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Trading Without a StopLoss

  • #1,741
  • Edited 6:22am Mar 21, 2014 6:12am | Edited 6:22am
Quoting Arusha
I am new to trading, still only using demo accounts. My opinions on the original question about trading without a stop loss are: 1. You are never trading without a stoploss as your account is a giant stop loss. 2. Of course it is ok to trade in this way as long as you are happy to eventually lose your account balance and have a money management plan that can cope with that. (i.e. not all of your money in that one trading account!) When I have found a system (or a few) that work and have been thoroughly tested, I plan on having multiple accounts...
Much of what you write is of value.
Here is my take: the last thing first. Ditch the martingale strategy: the only way it works is with an infinite supply of money, and if you have such a supply, why waste your time in the forex?

Second: Many systems work sometimes on a particular pair and sometimes not. The art then, consists of using a different system, or going to a pair on which it works. ( i.e.If you are making money on the pair, your system is working for you.)
some systems work better when the pair is climbing rapidly(Trending). Some systems work better when it is sitting level in a channel (consolidating). Some systems try to work well with both, and usually end up working poorly with either. With over twenty pairs to play with, all who behave similarly with only minor differences, you can almost always find a pair that is working well with your system. The big houses watch them all, and play any one when conditions seem to suit them.

Third, by trading without a stoploss, most people mean not using a fixed stoploss that takes you out of a trade because it hit a price, no matter what other conditions may exist at the time.

Fourth: Your balance is not a fixed stoploss. It varies. If you are successful your "stoploss" is getting further and further away.

Fifth: when you put money in your pocket the risk/reward ratio falls to Zero. The best of all outcomes has you putting more and more money in your pocket.

Let me put forth that the most meaningful ratio, one that bears constant watching is Account margin/Account balance.
Every time I close a trade in my account I update the margin in my this way:
First on the line is the largest margin for the month: Second is the smallest (and best) for the month. third is the current.
(You DO keep a journal, don't you?)
I mean every time, and that is frequently over a dozen times a day.
If I see a trade going into profit, I open the close trade window and watch it. When it stops going my way , I close it.
Then I look at that pair and (usually) re-enter. (Unless I see that it has stopped moving that way, of course).

Going above Margin/Balance ration of 50% is a signal that it is time for emergency actions.
Mine is currently at 29%

If you can keep that margin/balance ratio at less than 40% nothing else seems to matter, sooner or later you will be making money.

If you cannot keep it from becoming greater than 50% nothing else seems to matter, sooner or later you will lose.

Whether or not you use a fixed stop loss....


Margin is determined by (total lot size)* (number of trades in action). Note that margin takes no note of Take profit levels or stop loss levels.

The smaller the lot size you put on each trade, the more trades you can put into action for the same margin.
You can compensate for that small size with a bigger take profit. Margin makes no note of that. Your judgement is involved in asking yourself, "What take profit is so large that some price can come into profit, come close to take profit, while I am asleep, and go back into loss before I wake."

The more windows you have open, the more top-notch setups you will see, the more money you will make, the less time you will spend on setups that are not top-notch, and the lesser overall endemic risk you will encounter. What's not to like about that?

Finally: Put anything you hear or say from any source to the test of your own reason:
They may be wrong. I may be one of them.
Good luck in your future endeavors.
  • #1,742
  • Mar 21, 2014 6:34am Mar 21, 2014 6:34am
Just to add to the previous post. I try to keep my account to less than 10% DD, however at times it will get as high as 20%, I have found that once it gets higher than that you need to take action because above 30% you run out of wiggle room or the ability to add trades. So at 20% I definitely take some losses and usually start much earlier than that. It just depends how I feel about the long term fundamental of the currency. The reason the strategy can work is winners compound your balance where a running debit does not compound. I will try to explain the math but it goes like this.

If in Jan you had 10% increase in your account by pocketing profits and a 10% DD some people will argue you had a wash. But in Feb. you again pocket 10% an you keep your dd around 10%. You account balance is up 20% and you have increased your account.

A starting balance of 10K will look like this.

