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Trading Without a StopLoss

  • #341
  • Nov 10, 2013 7:07am Nov 10, 2013 7:07am

Besides what already was posted.


There are a lot of threads here, which bother this issue, especially money-management in detail.


Most of the traders think in terms of profits and always assume a risk reward of 1:1/2:1 or whatever.

But keep in mind after entering an order, nobody knows, how much profit any trade will generate or if the trade will move into loss.


That does not refer to the hit rate or applied strategies at all.

We know, that a hit rate < 50% can also be profitable, concerning and applying Order- and RMM-management.


What we can do and know with certainty, we can only calculate and define the loss, refering what we will risk at individual limits, concerning portfolio and account, as long we remain in a profitable and secure account-area, so we can deal with losses, even with multiple orders, without burning or endanger the account.


Unexperienced traders are mainly focused on setups to predict market/price -movements, disregarding risk- and money-management. It should be vice versa.

Newbies ask in almost every thread, how to place and use stop-loss?
It is worst of time, to talk to demo-traders in that way.


Ancient and successfully traders, like e.g. “Jesse Livermoore”,
he had apply a simple formula during his starting career in bucket shops.

He closed an order instantly, when his margin/invest of an order was hit in loss.
This was his individual risk-management.

On the other side, he protected any order in profit by SL and trailing, with scaling in and out, if the position did move into profit.


This is an example of the common expression, cut losses short and let winners run.


Order- and money-mangement provides a lot of possibilities, if we are familiar with price-action. We can scale in or out (e.g. by partial profit or hedging, OCO-Orders).


It´s traders live, that not every order will move into profit.

Ask yourself, if you are prepared to lose money and where are the limits?
Did you protect and remain your account in a position to compensate losses (even in worst cases)?


Again, don´t think in terms of profit.
Be aware of risk and losses and the issue of using stop-losses will be clarified and solved by itself, considering the account.


Only few thouhgts in generell.


Trade well my friends

Over60

Enter Signature
  • #342
  • Nov 10, 2013 7:45am Nov 10, 2013 7:45am
Quoting BeginnerJoe
Jesse Livermoore also held losing positions for years. For those who have the capacity, it's a perfectly legitimate strategy. The market is a contest. If you cannot beat it through firepower, you can beat it through sheer endurance. This is the kind of thing beginners like 2+2 will have to come to grips with before he can reach the next level. Capacity, now that's a key element of the holy grail.
Like how he kept buying cotton and then went broke that time because of that trade?
Build good relationships with others.
  • #343
  • Nov 10, 2013 7:47am Nov 10, 2013 7:47am
Quoting BeginnerJoe
Jesse Livermoore also held losing positions for years. For those who have the capacity, it's a perfectly legitimate strategy. The market is a contest. If you cannot beat it through firepower, you can beat it through sheer endurance. This is the kind of thing beginners like 2+2 will have to come to grips with before he can reach the next level. Capacity, now that's a key element of the holy grail.
I think there's quite a lot of truth in some of what you're saying.

Interbank dealers according to what I know don't use stop-losses. They simply manage their positions. I read this somewhere on this forum and I think this is everything you need to know about managing risk:

"As a wrongly timed entrance , just signifies your lack of the ability to pulse the market.

The right protocol, I repeat, would be to either withdraw from the position
with minimal damage.(damage control if you please).

OR to commit into the position, as a rescue process and a re-averaging process for position building.

There are no other avenues other than these two options.

If positioning was bad, and the trader reverts back to analysis, then the whole process collapses into hope and a host of subjectivity and egoistical processes begins.

Which will paralyse the traders determination and create illusional thinking.

