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No SL No Leverage Strategy - working so far

  • #921
  • May 24, 2012 7:54am May 24, 2012 7:54am
Nacho,

It looks like you should have about three months under your belt trading this strategy. With a good mix of ranging and trending conditions. How's it going for you?
  • #922
  • May 24, 2012 8:17am May 24, 2012 8:17am
Quoting RandyG67

And let's take into account the well known statistical failure rate of traders. The most common numbers thrown about are 95% fail. Whatever the true number let's all agree it's a lot. Surely you all can realize that it's probably some type of SL method that they're using (after all that's the de facto trading standard). Doesn't the scream to all of us that there might be another (gasp!....better) way?
utter rubbish that 95% fail... if you're going to base decisions about your financial future on statistics it would be an idea to actually research them first.

If you look at brokers statistics for retail traders you learn some interesting facts (this information is readily available and easy to find..)

1. the majority of retail traders with live accounts have a win loss of approx 60%, the traders with accounts over 10k have higher win rates than those on accounts of 1k.

2. of those losing money the main reason for well over 70% is losers greater than their winners, a negative risk to reward ratio.

So anyone who spent some time to consider these figures would realize that trading successfully has nothing to do with having a stop loss...

you're wasting your time being busy fools, sounds harsh i know, but forex is....
tradewith60
  • #923
  • May 24, 2012 9:21am May 24, 2012 9:21am
I can't speak for others but my financial future (as it relates to trading) is based on my P/L statement. Not statistics.
  • #924
  • May 24, 2012 9:26am May 24, 2012 9:26am
Quoting RandyG67
I can't speak for others but my financial future (as it relates to trading) is based on my P/L statement. Not statistics.
why quote them then as if it made some difference to your decision to trade with no SL?
tradewith60
  • #925
  • May 24, 2012 9:32am May 24, 2012 9:32am
Quoting RandyG67
Ok, I get what you're saying here but let's use a quick analogy......

If one were to take a long trip, flying is usually the best option. It get's you there in the least amount of time, giving you a good return for your time spent vs money invested (a'la stop-loss trading, according to the masses). But, there are people who are terrified of flying (a'la traders that just can't get the hang of SL placement, let's say) and decide to drive. It takes them longer to get there, it's not as efficient BUT THEY STILL GET THERE. They are "successful"...
I understand what you are trying to say in your analogy, but I think it's a poor analogy to use when comparing trading with a stop loss to trading without a stop loss. What if I told you that flying to the destination had a better chance of getting there alive, say 95% chance of getting there alive (while also getting there faster). Driving to the destination may feel safer, but there is a 80% chance you will crash and be killed. Would you still drive or try to overcome your fear of flying? The thought that unrealized and realized profit/loss are the same is lost on so many people. It's incredible how many people are fooled by this.

Now, that doesn't mean that trading without a stop loss can't be profitable in the long term. I've NEVER said trader X can't ultimately profit because he trades without a stop loss. What I am saying is that trader X's ROI will be much less than Trader Y's, who knows how to trade with an edge and a stop. I also believe that not only is the potential for greater return possible with a stop loss and edge, but that it is also safer in safeguarding your account from ruin. Just because one ultimately profits doesn't mean they were technically successful. When you factor in time that may not be the case, however this may be subjective according to the persons goals or objectives.

Trading without a stop loss may require years for a trade to turn around and become profitable (if it doesn't get margin called). If you are a trader that makes use of leverage and positive swap, in that time you cannot predict if (or when) things may change. For instance leverage could be lowered due to regulations. Interest rates may be lowered and become negative. Your broker may even go out of business! I like to open my trades and have them close within a relatively short time frame (within the week). If I have a bad week and lose money (which happens), I feel confident going into the next week knowing I have an edge and a better chance of making it back than not. Trading without a stop loss might have meant going into the next week with drawdown and not knowing if it's going to get worse. I would be married to that trade (psychologically and with my margin) and miss other (and better) opportunities. Remember, unrealized and realized are the same. Now if I have a good week, then I can withdraw the profit (if I want to) or keep it in the account and let it compound. This way I don't have to worry about anything but my trading.
  • #926
  • May 24, 2012 9:41am May 24, 2012 9:41am
Even if that 95% number that gets thrown around was right it tells us nothing about the pros and cons of using a stop loss, because the percentage refers to all the retail traders. We don't have separate statistics for SL, no SL, EA, hedging techniques etc.

However anecdotal proof seems to suggest that in fact few SL traders who also use strict money management rules blow up their accounts. Whenever I see an equity curve of someone who did that (and I saw 1-200 of those), or when I read such stories on forums, it's a pattern that suggests something else. What we generally see is people who had long strings of small wins followed by 1-2 huge losses. For example, the guy starts out with a $10,000 account, after 50 trades he is at 11,500, then all of a sudden he loses 7,000 in one day. That pattern is very typical for people who use martingale-recovery techniques, or at least keep moving their SL further away.

