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Trading Without a StopLoss

  • #881
  • Nov 21, 2013 7:34am Nov 21, 2013 7:34am
Quoting Slim Buffett
{quote} OK...... If I'm not mistaken you're one who trades for 9 or 10 pips (TP). In fact, I believe I read a post (yours) that said you adjusted your TP from 9 pips to 10 pips. Fine...... I respect that but at the same time find it laughable. I'm of the opinion that a 1 pip adjustment in TP is like a fart in the wind. It feels good for half a second but really means nothing. Regardless...... IF you do trade for 10 TP and you're here on this thread regarding no SL...... I'm curious as to how long (many pips) you would let a trade go against you...

Slim that is a good point worth considering and here is my current answer:
Just because I collect at ten points doesn't mean I have stopped trading the pair.. There are many split and staggered position schemes depending up the circumstances as I see them, and I pretty much have used them all.
As for the second point, Some trades I would not let ride for 500 pips.(or 50 even) Some trades may go for a thousand ( if I am convinced they will come back, and have room to make money on the pair going that way).

Yes I do have stops: I have them in mind when I enter a trade. They are not fixed, and are executed manually when my reasoned opinion finds them justified.

What I try not to do is tell my broker where they are (It is an automated desk, but what is it automated to do?).

There is a point at which the floating loss is no longer comfortable for me. (It seems to be at a lesser level than some others report)

Some day I might write an EA to handle this process for me, but I haven't gotten there yet.

I subscribe to this motto:

A margin call is a terrible thing.
  • #882
  • Edited 1:51pm Nov 21, 2013 1:27pm | Edited 1:51pm
Quoting 2+2=4ex
{quote} You don't need to predict the market more than 50% of the time. If your average reward to risk ratio is 7:1 (for example) you could profit substantially with only a 15-20% win rate. With that said, I agree that traders who approach every trade with set targets of 2:1, or 3:1, or whatever, is silly. There should be flexibility with your taking profit, but not so much with your stopping the loss. Ironically, you cite randomness as a main reason why traders should not use a stop loss. It should be the other way around. Since price is unpredictable...
2+2=4ex,

I don't doubt you are a successful trader. Matter of fact, if you are profitable long term and earn a living off of currency trading using stops then you are light years ahead of where I want to be. I really don't know how big your stops are or how much capital you employ but we all know the math. Too tight of a stop and you lose the vast majority of times. Too loose a stop and you can't take any significant position sizes without risking a good chunk of capital.

The reason for me posting what I did was to comment on the assault of any strategy that does not employ a stop loss. I agree this topic has been beaten to death in the past with neither side acknowledging the pros and cons of either strategies.

I don't see the irony you point out. Whatever your edge is, it's never going to work 100% of the time. Not having a stop affords you the privilege to avoid losing a position because of random noise. I agree with you when you say that a position can run against you and potentially wipe out your equity. However, this assumes that trader is using such huge positions that a move of 100 pips would be so detrimental to their trading equity. You can use adequate position sizes that would allow breathing room for price and even though you may have a floating loss you can still recover when price retraces without being in danger of a margin call. Again, this is nothing new. It's something that has been beaten and beaten to death.

Also, I don't agree with Vox completely when he says that having a floating loss is dangerous because it depletes your equity. Yes, this is true except when you are still building equity with other successful trades. So while your floating loss is there, your balance and therefore equity increase when your other trades hit TP.

A bit off topic but big Wall St. firms employ what are known as the Greeks; hedge parameters used for dynamic hedging. When a portfolio is gamma positive it doesn't matter where the market goes, they make money. Yes, there are times when the gamma is negative for an asset but the one true secret of Wall St. is that their portfolio at any give time, when the gammas are summed up, they are positive; and in black swan events when they're not, they stop all trading.

I'm not saying trading without a stop is anything like this; what I am saying is that you have to look at the whole picture. What else is the trader doing? Is he just letting 1 lot float around without a stop loss with a starting balance of $5,000? Or is he allowing breathing room for a trade that is adequately sized and currently in a loss and hitting profits elsewhere?

