Real Fx traders do not use stoploss

You and I started at the same time it seems. I had an interest in penny stocks until I learned about Forex. Equities and stocks can lose up to 99% of its value in a hurry when things go bad but I really doubt a currency will do that. At least those that are commonly traded.

I'm sorry you had a bad experience with your accounts. From all the research I did one thing that stuck with me was using proper money management in relation to the specific trading strategy that you chose. I believe the industry standard is something like using 1.5% to 2% risk. It would take a trading strategy catastrophy for an account to get wiped out with low risk trading amounts. For my strategy as long as I can sustain up to a 25% loss without getting a margin call I would be ok and wait for the rebound which the indicators on the longer time frame charts were projecting.

Just today I made 2 trades against my strategy and it went way south. From +11% profit to -16% loss in my account value. My practice account started out at $11,068 this morning and those 2 poorly timed trades I just left open and watched the balance plummet to $9,350 or so. But I waited patiently for 9 hours and the candles crept from -80 pips up to +12 pips on one and +3 pips for the other. I made a profit of about $114 on my practice account with those 2 trades. My account now stands at $11.182. I was trading on the 5 minute chart when I placed the trade. My indicators told me that it was going to go down but the indicators on the 15 minute, 30 minute, 1 hour, and the 4 hour charts said the candles should increase after the 80+ pip drop. I enjoy watching my father sit next to me and seeing these huge losses on my open trades. He about craps his pants when I do that. LOL! But I just lounge around and wait for the rebound. I showed him that those 2 trades were profitable just as I closed them out. The look on his face is hillarious. So far today's $1700+ loss and rebound on those 2 trades was a record breaker for me.

I should have taken some screen shots of that. Maybe next time. I save a detailed report from MetaTrader every day to keep track of my stats. So far from Sept. 19 to Sept. 29 (actually from Sept. 22 because I ignored this account when I was messing with a Hot Forex account) I made 31 trades. 26 profitable trades and 5 loss trades (darn trailing stop EA kept closing out my orders before the trades covered the commissions. LOL) Gross profit is $1,325 and gross loss is $16. Relative drawdown is 0.03% because I don't use stop losses except once when I panicked as mentioned in my earlier post.

I guess what I'm saying is that using stop losses with my strategy would without a doubt totally wipe me out in a week. It depends on what one chooses for a strategy to really determine whether using the stop losses is right or wrong so there is no real correct answer set in stone on this issue.

Also I really should add this caveat as well. my research I learned that statistically 90% of the traders that venture into Forex as well as commodity and equity trading end up losing money because they lack some basic discipline skills and fail to capitalize off others who lack those certain skills as well. Successful traders can ignore emotional and some psychological feelings when they trade. Emotion is human but it is a serious impediment to profitable trading and a major factor in generating losses. The markets are driven by fear and greed and both of those are what 90% of the traders fail to control within themselves thus why they lose money. Just like my father freaking out and nearly crapping his pants because I let my open trades drive my balance down so much today. Most people like him would panic and take a loss but I learned not to do that. I have to work so much harder trying to recover from the losses that I burn myself out trying to make a profit trading that way. I leave that kind of trading to the robot (which did nothing today, lol) I believe that realistically that I don't lose anything as long as the trade is open and dynamic. I've proven that point about a dozen times in the last week. That's why patience is a major factor in my strategy.

Most full time traders do not use stop loss because they don't want their stops picked off by other large trading houses who will pick off stops and then swing the market in the other direction. Most full-time traders watch the market so they use mental stops instead. The exception to this would be to place stops as protection on their original position, which stops are far enough away from the market to not get "picked off". In other words, they don't place protective stops until the market has moved far enough away from their original position that they won't be picked off.

Pro FX Traders do not use SL IMHO. The enter/exit their trades when price/indicator/or whatever they use as gauge reaches x value/price etc.
See the example below. They do NOT go in or out of trades just cos an indi turns fro +ve to -ve. Place a standard MACD on your chart and see this for yourself. You will see that price starts to drop or rise before the MACD gets to the zero line. This means that the Pros have entered the mkt before the indi or whatever they are using gets to the zero line etc.
I hope my little explanation helps.

If they don't use SL how do they manage their risk? What if they have multiple trades all without SL, how do they know how much they are in? I understand they don't want to get stopped out by other brokers/traders, that makes sense, but they must have a stop somewhere. If they use a mental SL how do they manage sudden spikes? It would make sense if they put an SL at e.g. 200 pips, at least they would know where it would stop out if the trade went against them.

you are trying to find an absolute answer to a market that is non-absolute.

Your definition of risk is?
My definition of risk is?
broker definition of risk is?
bank definition of risk is?
hedge fund definition of risk is?
other trader definition of risk is?

So the above hopefully demonstrates this a little... how can you have an absolute answer to a question like that? Or even the risk question?

A business could protect themself on varying swings in price if they do a big business over seas and they expect price depreciation or price appreciation in a given or multiple currencies. With that said, this is probably an answer you would not expect.

The best possible answer is don't be something your not. SL or no SL in the end it's all RISK because whatever your system is... if it doesn't make more than it loses it won't matter one bit if you use a SL or not. You're either a loser or a winner.

That's definitely not the reply I expected, it actually made me think quite a bit, and after a lot of pondering I have to admit that you are right. Risk can be very different for different people.