Let's just think for a moment. If you have 10,000 and set a SL and a TP of $100 (whatever that means in pips), you would need 100 consecutive losses to lose all your money. That's very difficult to do even if you're trying to pick the worst possible entries, working hard to lose money. More than that, nobody keeps risking the same $100 per trade as the account is bleeding. That is fine for a 10,000 account but not when you're left with 2,000. If you do the math you realize that in the real world even with a completely random entry it would take thousands of trades to blow the account assuming that your position size is decent (risk no more than 1-2% per trade).

While the death by a thousand cuts is certainly possible (even certain if the system has no edge), the reality is that the vast majority of people losing their accounts experience a different kind of death. They lose because:
a) Their position size is too big, risking way too much per trade;
b) They keep adding to losing positions and call it recovery or martingale - that can work very well for a while giving the trader a false sense of security;
c) They keep moving their SL to allow for more breathing space or revenge trade and that brings us back to point a) above.
  • #927
  • May 24, 2012 10:06am May 24, 2012 10:06am
Quote
why quote them then as if it made some difference to your decision to trade with no SL?

Statistics had no bearing on determining my trading style. Again, my comfort zone backed by my P/L statements determined that.

I brought up these stats to try and show to the knuckleheads that, given the high failure rate of traders, the knuckleheads should at least allow for the fact that there might be alternate ways to be profitable and that may include using no SL.
  • #928
  • May 24, 2012 10:20am May 24, 2012 10:20am
Quote
What I am saying is that trader X's ROI will be much less than Trader Y's, who knows how to trade with an edge and a stop.

Now I/'we don't have stats to prove this but anecdotely I see what your saying and if true what's so bad about being happy with your no-SL-profits even though they aren't as large as they "should" be or aren't as large a trader Joe who is diligently making use of SL? Someone somewhere is surely outperforming trader Joe....should he make revisions to try and keep pace with Super Trader?

Quote
Trading without a stop loss may require years for a trade to turn around and become profitable

Here's where I think there's the biggest disconnect in the understanding of using no SL. WE TAKE LOSSES TOO!!!!! I would not let a trade go months/years....I'll accept I was wrong and close the trade for a loss. By not using a SL I've given the trade it's maximum "wiggle room" to came back to me.

And another big misconception I see is that the pro SL crowd assumes price has to come back to the original entry point. It doesn't. If I can capture the lion's share of a 38% or 50% retrace of a move that went against me I can recover most or all of my initial position.
  • #929
  • May 24, 2012 10:28am May 24, 2012 10:28am
Quote
Their position size is too big, risking way too much per trade

Ugh, I can't believe I've gone this long without bringing up position sizing. Thank you Lazy Pawn!

Position sizing is key whatever side of the fence you are standing on, maybe even more so for the "recovery" crowd.
  • #930
  • May 24, 2012 11:40am May 24, 2012 11:40am
http://traderspodcast.com/episode9/
tradewith60
  • #931
  • May 24, 2012 12:52pm May 24, 2012 12:52pm
Quoting 2+2=4ex
I understand what you are trying to say in your analogy, but I think it's a poor analogy to use when comparing trading with a stop loss to trading without a stop loss. What if I told you that flying to the destination had a better chance of getting there alive, say 95% chance of getting there alive (while also getting there faster). Driving to the destination may feel safer, but there is a 80% chance you will crash and be killed. Would you still drive or try to overcome your fear of flying? The thought that unrealized and realized profit/loss are...
solid post brother.
  • #932
  • May 24, 2012 2:29pm May 24, 2012 2:29pm
Quoting RandyG67

Here's where I think there's the biggest disconnect in the understanding of using no SL. WE TAKE LOSSES TOO!!!!! I would not let a trade go months/years....I'll accept I was wrong and close the trade for a loss. By not using a SL I've given the trade it's maximum "wiggle room" to came back to me.
Semantics, you are in fact using a stop loss! There's nothing wrong with having a wide stop as long as your reward justifies the risk, the obvious futility would be taking several small gains and one large loss. Obvious, but that's in fact what some people do!