That's all I'm saying. I'm not claiming or advocating trading without a stop loss, but instead of just trashing the idea I wish people would be more open minded.

Also, yes I do agree that you can anticipate price movement by following fundamentals but even that in the long term is a wash. Last week, the European Central Bank cut interest rates and EU plunged 100 pips on one candle. Fine, a great example of following news and "predicting" price. However, how many times has price gone completely the opposite direction in light of news, good or bad? Countless.

I have no doubts you are successful 2+2=4ex. I've seen your posts in the past and you are a very helpful person. I wish you continued success in your future.
Remember, Red. Hope is a good thing, maybe the best of things...
  • #883
  • Nov 21, 2013 1:39pm Nov 21, 2013 1:39pm
Quoting Slim Buffett
{quote} I didn't suggest that you cannot trade without a stop loss ..... I DID suggest that it is useless to try and trade without ever "stopping" a trade versus letting it run forever against you. Even if you get that losing trade into profit, how many weeks/months/years might it take??? Do you take into consideration the opportunity cost ? Because of your months long draw down you can't enter another trade...........
Why can't you enter another trade? If you are referring to the backward, barbaric US regulations regarding not being able to have both a long and short of the same currency then that does not apply to me. If you are referring to margin then I do not trade huge position sizes.

Quoting Slim Buffett
{quote}I've also stated that my MM would not allow a huge drawdown because I would get a margin call long before that happens. Maybe that makes me stupid..... maybe that makes me careful. It IS the way I like it. {quote} http://en.wikipedia.org/wiki/Markov_process So if you believe that it's really so important then you do that Mr. Fury. Close your mind and never listen (really) to others...... only to what you BELIEVE others have said without looking further. That's you way.......... it seems.
Not at all Slim. I respect your opinions and glad you are commenting. I've also read many of your posts in the past and have learned from your insight. I just was defending my position on stop loss. That's all. If you are a profitable trader and you use stops then I think you are better off than someone who let's losses run. It's as simple as that. However, some of us just don't have the "talents" to trade this way.
Remember, Red. Hope is a good thing, maybe the best of things...
  • #884
  • Nov 21, 2013 3:20pm Nov 21, 2013 3:20pm
Quoting ForexFury
Also, I don't agree with Vox completely when he says that having a floating loss is dangerous because it depletes your equity. Yes, this is true except when you are still building equity with other successful trades. So while your floating loss is there, your balance and therefore equity increase when your other trades hit TP.
The fact you disagree on that point implies that you assume profits are guaranteed, whereas stacking more losses on top of the ones you already have, an impossibility. No disrespect meant, but I find it funny to say the least.

Quoting ForexFury
A bit off topic but big Wall St. firms employ what are known as the Greeks; hedge parameters used for dynamic hedging. When a portfolio is gamma positive it doesn't matter where the market goes, they make money. Yes, there are times when the gamma is negative for an asset but the one true secret of Wall St. is that their portfolio at any give time, when the gammas are summed up, they are positive; and in black swan events when they're not, they stop all trading.
Wallstreeters might not be the best role model for us you know. They can make profits on inside info, we can't. They screw up and get bailed out (all except poor Lehman's), we don't. Anyway, I've got to admit those Wallstreeters are good, I mean GOOD, they can even see black swan events coming! I don't understand why they would stop trading during a black swan event though. Why would they waste the best opportunity to make a quick gazillion $$$? I thought Wall Street was all about profits.