I guess next time I see a trader with no SL on his open positions I won't tell him to look into risk management

I manually close my positions most of the time, but almost always I have a fail-safe stop loss in the system should my internet go down.

interesting theory man,.. i will take a deeper look on this matter... thanks for sharing

Sorry i did not explain myself well or in detail.
Lets say I have $20,000 as my starting cptl and my risk is 20%.
From here, my trading becomes subjective on so many a criteria.
Example, since I dont use a stop, many pips am I willing to take as a draw-down before exiting the trade(s)?
I for one, caliberates my losses in 3 diff ways viz:

1 small loss: 1-5pips
1 medium loss:6-12pips
1 big loss:13-20pips and above

Opposite goes for profit. Of course, I try as much as possible to never take on a 1 big loss but am also prepared for it by using it in my money management calculations.

Don't forget also that time frame from which your trade is important too.

I hope this helps clarify your queries.

I think your logic is a bit wrong because IMHO if you have a $20,000 acct and don't use a stop your risk is always 100% or $20,000 whichever is greater.

Now if you mean what you risk on each trade as in lot size I think in time you will find you are over-leveraged. I doubt you will get away with that for long.

(This type of risk equation won't work for everyone... don't try this at home boys n girls.)




Ok, so in the first part you claim to have no stop but then go on to talk about small loss, medium and so on?

This doesn't sound right if you ask me? Unless these are mental stops... but you have to sleep sometime?

real forex traders are institutions and hedge funds that can move a market when an 'excuse' happens. example, there is a PMI that was lower than before, and technicals all line up.
why wouldnt they put millions to make market move?

thats how panic sells works. One makes the move, everyone else follows.

That makes the volume of sell orders, greater than the buy orders.



20 pips for them is much more than our earnings of a 200 pip move on our standard lots for us lol.

From what I have read and i am only relatively new to this but i follow guys like nial fuller and a few others of the same calbire, and the all use stop losses. Again, i am new but i think if you have to ask the question, best be using them.

Cheers

MUST use stop loss

and

Take profit


Also followed by trailing stop,(individual choice)

Regards

Ken

My first few posts I made my argument for not using stop losses in my trading strategy. I now have a screen shot of 2 trades I opened last thursday morning (09-29-2011). Both almost immediately went south on me and I mean way south. Nothing like the feeling of watching just 2 trades make a +$1,188 profit evaporate into a -$4,349 loss on an initial account balance then watch it slowly recover. This downward trend lasted a tad more than 7 days but I was persistant and left the trades open. The screen shot is on the 1 hour chart for clarity since the trades were open for a week. I also labeled the 2 buy lines and the take profit line as well as a line where the lowest point of the down trend with the loss. I could have used a stop losses to ensure a 100% possibility of a loss on those 2 trades that I would have to work that much harder to make up for but I just chose to be patient and ride out the trends and ultimately made a nice profit. I've done this over a dozen times so far and as I mentioned in an earlier post only lost money when I stopped the loss.

It's funny how one can make a profit off of a very volatile and troubled currency market climate as last week with the threat of a greek default and a cascading collapse of the european banking system - downgrades and all not to mention an idiot for a US president making his, "We're not better off than we were 4 years ago.." comment a strategic part of his re-election campaign and a US Treasury secretary claiming that our economic recovery is faltering. But as I mentioned earlier successful traders know how to profit off the greed and fears of other traders. Their losses are our gains. LOL.

Anyway, the screen shot of my 2 trades speaks for itself. I'll admit that the night before my orders were closed from the take profit command I lowered the take profit points of both trades by about 30 pips. I decided that as volatile as the market was that I was in no position to be greedy either and that paid off because the candle barely and briefly broke above my take profit mark.

Oh, by the way this account has been active for 2 weeks. The 1st week my profit was about $75 more than the 2nd week so both were about even at +11% per week however I did the 2nd in just 2 trades while the 1st took 31 trades. Also, my EA robot kicked my trading butt last week. It's total profit is about 24.7% gain while my manual account is at about $22.8% gain.

What was your deposit?

That looks over-leveraged and doing so in live would only kill you.

You do realize that you can pay more than you gave?

Learn about leverage friend, its the #2 killer on the market.

#1 its our emotional intelligence.

it can also be #1 if its controlled and positive.

Gee a $5500 drawdown for a measly $1100 profit. Dont see anything wrong there!



Ever hear the saying "A fool and his money are soon parted"?

You are the fool, but thats for the liquidity!

Even though that's just a demo account it's proving my strategy is working for me. I know it's leveraged pretty high but I'm fine with that with the way I normally trade. I'm a scalper and very rarely leave trades open for more than a few minutes. This is a highly abnormal trade for me but I used it to prove a point.

There's another saying - "To each their own.."

My strategy works fine for me. My opinion and the point of all my posts is that the drawdown is irrelevent as long as the trades are open and dynamic and the value is in flux, at least for my trading strategy. What's important to me is where it's at when I close the order.

And the measly $1100 profit is a profit. I see absolutely nothing wrong with any kind of profit in any trade whether it's a $4 profit or a $4000 profit. I personally am thrilled to see an 11% gain on these 2 trades.

Here are some more screen shots for you to look at:

This detailed report is for all the trades I closed for the month of September on this account. Except for the 1st trade which the lot size is WAAAAY over leveraged the others are consistent. Please note the gross profit vs. gross loss. My strategy is working for me despite the drawdowns and despite the over leveraging. The only part about the 31 Sept. trades is that well over $300 of my gross profits went towards the commission. The 2 October trades only about $10 went to commissions but I got about $75 back in swap. LOL.

As I sit here my balance is at $12,288.16

I guess its just too bad you cant withdraw it, huh?

LOL! If I could I'd have 100 demo accounts. I figure another month or so I'll open a live account.