I hope I articulated clearly."

from one of the traders here on FF.
Build good relationships with others.
  • #344
  • Nov 10, 2013 7:57am Nov 10, 2013 7:57am
Quoting shellsnail
{quote} Like how he kept buying cotton and then went broke that time because of that trade?
Even the best of them makes occasional misjudgement. My analysis is that he underestimated the size of his opponents. He should have held his position and traded the other side until the momentum in that direction is spent. At that point he can force it going further before loading up for the direction that he wanted.
  • #345
  • Nov 10, 2013 7:59am Nov 10, 2013 7:59am
Quoting shellsnail
{quote} I think there's quite a lot of truth in some of what you're saying. Interbank dealers according to what I know don't use stop-losses. They simply manage their positions. I read this somewhere on this forum and I think this is everything you need to know about managing risk: "As a wrongly timed entrance , just signifies your lack of the ability to pulse the market. The right protocol, I repeat, would be to either withdraw from the position with minimal damage.(damage control if you please). OR to commit into the position, as a rescue process...
to elaborate,

for

1) If your edge is very strong, you can often get out with a small profit or breakeven when you are in a 'bad' entry; most however can't read the market well enough to know when to take the loss and when to WAIT AND ENDURE until it comes back to breakeven so it's SAFER in general to just use a STOP-LOSS but it is by no means the ONLY approach.

2) If you entering on shorter TFs trying to catch a longer term reversal then as long as the longer term price structure holds then you can always see it as building a position at a better price.
Build good relationships with others.
  • #346
  • Nov 10, 2013 8:09am Nov 10, 2013 8:09am
Quoting shellsnail
1) If your edge is very strong, you can often get out with a small profit or breakeven when you are in a 'bad' entry;
The edge is made. The entry is uncritical. The ultimate trader is one who sculpts his edge in any environment.
  • #347
  • Nov 10, 2013 10:16am Nov 10, 2013 10:16am
Reviewing my trades, would I be better off without SL's my method is pretty strong and I'm not sure.

Obviously I'd have to be prepared to manually exit when a trend changes and it's going to continue to go without me, but that's easier said than done.

Lets go back and do the math on last weeks trades :- ( going backwards through them )

1. Loser EJ -$11 ish, went as low as -$65 if not for SL, gave entry -$35 best on that day. ( Very quick sell off ouch ) so call it -$30 there.

2. GA -$8 2 positions, news spike kicking it out, coulda taken +20 and +40 so +$18 so better off +$26 with no SL.

3. GA -$15. SL JUST hit here, shoulda gotten +20 +35 call it +$17 so that's +$32 with no SL

4. NU -$4 , counter trend so STUPID trade but without SL coulda hit +$9 I think, so +$13 better off.



I'd be approx $41 better off at best with no SL, interesting.

6 losing positions ( some of above had 2 positions ) , 11 winning positions.