Quoting ForexFury
I'm not saying trading without a stop is anything like this; what I am saying is that you have to look at the whole picture.
I believe at least some in here are looking at the whole picture, cause they are discussing something that's important (cutting losses timely) and not the details (SL or no SL).
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #885
  • Nov 21, 2013 5:11pm Nov 21, 2013 5:11pm
Quoting 2+2=4ex
{quote} Well said vox. It's also a very good point that you mention how traders fall into the "over-traps". You explained it well.
Hi 2+2,

I'm glad to read this from you and that you didn't mind the 'nitpick'

Cheers
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #886
  • Nov 21, 2013 5:22pm Nov 21, 2013 5:22pm
Quoting ForexFury
If you are referring to margin then I do not trade huge position sizes.
A lot of people don't know how to size their trades. They think that they have to bet the whole account in order to make that 0.1% profit. For them, stop loss makes sense because they are really gambling. For people who know how to size their trades, they can get very good returns while trading a reasonable size.
  • #887
  • Nov 21, 2013 7:55pm Nov 21, 2013 7:55pm
Quoting BeginnerJoe
{quote} A lot of people don't know how to size their trades. They think that they have to bet the whole account in order to make that 0.1% profit. For them, stop loss makes sense because they are really gambling. For people who know how to size their trades, they can get very good returns while trading a reasonable size.
This is a good concept. Another trader with a business background elaborated on this at quite some length.

http://www.forexfactory.com/showthread.php?t=245149
If you are good at something, never do it for free--Joker
  • #888
  • Nov 21, 2013 9:22pm Nov 21, 2013 9:22pm
Quoting jmn5611
{quote} This is a good concept. Another trader with a business background elaborated on this at quite some length. http://www.forexfactory.com/showthread.php?t=245149
Very good. He had a business background. That gave him tremendous advantages in being able to see forex as just like a normal business. Additionally, he had patience. This combination gave him everything he needed to succeed.

His preference for placing a break-even stoploss in the following the day tells me he clearly understood the effect of the stop on the market behaviour.

I am happy to count him as a convincingly profitable trader, even though I have read only the first page of of his thread. With some people, they are just clearly apparent to me. His strategy is simple and very good.
  • #889
  • Nov 21, 2013 9:30pm Nov 21, 2013 9:30pm
Quoting BeginnerJoe
{quote} I remain biased. This is business and not crapshoot. Strangely enough, I have not taken on any positions. The position will load itself when ready. As I explained before, it's an active process. You are too easily influenced by what has already happened, and not what will happen later. That's a typical black/red mentality. A real business man looks at what will be in demand ahead of time. If you are that keen in taking notes of my trades, here's one for you: I am newly long in usd/chf. Feel free to jump up and down when it goes against me....

Speaking of "crapshoot".....your bias is now 100 pips wrong, and your UC trade has been underwater from the moment you entered the trade.

Here's a tip for you.....businessmen don't forma a bias, because it's suicidal. They remain flexible, like a tree blowing in the wind, so that they are able to adapt to whatever the trend dictates.

Have you figured out how to post a chart yet...or are you just going to run your mouth for ever?
Doing what you like is Freedom. Liking what you do is Happiness.
  • #890
  • Nov 21, 2013 9:48pm Nov 21, 2013 9:48pm
Quoting realjumper
{quote} Speaking of "crapshoot".....your bias is now 100 pips wrong, and your UC trade has been underwater from the moment you entered the trade. Here's a tip for you.....businessmen don't forma a bias, because it's suicidal. They remain flexible, like a tree blowing in the wind, so that they are able to adapt to whatever the trend dictates. Have you figured out how to post a chart yet...or are you just going to run your mouth for ever?
I respectfully disagree with this. Businessmen take biases all the time. I don't know how it is in Brazil, but in the US, the inventory in a WalMart is based to a large extent on where that WalMart is.

Internationally the menu at a McDonalds can be radically different, even state to state here. Businessmen do take biases.
If you are good at something, never do it for free--Joker
  • #891
  • Nov 21, 2013 9:50pm Nov 21, 2013 9:50pm
Quoting jmn5611
{quote} I respectfully disagree with this. Businessmen take biases all the time. I don't know how it is in Brazil, but in the US, the inventory in a WalMart is based to a large extent on where that WalMart is. Internationally the menu at a McDonalds can be radically different, even state to state here. Businessmen do take biases.
No they don't.

They gauge what the market wants, and then meet that demand.

