Do you believe tight stop-losses cause losses in the long run? | Page 2 | Forex Factory

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Do you believe tight stop-losses cause losses in the long run?

  • #21
  • Aug 4, 2013 3:26am Aug 4, 2013 3:26am
Hi sandy, I don't use stop loss so I don't need to care about them thus, they are a source of concern that I have removed from my trading.

Instead I let the price action tells me when to stop and reverse a position and I do this with moving averages which helps a lot to filter noise spikes, you know, the ones that hit sooner than later those tight stops.
Simplicity is the Ultimate Sophistication.
  • #22
  • Aug 4, 2013 7:01am Aug 4, 2013 7:01am
It's a tough 1, I'm getting better results since moving from 10 to 30, but times where 10 looks better but then spikes take them out.

current theory is bigger SL even when wrong gives me a 40% chance of getting to profit, so it's kindaworth the extra 20 cost, kinda.

does reduce the need for such accurate entry's.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #23
  • Aug 4, 2013 9:08am Aug 4, 2013 9:08am
Quoting Makavell
{quote} i use a prime broker with a minimum balance req of $50,000, but my account balance is way more than that.

Which Prime Broker has a minimum balance of USD50K ? Do they have facilities for Money Managers ?
  • #24
  • Aug 4, 2013 9:48am Aug 4, 2013 9:48am
Quoting broketrader
Hi sandy, I don't use stop loss so I don't need to care about them thus, they are a source of concern that I have removed from my trading. Instead I let the price action tells me when to stop and reverse a position and I do this with moving averages which helps a lot to filter noise spikes, you know, the ones that hit sooner than later those tight stops.
Everybody, don't be this guy. Great way to financial ruin.
  • #25
  • Aug 4, 2013 9:48am Aug 4, 2013 9:48am
stop loss is used for teh protection of investor.. though tight stop loss sometimes make u feel lost but in the long run it is useful for investor...but the main point is it is useful only if investor knows how to use it properly and effectively.. small amount of pips or large amount of pips are equally useful but it totaly depends upon the situation of the market and transaction too.
  • #26
  • Aug 4, 2013 9:52am Aug 4, 2013 9:52am
Quoting Kanzler
{quote} Everybody, don't be this guy. Great way to financial ruin.
Another guru who knows it all. what the fuck !
Simplicity is the Ultimate Sophistication.
  • #27
  • Aug 4, 2013 10:00am Aug 4, 2013 10:00am
Quoting Kanzler
{quote} Everybody, don't be this guy. Great way to financial ruin.
dude, don't be so quick to judge. just because somebody doesn't trade the way you do means it doesn't work. anyway, at the end of the day, regardless of whether he makes or loses money, it doesn't effect you. chill out man...
  • #28
  • Aug 4, 2013 10:24am Aug 4, 2013 10:24am
Quoting wlk1
{quote} dude, don't be so quick to judge. just because somebody doesn't trade the way you do means it doesn't work. anyway, at the end of the day, regardless of whether he makes or loses money, it doesn't effect you. chill out man...
Quoting broketrader
{quote} Another guru who knows it all. what the fuck !
If I know one thing, it's that no professional trader EVER trades without a stop loss. And I know at least a couple of them who trade full time for a living. If you can't place a stop loss with your order you don't know where you're wrong, and you're setting yourself up for failure from the very beginning. A lot of people will cite "stop hunting" as the reason for them not using stop losses but can you honestly tell me what a stop hunt setup even looks like? And if so, where they happen? If you can, you wouldn't place your stop there to begin with. Additionally, if you don't use a stop loss, you're setting yourself up for literally unspecified losses. What happens if there's a surprise announcement and you're busy scalping your 5 minute chart with maximum leverage without a stop? Are you really going to tell me you're at the computer screen every second of the hour watching it move?
  • #29
  • Aug 4, 2013 10:36am Aug 4, 2013 10:36am
You can trade without an SL if your position is so small that 200+pip movements don't impact your P&L much. For the benefit of the 99.9% who don't have an account balance to allow this kind of trading, use a stop loss.