1K profit in Jan goes to 11K or 10% but DD is 1000 dollars
1.1K profit in Feb. account goes to 12,100 but DD is 1220 dollars
1.2K profit in March account goes to 13,300 but DD is 1330

This does not mean I keep a debit balance all year but if I accumulate one that is how I handle it.

In other words you compound your profits but you dont compound your losses and your account balance goes up.
So my SL is when a currency changes direction fundamentally and you can see fundamental turns on the monthly chart. Put a 2MA on the Monthly chart and follow the trend. Add positions with the trend and wait for turnarounds and add more positions back into the trend. Most currencies will only change their fundamental direction 1-3 times a year and that is when I will clean out some of my DD. I will clean out DD if it gets above that 20% mark and start dealing with some of it when it gets above 10%. I have found out that I can keep close to 10% increase average per month over a year with such a strategy. Sometimes a losing week or month but most of the time winners. So my SL is when there is a fundamental change of direction of a currency on a monthly chart. Otherwise i hang in there and add positions during the dips/rallies of a currency move.
  • #1,743
  • Mar 21, 2014 7:17am Mar 21, 2014 7:17am
Quoting nanningbob
Just to add to the previous post. I try to keep my account to less than 10% DD, however at times it will get as high as 20%, I have found that once it gets higher than that you need to take action because above 30% you run out of wiggle room or the ability to add trades. So at 20% I definitely take some losses and usually start much earlier than that. It just depends how I feel about the long term fundamental of the currency. The reason the strategy can work is winners compound your balance where a running debit does not compound. I will try to...
It's good to see you post this nanningbob. As you can see, the method that you trade is getting a little bit of traction among a few who can understand what you are saying. I know you stopped teaching that here, and are reluctant to teach it at your new home. But it is how the big players do it, whether retailers can accept this or not. The triggers are different, but the money management is the key to all of trading.
If you are good at something, never do it for free--Joker
  • #1,744
  • Mar 21, 2014 7:32am Mar 21, 2014 7:32am
Quoting jmn5611
{quote} It's good to see you post this nanningbob. As you can see, the method that you trade is getting a little bit of traction among a few who can understand what you are saying. I know you stopped teaching that here, and are reluctant to teach it at your new home. But it is how the big players do it, whether retailers can accept this or not. The triggers are different, but the money management is the key to all of trading.
Thanks, I appreciate the comment. As you know I will draw a crowd quickly who will try their best to smear the meaning of what I teach but some are smart enough to grasp what I am trying to say even though they may not fully understand it.

Well I came to the conclusion that Forex brokers dont want you knowing this and have their minions attack traders who publicly post about such trading practices. If you look at COT charts and see that the big traders are almost always 55-45 in one direction or the other you know they arent trading what is commonly taught by the brokers and their teaching forums. I find it hard to believe 45% of the big COT traders are on the wrong side of a trade. I can believe they use multiple positions and carry some DD and are constantly increasing their account balance with multiple trades.

If you dont have a SL and you trade small enough lots to prevent brokers from margining out your account they cant touch you and you can consistently make money. You are not vulnerable to their games or market volatility. I also have been trying something where I trade most of my trades in the positive swap direction so if I do encounter DD I am reducing it also with swap. Its not much money but over a year it adds up.

I handle DD with using profits not my account, so if I make some money in a day and have some DD I am not comfortable with then I clean out some of the DD with half of my profits. This helps keep you DD low when you do have it. Then it wont accumulate to that 20% or bigger mark and my account balance is always increasing while my DD lessens or stays stable.
  • #1,745
  • Mar 21, 2014 7:53am Mar 21, 2014 7:53am
To Nanningbob:
"The reason the strategy can work is winners compound your balance where a running debit does not compound."

100% true: have you taken notice of this from one of my posts:
Going above Margin/Balance ration of 50% is a signal that it is time for emergency actions.
Mine is currently at 29%

If you can keep that margin/balance ratio at less than 40% nothing else seems to matter, sooner or later you will be making money.

If you cannot keep it from becoming greater than 50% nothing else seems to matter, sooner or later you will lose.

Whether or not you use a fixed stop loss....


Margin is determined by (total lot size)* (number of trades in action). Note that margin takes no note of Take profit levels or stop loss levels.