The market sets the trend, not the businessman.
Doing what you like is Freedom. Liking what you do is Happiness.
  • #892
  • Nov 21, 2013 10:06pm Nov 21, 2013 10:06pm
Quoting realjumper
{quote} No they don't. They gauge what the market wants, and then meet that demand. The market sets the trend, not the businessman.
Business does ignore what the market wants, at times, look at all the traders that trade countertrend......sometimes businesses try to create a trend, but I do see what you are trying to say.

As far as BeginnerJoe is doing, the factory has this before, his trade secret is that he has found a way build inventory while keeping costs low. Genesis is good for this as well.

This is an argument in semantics I think.
If you are good at something, never do it for free--Joker
  • #893
  • Nov 21, 2013 10:22pm Nov 21, 2013 10:22pm
Quoting realjumper
{quote} Speaking of "crapshoot".....your bias is now 100 pips wrong, and your UC trade has been underwater from the moment you entered the trade. Here's a tip for you.....businessmen don't forma a bias, because it's suicidal. They remain flexible, like a tree blowing in the wind, so that they are able to adapt to whatever the trend dictates. Have you figured out how to post a chart yet...or are you just going to run your mouth for ever?

My bias remains regardless of the 100 pip wrong. As for usd/chf, I am disappointed it didn't move much against me. I was hoping for more. If it makes you happy, it stands at -19 pips.

I post chart when I see a reason. But my trading technique is not for discussion. Telling people what trade I am looking at isn't a problem. There's currently still no loading of aud/usd. Maybe it will load while I sleep. In fact with the way gbp was going I could load nothing for all day, and this was bad for trading. Ended the day at mere 0.27% account growth.

Yes I will run my mouth forever, except when I am sleeping.
  • #894
  • Nov 21, 2013 11:27pm Nov 21, 2013 11:27pm
Quoting jmn5611
{quote} Business does ignore what the market wants, at times, look at all the traders that trade countertrend......sometimes businesses try to create a trend, but I do see what you are trying to say. As far as BeginnerJoe is doing, the factory has this before, his trade secret is that he has found a way build inventory while keeping costs low. Genesis is good for this as well. This is an argument in semantics I think.
Businesses ignore what the market wants to their peril. If they ignore the demand and fail to supply....they will not prosper
Doing what you like is Freedom. Liking what you do is Happiness.
  • #895
  • Nov 21, 2013 11:32pm Nov 21, 2013 11:32pm
Quoting BeginnerJoe
{quote} My bias remains regardless of the 100 pip wrong. As for usd/chf, I am disappointed it didn't move much against me. I was hoping for more. If it makes you happy, it stands at -19 pips.
It doesn't make me happy....a 24 hour drawdown is nothing to be happy about....neither is a -130 pip bias. It's just plain stupid.


Quoting BeginnerJoe
I post chart when I see a reason. But my trading technique is not for discussion. Telling people what trade I am looking at isn't a problem. There's currently still no loading of aud/usd. Maybe it will load while I sleep. In fact with the way gbp was going I could load nothing for all day, and this was bad for trading. Ended the day at mere 0.27% account growth. Yes I will run my mouth forever, except when I am sleeping.
As far as anyone here is concerned, you do not have a 'trading technique'......all you have is your mouth......
Doing what you like is Freedom. Liking what you do is Happiness.
  • #896
  • Edited Nov 22, 2013 12:14am Nov 21, 2013 11:43pm | Edited Nov 22, 2013 12:14am
Quoting ForexFury
{quote} 2+2=4ex, I don't doubt you are a successful trader. Matter of fact, if you are profitable long term and earn a living off of currency trading using stops then you are light years ahead of where I want to be. I really don't know how big your stops are or how much capital you employ but we all know the math. Too tight of a stop and you lose the vast majority of times. Too loose a stop and you can't take any significant position sizes without risking a good chunk of capital. The reason for me posting what I did was to comment on the assault...
Hello Fury,

I trash no stop loss trading because there is no benefit to it from a retail traders standpoint. All retail traders that get margin called are cause of no stop loss. Even if a retail trader opens too large of a position, they can prevent a margin call with an appropriate stop loss.