Quoting RandyG67

And another big misconception I see is that the pro SL crowd assumes price has to come back to the original entry point. It doesn't. If I can capture the lion's share of a 38% or 50% retrace of a move that went against me I can recover most or all of my initial position.
That's just strategy, there are many variations, but what I have noticed is a growing number of people who follow these types of strategies offsetting winning trades against the unrealised loss of an open losing trade, in effect they're working to cover unrealised loss as opposed to working to make profit, it's as if they believe it's not really a loss that they're spending their profit on!
  • #933
  • May 24, 2012 5:03pm May 24, 2012 5:03pm
True, there are many variations......of every trading style. The main point of contention I have with you and some of the others here is the apparent total lack of belief that a method such as Bob uses and advocates (though I have yet to see him hold a gun to someone's head and proclaim his way as the only way) works. It just plain does.

And I think we're talking more than just semantics. If a position goes against two different traders, the one that used a SL (and it gets triggered) has absolutely lost that money on this trade (let's give him credit for being good enough to earn that back and more on future trades). I will let the run against me consolidate and re-enter and give myself at least the chance to break even on the retest/countertrend move. It happens and it happens often and I end up ahead on this trade. And just as I allowed for the SL trader to make money on his successive trades, I give myself the same allowance only I won't have to use some of my profits to offset my stopped out trade.

To be fair, I can't trade back to break even all of the time and I'll close my initial position with a loss. BUT, I've given that original entry a fighting chance. A chance an already stopped trade doesn't get.
  • #934
  • May 24, 2012 9:39pm May 24, 2012 9:39pm
Quoting RandyG67

The main point of contention I have with you and some of the others here is the apparent total lack of belief that a method such as Bob uses and advocates (though I have yet to see him hold a gun to someone's head and proclaim his way as the only way) works. It just plain does.
We're back to square one here (Sharpe), it depends how you define 'works' and where you set the bar as far as productivity goes (time, money, effort, risk, return). If your only criteria for 'works' is a bottom line profit, any profit, then there is every chance it may work, but grossly skewing risk:reward doesn't put the odds of longevity in it's favour. Small gains for high risk, it doesn't sound good, and win:lose doesn't seem like it's going to save the day in the long run.

A few of the main advantages of trading this market are liquidity, leverage, low transaction costs, and the clearly defined tradeable patterns/levels which develop. Strategies like Bobs fail to exploit most if not all of those advantages. Trading retail forex is traditionally accepted as being speculative rather than an investment.


Quoting RandyG67
And I think we're talking more than just semantics. If a position goes against two different traders, the one that used a SL (and it gets triggered) has absolutely lost that money on this trade (let's give him credit for being good enough to earn that back and more on future trades). I will let the run against me consolidate and re-enter and give myself at least the chance to break even on the retest/countertrend move. It happens and it happens often and I end up ahead on this trade. And just as I allowed for the SL trader to make...
The main strategy difference is you're using a wider stop, but it's still a stop. The disadvantage you have is that if/when that stop gets hit it's going to take a whole heap of profitable trades to cover the loss because the profit on your profitable trades is so small. If you had a comparable reward then it wouldn't be so much of an issue but you don't.


Quoting RandyG67

To be fair, I can't trade back to break even all of the time and I'll close my initial position with a loss. BUT, I've given that original entry a fighting chance. A chance an already stopped trade doesn't get.
Ok now we're getting into a traders adeptness at market analysis, some traders don't need to let price run far before they know their analysis was wrong so they close and look for other opportunities rather than spend time, energy, focus, and money trying to force a trade to be profitable. The advantages are obvious. The other thing to take into consideration is that unrealised loss on an open trade is still a loss, it's just not realised yet. If there's any doubt about that then check your available equity.

If they're honest with themselves I would hazard a guess that any of the Bob traders (even Bob himself) would much prefer to develop the necessary skills to trade in a more traditional way and be infinitely more productive rather than do what they're doing. Sure it's more comforting than being one of the failure stats but to be perfectly frank with you it's not really trading.

The Bob approach to trading isn't anything new though, it's been tried in all different kinds of formats, all equally as non-productive as the other. For most people it's just a phase they go through on the journey, they eventually realise the numbers don't add up and that it doesn't really make any logical or financial sense so they move on to greener pastures....
  • #935
  • May 25, 2012 1:59am May 25, 2012 1:59am
Quote
If your only criteria for 'works' is a bottom line profit, any profit, then there is every chance it may work, but grossly skewing risk:reward doesn't put the odds of longevity in it's favour. Small gains for high risk, it doesn't sound good,

For ME, I'll take any consistent profit as "working". You say it's not really trading.....I'll concede there too. Given the choice of calling my self a trader or being consistently profitable, I'll take what's behind door #2 thank you.

And the high risk you speak of I assume you're talking about risk of the catastrophic trade scenario but that's offset by correct position sizing. Remember, misdirected though we (non SL "traders" are ) are, the burden of correct entries with proper account risk is still at the top of the priority list.

Quote
The disadvantage you have is that if/when that stop gets hit it's going to take a whole heap of profitable trades to cover the loss because the profit on your profitable trades is so small.