The smaller the lot size you put on each trade, the more trades you can put into action for the same margin.
You can compensate for that small size with a bigger take profit. Margin makes no note of that. Your judgement is involved in asking yourself, "What take profit is so large that some price can come into profit, come close to take profit, while I am asleep, and go back into loss before I wake."

If you keep your lot size at a fixed ratio of your balance, (Mine is 0.02 lot per 1000 + 1) and a sufficient balance ( say, 2500) then when your balance goes up your profit will go up, compounding it. The more rapidly more balance goes up, the more rapidly you compound.

Why in those circumstances, would you want to do something you did not really have to, not to avoid lessening the balance?

What you have posted here is reason enough to subscribe to you.
  • #1,746
  • Mar 21, 2014 8:25am Mar 21, 2014 8:25am
Quoting nanningbob
{quote} Thanks, I appreciate the comment. As you know I will draw a crowd quickly who will try their best to smear the meaning of what I teach but some are smart enough to grasp what I am trying to say even though they may not fully understand it. Well I came to the conclusion that Forex brokers dont want you knowing this and have their minions attack traders who publicly post about such trading practices. If you look at COT charts and see that the big traders are almost always 55-45 in one direction or the other you know they arent trading what...
Thanks for that tip nanningbob. It helps me freak out less, I start trimming the hedges at 5% drawdown, so now I can relax a bit. Im going to try 20% and see if I can handle it.
If you are good at something, never do it for free--Joker
  • #1,747
  • Mar 21, 2014 8:28am Mar 21, 2014 8:28am
Quoting Rap Skallion
To Nanningbob: "The reason the strategy can work is winners compound your balance where a running debit does not compound." 100% true: have you taken notice of this from one of my posts: Going above Margin/Balance ration of 50% is a signal that it is time for emergency actions. Mine is currently at 29% If you can keep that margin/balance ratio at less than 40% nothing else seems to matter, sooner or later you will be making money. If you cannot keep it from becoming greater than 50% nothing else seems to matter, sooner or later you will lose. Whether...
As for you Rap, you continue to put your work out there even though few can see it's value. I appreciate that. If you ever wonder whether or not your posts are worth it, please Google "the butterfly effect"

It is amazing that a man at your point in life who is fighting cancer can post the prolonged post that you do. I am only middle aged, and fighting my waistline, and I do not have the energy to teach.

Maybe someday I will.
If you are good at something, never do it for free--Joker
  • #1,748
  • Mar 21, 2014 9:02am Mar 21, 2014 9:02am
Quoting Rap Skallion
To Nanningbob: "The reason the strategy can work is winners compound your balance where a running debit does not compound." 100% true: have you taken notice of this from one of my posts: Going above Margin/Balance ration of 50% is a signal that it is time for emergency actions. Mine is currently at 29% If you can keep that margin/balance ratio at less than 40% nothing else seems to matter, sooner or later you will be making money. If you cannot keep it from becoming greater than 50% nothing else seems to matter, sooner or later you will lose. Whether...
I like your ratios and MM, etc. It is just from my experience to keep the DD at a smaller rate. I learned that in the Oct. 2008 crash. I couldnt overcome that big of a run however with a higher than 20% DD, from my studies I would have overcome it if I had closed a bunch of trades at the 20% mark and would have survived. So in a worse case scenario I survive with these rules. Also I cannot hedge and if you can you probably could survive a worse case scenario with a higher DD. I like your lot size to account size, I am slightly bigger with .03 to .05 per 1,000 so I use more caution. Without working the figures you maybe able to survive a higher debt load trading .02 lot size to 1000. So I am not deeply disagreeing with you on this point. I just learned something the hard way in Oct. 2008. You also should know I trade a much bigger account than 2500 and the bigger the account the lower you want to risk the account. However, a bigger account makes more money thereby I dont need to get as big of percentage. 20% of 2000 is 400 a month 10% of 10K is 1000 a month, 5% of 30K is 1500 a month so as your account grows you will want to take less risk but you are making more money than previous. Anyway that is how I am looking at it.
  • #1,749
  • Mar 21, 2014 9:08am Mar 21, 2014 9:08am
Also DD is DD but there are two different kinds. Permanent DD in which you keep taking SL and floating DD which if managed properly keeps your account balance continuing up.

