This has been an interesting discussion, especially the last few pages. I trade with a stop loss on every trade, and my average stop loss is never greater than 25 pips. On a trade of one standard lot, my loss will never be greater than $250. So, trading without a stop loss would require a strategy that would never negatively impact my account by more than $250. From what I have read here, this requires reducing my position size to something less than $10/pip. I have a target for every trade that averages 80 pips, so lowering my position size will result in less money per trade. If I cut the position size to $3/pip, I can accommodate an 80 pip draw down, but my gain per trade goes from $800 to $240 per trade. However, if the potential drawdown exceeds 80 pips, then the position size must be reduced further, thereby reducing potential gains further. But, let me stick with this example. After20 trades, I have 17 positive trades and 3 losses, or $13600 in gains, and $750 in losses, netting $12850. Assuming that all the trades with no stop loss either break even or go to target, I would have 17 positive trades at $240 each, or $4080 total. But, the net, liquidation value must be calculated by subtracting to unknown value of the open, running negative trades, which lowers the value of the positive trades to something less than $4080. In addition, the net efficiency of the account is impacted by the open negative trades. In this example, 3 trades might be open at any moment. If these are open in an FXDD account, and are EUR/USD positions, at $3/pip, then about $750/trade is set aside for the trade! or a total of $2250 of my account balance unproductively being tied up in trades that I hope will reach break even.
I know this assumption is based on a trading style, strategy and planning that can pick targets. But, given that is what I do, where is the advantage in trading without a stop loss? By the way, if one open trade goes negative by more than 135 pips, my net position, the running liquidation impact of my trading, goes from positive to negative. Why is that ever a good thing?
I am am not putting down the idea of trading without a stop loss, since many successful traders do just that. I am trying to figure out why it might be considered a better way to trade.
I know this assumption is based on a trading style, strategy and planning that can pick targets. But, given that is what I do, where is the advantage in trading without a stop loss? By the way, if one open trade goes negative by more than 135 pips, my net position, the running liquidation impact of my trading, goes from positive to negative. Why is that ever a good thing?
I am am not putting down the idea of trading without a stop loss, since many successful traders do just that. I am trying to figure out why it might be considered a better way to trade.