My method, seems to support no SL's will give it more thought ofcourse!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #348
  • Nov 10, 2013 12:29pm Nov 10, 2013 12:29pm
I would be cautious about taking what some are saying here as sound advice. If you've been trading for some time and have some experience, you probably already know how trading without a stop loss can wipe out months worth of profit in a week. Trading without a stop seems wonderful as you keep banking trade after trade for a profit, but then all of a sudden the trades start going backwards. Before you know it half your account is gone and the other half will be gone even sooner, especially if you are averaging down. So, for those of you who are beginners, don't follow the advice of other beginners. Don't listen to nonsense like you can "create your own edge". Unless you have the resources or reputation to move the market ($$ Billions) or are willing to risk your life blowing up a pipeline or something, you cannot create your own edge. All you can do as a retail trader is find inefficiencies in the market and exploit them. Best way to exploit these inefficiencies (once you become good at finding them) is by capping your loss and not capping the gain. Only getting out when you deem the inefficiency no longer exists. In effect, it's the reverse of what no stop loss traders do.
  • #349
  • Nov 10, 2013 12:36pm Nov 10, 2013 12:36pm
Quoting Turveyd
Reviewing my trades, would I be better off without SL's my method is pretty strong and I'm not sure. Obviously I'd have to be prepared to manually exit when a trend changes and it's going to continue to go without me, but that's easier said than done. Lets go back and do the math on last weeks trades :- ( going backwards through them ) 1. Loser EJ -$11 ish, went as low as -$65 if not for SL, gave entry -$35 best on that day. ( Very quick sell off ouch ) so call it -$30 there. 2. GA -$8 2 positions, news spike kicking it out, coulda taken +20 and...
If you review all your trades you will find plenty of examples where not having a stop would have resulted in a profit. Those trades are common and apparent. What is not common or apparent are those few trades you stopped early that would now be huge losers. Losers so big that they eclipse the gains of all the profitable trades.
  • #350
  • Nov 10, 2013 1:01pm Nov 10, 2013 1:01pm
Quoting Turveyd
Reviewing my trades, would I be better off without SL's my method is pretty strong and I'm not sure. Obviously I'd have to be prepared to manually exit when a trend changes and it's going to continue to go without me, but that's easier said than done. Lets go back and do the math on last weeks trades :- ( going backwards through them ) 1. Loser EJ -$11 ish, went as low as -$65 if not for SL, gave entry -$35 best on that day. ( Very quick sell off ouch ) so call it -$30 there. 2. GA -$8 2 positions, news spike kicking it out, coulda taken +20 and...
Imho, no conclusions can be drawn using such a small sample of trades. In the event that the trade sample was large enough, the conclusion that you would be better off without using a Stop Loss could still be invalid. It could simply mean that the way you're placing your stop loss currently is inefficient, and needs to be revised.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #351
  • Edited 1:17pm Nov 10, 2013 1:04pm | Edited 1:17pm
I trade without fix stop loss.
My SL is money allocated for that trade.(Idea is well explained in a book called "Bird Watching in Lion Country")
Instead of pips my stop for example is $200
If my position is .50 a pip that's 400pips
This way you are not getting stopped out on minor daily moves but important like everyone is saying you still must take the loss if position is seriously going wrong way.
Example I was long on Aussie at 1.012 and took the loss.Priced dropped over 1k pips after my loss.Went back in at 88 89 90 and made more then my loss back but its important not to be stubborn when market is clearly telling you otherwise.
I think also SL depends where the trade is taking place.80% forex is not trending instead price is confined to a range-channel.With exception of Yen pairs most pairs are in range.
If I am at bottom or Top range I build positions in increments without SL.This is my method and I don't advocate to anyone.
Regards
In trading, you have to be defensive and aggressive at the same time
  • #352
  • Nov 10, 2013 1:14pm Nov 10, 2013 1:14pm
In a volume size of 0.01 to 0.02 and trading a single trade for weeks or fortnightly . and want to make good return
let me explain as mentioned above lot size and single trade for the above said period and having a balance of $100 .
No need for stop loss only put profit marging of 20 to 30 $ that is all as many broker hits the stop loss point too quickly .
But if yu want to trade above the lot size of more than 0.03 than you need the stop loss what ever may be your account balance . Than it wil be like suicide for your account But what i mentioned above any one follows will bring you 99% of time profit
Neither a Bro Nor a Pro I am I
  • #353
  • Nov 10, 2013 1:21pm Nov 10, 2013 1:21pm
Quoting 2+2=4ex
I would be cautious about taking what some are saying here as sound advice. If you've been trading for some time and have some experience, you probably already know how trading without a stop loss can wipe out months worth of profit in a week. Trading without a stop seems wonderful as you keep banking trade after trade for a profit, but then all of a sudden the trades start going backwards. Before you know it half your account is gone and the other half will be gone even sooner, especially if you are averaging down. So, for those of you who are...
I find it hilarious that there are people delusional enough to actually think they can beat the market