If your stop is 5/7 pips behind your entry - you'll get spiked often that transaction costs will impact your bottom line so much that it will be incredibly difficult to be profitable over the long term.
  • #30
  • Aug 4, 2013 10:42am Aug 4, 2013 10:42am
Quoting Kanzler
{quote} {quote} If I know one thing, it's that no professional trader EVER trades without a stop loss. And I know at least a couple of them who trade full time for a living. If you can't place a stop loss with your order you don't know where you're wrong, and you're setting yourself up for failure from the very beginning. A lot of people will cite "stop hunting" as the reason for them not using stop losses but can you honestly tell me what a stop hunt setup even looks like? And if so, where they happen? If you can, you wouldn't place your stop...
Okay, It seems that you are benevolent, so why reduce all you have just said to one phrase "don't be this guy" ?

You don't know me and don't even know how I trade. Who told you that I scalp the 5 min chart with high leverage ? On the contrary, when I do so, I put hard stop loss because these are special and rare trades for me and I don't feel comfortable letting them run without any stop loss.

On the other side I have an EA who trades without stop loss since 3 months now and it's doing well until know. And if you read me well, I said that in fact my stop losses are dynamic in the way that instead of setting a hard stop loss, I let the cross of two moving averages tell me when I should stop, that is to say, close the position. You see it ? Most of the time, this removes the noise but in some occasions I know that I could be hit a bit hard, almost on news announcements, FOMC, NFP, but I'm aware of that and play accordingly and these are the only times when I need to be in front of the screen.
Simplicity is the Ultimate Sophistication.
  • #31
  • Aug 4, 2013 10:49am Aug 4, 2013 10:49am
Impossible to answer

one thing is for sure, your optimum stop level is going to be a function of your skill level.

To give a simplified example, think about it in the same way you might think about what strategy you might use if playing a game of darts. If you had no skill, you'd aim for the centre of the board, as aiming for treble 20 would penalise you. If you had high skill, you'd go for the treble 20, aiming for the centre would reduce the score. Dependent on skill level, there's an optimal position to aim for

same thing applies to trading, different levels are required at different stages of development, but even then it's hard to generalize as different trading methods require different approaches. It's one of those things that take experience and work.
  • #32
  • Aug 4, 2013 10:53am Aug 4, 2013 10:53am
Quoting Razzle
...it's hard to generalize as different trading methods require different approaches. It's one of those things that take experience and work.
Wise words, just what I was trying to say
Simplicity is the Ultimate Sophistication.
  • #33
  • Aug 4, 2013 11:00am Aug 4, 2013 11:00am
yes
  • #34
  • Aug 4, 2013 11:22am Aug 4, 2013 11:22am
Quoting spufuz
Yes. If its to tight it will be too easily hunted or caught in market noise.
Maybe, it depends if you make the SL when you place the order or if you manually (or via EA/custom app) enter the stop loss order once the stop loss point has been hit. If the SL order is not on the book it cannot be seen and hunted.

I think every trader has a stop loss, the method for calculating that stop loss point will be different for everybody, if you are a real HFT then a 1 pip stop loss will seem normal, if you trade longer terms using daily bars etc then then stop loss may be calculated on some multiple of the average daily range etc....
  • #35
  • Aug 4, 2013 11:37am Aug 4, 2013 11:37am
Funny, this thread is turning into a SL vs no SL discussion. IMO ( and please note this is just my personal opinion ) in order for a trade to be a trade it must have a stop loss, the rest is semantics and/or hard core gambling. But what's a SL then? For me it isn't necessarily a line saying sl on a chart. It is how much I stand to lose on a given trade, OR set of trades (ie, equity %). That said if I'm trading 1 pair, the sl will be visible on the chart. It may be very tight, very wide, or most often somewhere in-between, depending on the specifics of the trade. However, if I'm trading currencies (ie, basket of pairs) there will be no sl visible on any chart. Wait don't bash yet... The SL is still there! It is a set % of my equity, and of course like a regular SL it is there for my protection only and it's not supposed to be hit. Think of it this way: Is it really wise to go for a ride in a Kawasaki Ninja ZX-6R without wearing a helmet? Personally, rather have it and not need it, than need it and don't have it.