10% is ok the part you have to learn is when and where to take a loss. I like taking my losses of off just a poor execution of a trade. For example NZD raised its interest rates. I dont bother waiting out any sell trades, I know I will do better if I close my sells and jump into buys. That is a fundamental and I dont want to trade against a strong fundamental. Or clear change of direction, monthly trend, or sometimes I just dont think it was a good trade once i am into it. That will stop a lot of your DD right there. But dips and rallys in trends or ranging markets, there is no reason to take a SL. Just enter a 2nd position and make it up.
  • #1,750
  • Mar 22, 2014 5:59am Mar 22, 2014 5:59am
Quoting nanningbob
Also DD is DD but there are two different kinds. Permanent DD in which you keep taking SL and floating DD which if managed properly keeps your account balance continuing up. 10% is ok the part you have to learn is when and where to take a loss. I like taking my losses of off just a poor execution of a trade. For example NZD raised its interest rates. I dont bother waiting out any sell trades, I know I will do better if I close my sells and jump into buys. That is a fundamental and I dont want to trade against a strong fundamental. Or clear change...
A re-read of your post gives me a nugget I have not considered:
"For example NZD raised its interest rates. I dont bother waiting out any sell trades, I know I will do better if I close my sells and jump into buys."

Let me elaborate:
When A financial decision by a governing body goes against you, It will be a loooong time before that losing trade turns around and heads for profit. It will just eat into your equity, your free margin, and do nothing for your margin.

Closing such a trade early, rather than late, will keep its costs cheap, reduce your margin, and give you room to make the reduction in balance back.

You have to ask yourself "What is the likelihood of another decision be this body reversing the effects of this one?" . The answer to that one is "pretty Low".

So some scheduled news events, especially decisions by the Fed and its counterparts, should be looked at from the standpoint of closing the trades they effect negatively quickly, as well as making profits form the trades they help.

I must amend my guidance charts once again, but it will be well worth it. (only 85 pips friday: better days are coming!)
  • #1,751
  • Mar 22, 2014 2:09pm Mar 22, 2014 2:09pm
Quoting Rap Skallion
{quote} Much of what you write is of value. Here is my take: the last thing first. Ditch the martingale strategy: the only way it works is with an infinite supply of money, and if you have such a supply, why waste your time in the forex? Second: Many systems work sometimes on a particular pair and sometimes not. The art then, consists of using a different system, or going to a pair on which it works. ( i.e.If you are making money on the pair, your system is working for you.) some systems work better when the pair is climbing rapidly(Trending). Some...
Thank you very much for your post. I am learning forex and still demo trading.

Learning and searching for methods that work for me is a job by itself. I found myself breaking too many rules that are taught out there: no SL; add to losing trades; try to pick tops/bottoms; over-leveraged; overtrading...

I do keep my eyes on the margin level all the time though. When it gets low I start washing the losing positions beginning with the smallest losses.

This month I've been trading as a daily scalper. The demo result is too scary for me. I need to come up with a formula to balance the equity/margin level/position size/number of positions/draw downs... and I find your posts extremely useful.

I am sure the forex journey is different for every one. I have much more to learn and appreciate your sharing notes.
I need to read them again and again.

If you have the time please check out the stats on my demo account here and tell me what I need to watch out for.

Many many thanks,
tt
  • #1,752
  • Mar 22, 2014 2:18pm Mar 22, 2014 2:18pm
Quoting nanningbob
{quote} I like your ratios and MM, etc. It is just from my experience to keep the DD at a smaller rate. I learned that in the Oct. 2008 crash. I couldnt overcome that big of a run however with a higher than 20% DD, from my studies I would have overcome it if I had closed a bunch of trades at the 20% mark and would have survived. So in a worse case scenario I survive with these rules. Also I cannot hedge and if you can you probably could survive a worse case scenario with a higher DD. I like your lot size to account size, I am slightly bigger with...
Thank you for your sharing nanningbob!
tt
  • #1,753
  • Mar 23, 2014 1:15pm Mar 23, 2014 1:15pm
trading without a stop loss