Aahhhh, but why must you assume that the profit on my profitable trades are so small?? I have my share of correct entries that turn into good runners. Don't we all?

Quote
Ok now we're getting into a traders adeptness at market analysis, some traders don't need to let price run far before they know their analysis was wrong so they close and look for other opportunities rather than spend time, energy, focus, and money trying to force a trade to be profitable.

Yes, anyone can fall victim to letting a trade get away from them. Most likely they're being stubborn in their ability to admit a mistake. This affects us all, though. "Run far" is highly subjective and is a function of acceptable risk. A SL trader may set his stop at a point that would make another trader throw up and bail out. But can we rightfully say that one is wrong and the other right? You can substitute SL placement for "acceptable drawdown" and just as easily be talking about two differing non-SL traders (or market participants, if you'd rather ).

Quote
The other thing to take into consideration is that unrealised loss on an open trade is still a loss, it's just not realised yet.

Really!? Those that held firm through 2008 vs those that bailed would love to take you to task for this statement right now.

Quote
If they're honest with themselves I would hazard a guess that any of the Bob traders (even Bob himself) would much prefer to develop the necessary skills to trade in a more traditional way and be infinitely more productive rather than do what they're doing.

I feel that would truly be a hazardous guess for the one's that are doing this profitably. And I agree that "traders" of all sorts have had to move on to (for them) greener pastures.
  • #936
  • May 25, 2012 4:39am May 25, 2012 4:39am
Some great thoughts and posts on this thread. Never let anyone disuade you from what you believe is best for you - myself included. My comments are based on my experiences. I truly wish the best for everyone here. Thank you for your contributions.
  • #937
  • May 25, 2012 4:46am May 25, 2012 4:46am
has anyone built a risk model on these ideas?
tradewith60
  • #938
  • May 25, 2012 11:58am May 25, 2012 11:58am
Quoting RandyG67

Given the choice of calling my self a trader or being consistently profitable, I'll take what's behind door #2 thank you.
Ok, so you'd rather be consistently profitable than be a trader.


Quoting RandyG67

correct position sizing.....proper account risk
Well that's half the equation, what about risk:reward?



Quoting RandyG67

why must you assume that the profit on my profitable trades are so small?
Only from details of the occasional trade posted. Risk seems to be in the hundreds of pips (or perhaps even unlimited, those details are conveniently omitted!), reward barely 100 pips. With that kind of risk:reward the probability of meltdown is extremely high.


Quoting RandyG67

Yes, anyone can fall victim to letting a trade get away from them.
No.


Quoting RandyG67

Really!? Those that held firm through 2008 vs those that bailed would love to take you to task for this statement right now.
The smart money bailed and sold on before it hit the fan, others were left high and dry with no escape route. Your 'catastrophic trade scenario' played itself out and we all saw and felt the results. Ask some of those institutions whether, in retrospect, managing risk would have been a good idea. Ask some of the investors who went bust overnight whether they think they should have accepted a loss earlier on rather than hoping and praying the thing would turn around.

"Markets can remain irrational a lot longer than you and I can remain solvent." from A. Gary Shilling, Forbes (1993)


Quoting RandyG67

I feel that would truly be a hazardous guess for the one's that are doing this profitably. And I agree that "traders" of all sorts have had to move on to (for them) greener pastures.
I can't imagine anyone being content with making pennies for the rest of their time in this business. Once the novelty of not losing has worn off they'll want to get where the real money is, it's only natural.
  • #939
  • May 25, 2012 12:03pm May 25, 2012 12:03pm
Quoting 60minuteman

has anyone built a risk model on these ideas?
It's impossible to do. The strategies are vague and constantly changing to suit circumstances after the fact (ie 'I wouldn't have taken that trade because of x y z rule/indicator/circumstance, sorry I forgot to mention it before!'). Retrospective trades are always the best, unfortunately my broker is a party pooper, he doesn't allow me to trade on historical prices!
  • #940
  • May 25, 2012 3:10pm May 25, 2012 3:10pm
Well it seems we've reached the inevitable diminishing returns in the point/counterpoint debate. Just pretend I posted some more retorts for "my side" and I'll pretend you did the same after that and we'll each enjoy our weekend and get back to what it is we each do.

To the OP, I'm still interested in how you are doing since you opened this thread. To anyone else that is having a tough go of it, don't despair, there are other ways to skin the cat! Don't let some of the negative usual suspects chase you off of trying something new. Remember, they bash only in theory....I haven't heard (though, admittedly, I may have just missed it) of any of them actually trying what they "KNOW" to be wrong. Some of us have the perspective of actually having tried both methods.
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