My 2c
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #36
  • Aug 4, 2013 12:02pm Aug 4, 2013 12:02pm
If you can trade without a SL and be objective enough to go, market is going up, I'm short, change sides and see what happens if your in a profit or loss at the time, most of us haven't, so our losses grow and grow till margin call, but if you can crack trading that way and handle the drawdowns then awesome it's very likely the way to go.

Might run a demo account and experiment with this pretty much always in, no SL method.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #37
  • Aug 4, 2013 12:41pm Aug 4, 2013 12:41pm
Quoting Turveyd
If you can trade without a SL and be objective enough to go, market is going up, I'm short, change sides and see what happens if your in a profit or loss at the time, most of us haven't, so our losses grow and grow till margin call, but if you can crack trading that way and handle the drawdowns then awesome it's very likely the way to go. Might run a demo account and experiment with this pretty much always in, no SL method.

I think of it like this (or thought of it a while ago).

I traded conventionally for more than a year with a stop and a TP placed at entry. I traded a trending market and always traded in the direction of the trend. I followed every classic tip or assumed logic that I could as I thought that was being most wise. I mean if it was an assumed protocol why would I challenge it.

Net result over a full year was negative.

I then looked back and found that every trade I ever placed would have been a winner if I had not placed the stop loss so tight. When I looked at the relative tightness of the stop loss in terms of 'what would it have taken to not trigger a stop loss' some of the numbers where quite high and as much as 500 pips.

So my question to myself is then, if I don't place a stop loss surely I would win every trade at some point?

Well while this is partly true it will still depend on your entry and trade choice. Trade without a stop when you don't really know what your doing and your account is over.

All you have to do is lose one trade and you lose everything. trading with or without is a personal choice but what I am certain of is that if you trade without (which is tempting I know)then make sure you really know your stuff and in my opinion you should have years and years of experience before attempting this.
Money never sleeps...
  • #38
  • Aug 4, 2013 1:18pm Aug 4, 2013 1:18pm
Absolute!
  • #39
  • Aug 4, 2013 3:00pm Aug 4, 2013 3:00pm
Quoting Turveyd
If you can trade without a SL and be objective enough to go, market is going up, I'm short, change sides and see what happens if your in a profit or loss at the time, most of us haven't, so our losses grow and grow till margin call, but if you can crack trading that way and handle the drawdowns then awesome it's very likely the way to go. Might run a demo account and experiment with this pretty much always in, no SL method.

Hanover has a post on SL vs no SL where he considers this view. Looked for it recently, but unfortunately couldn't find it. The way I see it such approach where one is always in the market would require a nearly flawless trader. Don't get me wrong, I'm sure there are a few exceptional traders who can make money trading this way. But clearly this isn't for everyone. I know it isn't for me. I make mistakes, and this leaves too little room for error. It would also make me miss on what is often the most profitable position which is having no position at all.

However, if I was to find a real objection to this approach it would be that comparing draw down management the way described with using a SL is fallacious, as these two are not the same thing. Managing draw down leaves one exposed to the unforeseeable black swan. Using a SL does not. Like Inpatient mentioned, one trade without SL will suffice to lose a whole account. IMO using a SL is the only sure way to limit losses, and the only way a trade plan can possibly account for the unaccountable.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #40
  • Aug 4, 2013 4:07pm Aug 4, 2013 4:07pm
Quoting vox dei
{quote} Hanover has a post on SL vs no SL where he considers this view. Looked for it recently, but unfortunately couldn't find it. The way I see it such approach where one is always in the market would require a nearly flawless trader. Don't get me wrong, I'm sure there are a few exceptional traders who can make money trading this way. But clearly this isn't for everyone. I know it isn't for me. I make mistakes, and this leaves too little room for error. It would also make me miss on what is often the most profitable position which is having no...
Dunno, the amount of times I've been SL'd at the bottom which them would of ran for very good pips, it's tempting to run without.

Ofcourse a lot of SL's saved me from 200pip moves against me, so you'd have to trade at a lot size where 200-300pips is 3% say.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
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