Attached Image (click to enlarge)
Click to Enlarge Name: NoStopLoss.jpg Size: 46 KB
  • #1,754
  • Mar 23, 2014 3:17pm Mar 23, 2014 3:17pm
Quoting Mingary
trading without a stop loss {image}
The tree is fake.
  • #1,755
  • Mar 23, 2014 4:38pm Mar 23, 2014 4:38pm
Quoting Rap Skallion
{quote} The tree is fake.
So is the rope and probably the water.
  • #1,756
  • Edited 7:05pm Mar 23, 2014 6:18pm | Edited 7:05pm
Quoting nanningbob
{quote} So is the rope and probably the water.
Attached Image (click to enlarge)
Click to Enlarge Name: close on decision.jpg Size: 60 KB


Here is a reasonable device to use as a guide to closing losing trades when the heavy news goes against (rate decisions. Long term stuff).

there are far more intelligent ways to deal with losing trades. As for me, I expect to be dead before the next black swan enters the fray.

Here is one black swan for your perusal. The croplands in the mid and far west of the us have been draining down an aquifer for some 4 decades now. They estimate it is 40% depleted But this is just a guess. Nobody really knows where the bottom is. What if they hit it during the dry season next summer. Sooner or later this will happen
and people are going to die because of it.

All those swimming pools you see in the southwest: what a waste! How often does Unicef say a baby dies from drinking polluted water? You do not want to know, the answer will haunt you.
But look it up; you deserve to be haunted.
  • #1,757
  • Mar 23, 2014 6:40pm Mar 23, 2014 6:40pm
Quoting Rap Skallion
{quote} The tree is fake.
Quoting nanningbob
{quote} So is the rope and probably the water.
Perhaps the only thing that's "real" is the rope with which you attempt to get traders
to hang themselves with.
But whatever works for you does just that, I suppose.

Quoting Rap Skallion
{quote} {image} there are far more intelligent ways to deal with losing trades. As for me, I expect to be dead before the nest black swan enters the fray.
My Father died from cancer many years ago. I CANNOT imagine that he would have spent his last
days posting on a forum.

Quoting Rap Skallion
{quote} {image} Here is a reasonable device to use as a guide to closing losing trades
So regardless of what you say.... you do have something that's used as a stop loss.

But carry on and be the best you can be.
When the Joker is in the deck.. fear not and play it well
  • #1,758
  • Mar 23, 2014 7:04pm Mar 23, 2014 7:04pm
"So regardless of what you say.... you do have something that's used as a stop loss."

Absolutely Slim. The only thing I have against fixed stop loss is that there has to be something better out there. I am seeking it.

Wait till you read my coming post on Margin/Balance ratio!

Your father spent his last days according to his wisdom. That is always best. I advise you to do the same. I shall do the same.

My last days, I find to be my best. I expect to find my last breath on this earth to be my most enjoyable one.

If you find my "rope" to be "real" I trust you have enough sense not to hang yourself with it.
It is good to hear from you again.

Remember the poor!
  • #1,759
  • Mar 23, 2014 7:46pm Mar 23, 2014 7:46pm
Quoting Rap Skallion
Absolutely Slim. The only thing I have against fixed stop loss is that there has to be something better out there. I am seeking it.
Wasn't that part of the "point". You're supposedly an old (older) dude suffering from cancer
and trying to teach people how to trade. But you still seek the answers.

Quoting Rap Skallion
Wait till you read my coming post on Margin/Balance ratio!
I await with bated breath ?

Quoting Rap Skallion
. If you find my "rope" to be "real"
I haven't noticed that about you just yet. Maybe in time............
When the Joker is in the deck.. fear not and play it well
  • #1,760
  • Mar 24, 2014 7:17pm Mar 24, 2014 7:17pm
Wasn't that part of the "point". You're supposedly an old (older) dude suffering from cancer
and trying to teach people how to trade. But you still seek the answers.


I shall always seeks new answer, better wrinkles, etc but the basic relationships between Pushes, Moving averages and lines of support/resistance still remain the same.

Sorry for the short post. I was very ill today tomorrow for the talk on ratio.

I am glad you do not condemn me out of hand.

They are talking about salting my bones with Radium 2,2,3: That may be a step too far for me.

If you get any good out of this pay it forward to the Poor.
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