I have read enough of your comments (as well as Joe's comments) to know exactly what you guys are doing. Remember, I never said that a no stop loss trader cannot ultimately end up in profit. If all your little positions are so tiny (as in very very very very small) you may in fact be able to withstand a severe drawdown with enough time - this can be proven with math. All I am saying is... is it worth the time? I don't think so. It just doesn't make business sense to constantly assume so much risk (per trade) for a minimal return (per trade), in my opinion. You are essentially taking high risks on your dollars to try and make pennies. The accumulation of multiple tiny positions all going into drawdown simultaneously, severely puts you at a mathematical disadvantage of making satisfactory profit within a reasonable time frame (time = opportunity cost). If you're going to do that then your better off buying bonds and reinvesting all the profits from those bond purchases back into more bonds (basically compounding a consistent and positive return).

Keep in mind that reward is proportional to risk. If you open a super tiny position where 100 pips in the red doesn't hurt you, then gaining 100 pips doesn't gain you much either. It's all relative. There is no way around the math. You cannot fool the market with money management only. You need a method or edge and then exploit that edge as aggressively as you can without being too aggressive. Best way to do that is to take losses along with the profits. You need to get in and get out. The edge will produce the profits over many trades. My suggestion is to find a method that works, you are comfortable with, and can trade it with a stop loss. When you see that you are consistently bringing in positive return (without open drawdown!!) then you are on the path to healthy account growth. If market conditions change, then move on to another method that works better under those conditions. You can make a lot of money trading, but it doesn't come overnight. It takes effort and consistent compounding over time to achieve that. By consistent I don't mean taking tiny profits every day while the account is overall negative due to drawdown from open positions without a stop loss. I mean compounding the profit after all trades are settled.
  • #897
  • Nov 21, 2013 11:47pm Nov 21, 2013 11:47pm
Quoting 2+2=4ex
{quote} Hello Fury, I trash no stop loss trading because there is no benefit to it from a retail traders standpoint. All retail traders that get margin called are cause of no stop loss. Even if a retail trader opens too large of a position, they can prevent a margin call with an appropriate stop loss. I have read enough of your comments (as well as Joe's comments) to know exactly what you guys are doing. Remember, I never said that a trader cannot ultimately end up in profit. If all your little positions are so tiny (as in very very very very small)...
Well said
Doing what you like is Freedom. Liking what you do is Happiness.
  • #898
  • Nov 21, 2013 11:53pm Nov 21, 2013 11:53pm
Quoting jmn5611
{quote} I respectfully disagree with this. Businessmen take biases all the time. I don't know how it is in Brazil, but in the US, the inventory in a WalMart is based to a large extent on where that WalMart is. Internationally the menu at a McDonalds can be radically different, even state to state here. Businessmen do take biases.
This is a different bias then the bias of choosing to have a stop loss or not.

Wal-Mart's inventory will obviously vary depending on the surrounding demographics. This would be like a trader selling AUD/USD based on study/analysis of fundamental factors. Wal-Mart also studies and analyzes a neighborhood to maximize profit. The question then becomes, will Wal-Mart continue to stock the shelves with something that is not selling? I'm sure they would find that very inefficient and detrimental to their profits. So should a trader continue adding when the results are not producing profit?
  • #899
  • Nov 21, 2013 11:57pm Nov 21, 2013 11:57pm
Quoting realjumper
{quote} No they don't. They gauge what the market wants, and then meet that demand. The market sets the trend, not the businessman.
Oh I see you answered this also.

In a much shorter and clearer response too!
  • #900
  • Nov 22, 2013 1:48am Nov 22, 2013 1:48am
Quoting 2+2=4ex
{quote} So should a trader continue adding when the results are not producing profit?
That depends on whether you are thinking like a mom and pop store or a multinational. There are going to be positions that are not in profit. Are your other positions making more money that you laggard is losing?

This is how multifaceted business would think, and it is quite far away from red or black.
If you are good at something, never do it for free--Joker
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