There's no beating the market. All one can do is to position oneself on the market's side, and let the market do the heavy work. Rinse and repeat.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #354
  • Nov 10, 2013 1:24pm Nov 10, 2013 1:24pm
Quoting vox dei
{quote} I find it hilarious that there are people delusional enough to actually think they can beat the market There's no beating the market. All one can do is to position oneself on the market's side, and let the market do the heavy work. Rinse and repeat.
Absolutely, most traders fail because they try to beat the market or guess where will be EURUSD after 1 month. The most complicated about trading is that it is pretty simple. Just by or sell and manage the risk.
  • #355
  • Nov 10, 2013 1:29pm Nov 10, 2013 1:29pm
Quoting Davit
I trade without fix stop loss. My SL is money allocated for that trade.(Idea is well explained in a book called "Bird Watching in Lion Country") Instead of pips my stop for example is $200 If my position is .50 a pip that's 400pips This way you are not getting stopped out on minor daily moves but important like everyone is saying you still must take the loss if position is seriously going wrong way. Example I was long on Aussie at 1.012 and took the loss.Priced dropped over 1k pips after my loss.Went back in at 88 89 90 and made more then my loss...
I see nothing wrong with the way you trade. You're clearly humble (and intelligent) to accept the possibility your trade has gone bad, and cut the losses before they cripple you.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #356
  • Nov 10, 2013 1:29pm Nov 10, 2013 1:29pm
Quoting vox dei
{quote} I find it hilarious that there are people delusional enough to actually think they can beat the market There's no beating the market. All one can do is to position oneself on the market's side, and let the market do the heavy work. Rinse and repeat.
I don't think anyone here is talking about beating the market though... it's more about reading the pulse of the market. the better you can do it, the better your entries will be and the less drawdown you will have. As I said, if an entry isn't working then either exit immediately on either a good retracement using limit orders or use stop-loss to get out or average in if it is a longer term position, but never ever go back into PLANNING/thinking.
Build good relationships with others.
  • #357
  • Nov 10, 2013 1:39pm Nov 10, 2013 1:39pm
Quoting srmfx
{quote} Absolutely, most traders fail because they try to beat the market or guess where will be EURUSD after 1 month. The most complicated about trading is that it is pretty simple. Just by or sell and manage the risk.
I find a bit more complicated than Just by or sell and manage the risk. Entries are just as important as exits. If the entry is not good enough one may never have the chance to manage the position.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #358
  • Nov 10, 2013 1:44pm Nov 10, 2013 1:44pm
Quoting shellsnail
{quote} I don't think anyone here is talking about beating the market though... it's more about reading the pulse of the market. the better you can do it, the better your entries will be and the less drawdown you will have. As I said, if an entry isn't working then either exit immediately on either a good retracement using limit orders or use stop-loss to get out or average in if it is a longer term position, but never ever go back into PLANNING/thinking.
There was one person defending the proposition that the market could be beaten (not you though, fortunately for you).
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #359
  • Nov 10, 2013 1:50pm Nov 10, 2013 1:50pm
Quoting vox dei
{quote} I see nothing wrong with the way you trade. You're clearly humble (and intelligent) to accept the possibility your trade has gone bad, and cut the losses before they cripple you.

Hi Vox
As you obviously know trading is complex.Its dynamic and market does not care about your position or opinion.
We must put our egos aside see the market what it is.
Jack Schwager in his trading interviews with Top traders said this.
"Best Traders can change their minds on a dime"
What this to me means flexibility to adapt to new situation.
Darwin said the same-Its not the smartest that survive but the ones who can adapt to change.
Article worth reading
Regards
In trading, you have to be defensive and aggressive at the same time
  • #360
  • Edited 7:46pm Nov 10, 2013 2:12pm | Edited 7:46pm
Quoting Davit
{quote} Hi Vox As you obviously know trading is complex.Its dynamic and market does not care about your position or opinion. We must put our egos aside see the market what it is. Jack Schwager in his trading interviews with Top traders said this. "Best Traders can change their minds on a dime" What this to me means flexibility to adapt to new situation. Darwin said the same-Its not the smartest that survive but the ones who can adapt to change. Article...
Hi Davit,

Those are some of the wisest words. Finding the perfect balance between holding a bias, or letting it go (=changing, being counter human nature), it's what I find most challenging in trading that involves high degree of discretion. That's also the reason why I take refuge in more systematic trading approaches. Systematic approaches may cap profit potential compared to discretionary trading, but they also cap loss potential. Consistency is much easier to come by.

EDIT:

Thanks for the article. Trade like a croc - enjoyable read!
"To hold, you must first open your hand. Let go." - Lao Tzu
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