. it's not hard so don't overthink it. what is the safest way to have your entire available margin in a position and have absolutely zero risk? have a look at your charts and see how you would accomplish this. this is one person's holy grail... there are many ways to skin a cat.
Congratulations ScalaFX for coming out of the closet!
  • #75
  • Jun 11, 2010 12:50am Jun 11, 2010 12:50am
Quote
what is the safest way to have your entire available margin in a position and have absolutely zero risk?

nubcake, I am afraid I do not follow you.

Disregarding the margin part, the only way I am aware of zero risk is if your position goes to zero (which can not since it is a discrete number and >1,000 base currency for the majority of the brokers). At least if we mean the same thing with 'risk'. For me 'risk' is the maximum possible loss (to be adjusted for possible slippage). I also assume a leverage >=1:1.

Looking forward to your insight.
  • #76
  • Jun 11, 2010 12:51am Jun 11, 2010 12:51am
Quoting actarus
Are you sure? If I were the market, I would bet against you on these chances, because from your answer I infer (tell me if I am wrong) that you believe that you would be profitable; therefore you will keep on betting (right?). That is at least what a trader does: he keeps on trading (I guess).
I simplified. How much I'd risk on subsequent coinflips would depend on how many are being offered, and what kind of capital I have. If I was just offered one coinflip, I'd go for 50%. If it were on offer until one side busts, I'd be more conservative.

Quote
Do you think a series of 10 losses in a row would be 'impossible' on a large number of sorting? Of course not: after that you would remain with less than 1/1000 of your initial wealth and 10 losses in a row is not the worst which may happen.

Of course 10 losses in a row is possible, but theoretically everyone can have a string of losses to go bust. 10 wins are equally as likely, which would net something along the lines of 10 million for every $1 of capital. In those 10 flips and 100k, we're as likely to become the richest person in the world as to go bust.

We will occasionally suffer a significant drawdown in the beginning, but we'll also usually recover from it and never look back.

Quote
Anyhow with such a huge expected reward the truth is you will be out of the game, probably, satisfied, at a certain point if you are not extremely unlucky.

Probably. Part of me would want to exploit it, but another part would wonder why bother. The bet can only be offered for so long because our bettor ends up with all of the money on offer. Since this is the probable outcome if the bets were offered until one side busts, I wouldn't risk 50% in the first place as it would just be a matter of time before arriving at the same place.

Quote
Should I find a good edge, I hope I will try my best not to ruin it, with my greed.

It's not a matter of greed, but driving home an advantage. Some will view risking 1% on a trade as responsible, while I may view it as a waste of a good opportunity. Different levels for different folks.
  • #77
  • Jun 11, 2010 12:51am Jun 11, 2010 12:51am
Quoting nubcake
you make the assumption that there is lots at risk with a large drawdown....
Actually i tried this type of trading once way back when I was a beginner. I used 400:1 leverage and 500 dollars in my account. I could trade 9 lots. If the trade went against me I margined out @ 50 bucks. If the trade went for me I made a killing. The problem was I was a lousy trader at that point. Wonder if I tried it now I could make it work. Hmmmmmmmm.............. Maybe we should start a thread with that one. 50 dollar losses versus 400 dollar gain on a 50 pips move ............... nice risk to reward ratio .........................
  • #78
  • Jun 11, 2010 1:27am Jun 11, 2010 1:27am
Mr J, I see what you are saying and I do not doubt it works for you.

At the moment for me it is too tough. I could not stand hug profits or losses: I would concentrate on them.

I am conscious I have so much to learn, but I noticed I easily over-trade and make mistakes (the majority of them avoidable, if not driven by greed) if I am too exposed; other than that I am not that confident to manage that risk, so far.
  • #79
  • Jun 11, 2010 3:04am Jun 11, 2010 3:04am
edit: this is in reply to actarus's confusion on a few posts back to my question...

to rephrase, if you do not have enough money to open 1 lot, but have enough to open 0.5, or 0.1, or 0.04, or 0.06 etc etc... then you are able to open SOME form of position. so, keeping this in mind, how can you get yourself to a point where you are no longer able to open any further positions than what is already open due to not enough available margin left anymore and yet be in a position to not lose any money.

truth be told there are a so many combinations of ways to get to that point, but the methodology behind it is the same for all. some combinations are more favourable than others too obviously.

this might be basic stuff, or perhaps you had never thought about this type of setup before. i do not know. have a think and a play and see if anything gels.
Congratulations ScalaFX for coming out of the closet!
  • #80
  • Jun 11, 2010 3:07am Jun 11, 2010 3:07am
Quoting nanningbob
Actually i tried this type of trading once way back when I was a beginner. I used 400:1 leverage and 500 dollars in my account. I could trade 9 lots. If the trade went against me I margined out @ 50 bucks. If the trade went for me I made a killing. The problem was I was a lousy trader at that point. Wonder if I tried it now I could make it work. Hmmmmmmmm.............. Maybe we should start a thread with that one. 50 dollar losses versus 400 dollar gain on a 50 pips move ............... nice risk to reward ratio .........................
heh i think we all have. it's necessary to do it at least once. but from this i infer that you now do the opposite and i'm almost certain i know what you are doing. gotta have a bigger stick always though.
Congratulations ScalaFX for coming out of the closet!
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