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Trading Without a StopLoss

  • #1,921
  • May 4, 2014 8:09pm May 4, 2014 8:09pm
Quoting hanover
{quote} I fully understand that, and I also understand the following: I know that it seems that hedging provides an advantage, in that it having the two offsetting positions neutralizes the position (the 'pause button') while still giving you trading options (i.e. you have the opportunity to close both the long and short orders in profit). But, if you think it through carefully, the single-position trader has exactly the same opportunity, by simply opening a position (buy or sell) when you close out one of the positions in your hedge, leaving himself...
only if trader B was using no SL
tradewith60
  • #1,922
  • Edited 8:54pm May 4, 2014 8:26pm | Edited 8:54pm
Quoting nanningbob
.....
Bob,

You're correct that the text in green typeface is the crux of the matter.
Now I will attempt to demonstrate that it's possible to make the same profit, as the hedge trader in your example, without hedging.

Hedge trading. He buys
I buy also.

at -100 he hedges and buys again.
I am likewise -100. Now if I understand you, you are opening both a sell (to hedge) and an additional buy position at this point. That leaves you with 2 buy positions and 1 sell position. So you are net 1 long.
I already have 1 buy position, hence to replicate your net position, I don't need to do anything.

At -200 he hedges but profits +100 on the sell.
OK so you are opening another sell position here, leaving you with 2 buys and 2 sells, i.e. net flat.
So, to likewise be net flat, I must close my buy position, for a 200 pip loss.

price goes back up and he profits at +100 for 200 and his two losses (one buy one sell) is at -200.
Assuming I understand you, price rises 300 pips (from -200 to +100).
Since you are net flat, I replicate this by remaining out of the market.
So you have a buy trade (the original buy entered at 0) which is now +100 pips
You have a buy that you entered at -100, which will now be +200 pips
You have a sell that you entered at -100, that will now be -200 pips
You have a sell that you entered at -200, that will now be -300 pips

So, adding all these, your net P/L is +100+200-200-300 = -200 pips
My net P/L (from the one buy order that I closed out) = -200 pips

So, assuming that I understand correctly, we both end at -200 pips, i.e. I have replicated your hedge, without hedging, for the same P/L.

But perhaps I misunderstood. Can you give an example that includes price levels (e.g. EURUSD at 1.3000), at each step where you buy/sell/hedge? Then I can be sure that I know exactly what is happening at each level.

Thanks,
David
  • #1,923
  • May 4, 2014 8:28pm May 4, 2014 8:28pm
Quoting 60minuteman
{quote} It's an opinion not an attack. You seem unable to grasp that the hedge is/can be a pause button.
And so many of you "no stop + nedge" geniuses seem unable to grasp that to close a buy you sell, and to close a sell you buy... which is exactly what a nedge is with the only difference you pay more swap on a nedge and you get the warm and fuzzy feelings from seeing 2 so-called "open" trades on your platform, plus the warm and fuzzies from feeling like you are so edgy by going against common-sense and common wisdom by ignoring the patently obvious.

It really is amazing that so many of you are so hell-bent on denying the reality that is right in front of you. You can engineer all of the examples and excuses and "oh but I'm not a single position trader" like Bob, but at the end of the day it's all SO VERY FUCKING SIMPLE and trying to complicate it is all just poor attempts to obfuscate your own shortcomings and baffle people with bullshit.

The problem is there are people who are smarter than your group on this forum. Profitable, unprofitable, traders, non-traders. What's blindingly obvious to them escapes people like you time and time again.

And so here we are with Hanover wasting his breath like usual. Keep making-up scenarios to try and engineer a situation absurd enough that nobody can follow it, then declare victory for "no stops + nedge" because by then nobody could give a fuck and bother de-noising your ongoing absurd examples.

This thread still lives? Why?
Congratulations ScalaFX for coming out of the closet!
  • #1,924
  • May 4, 2014 8:32pm May 4, 2014 8:32pm
Quoting 60minuteman
{quote} only if trader B was using no SL
Correct.

A SL would potentially adjust his net position, so that it no longer replicated the net position of the hedged trader.
  • #1,925
  • May 4, 2014 8:37pm May 4, 2014 8:37pm
Quoting nubcake
{quote} And so many of you "no stop + nedge" geniuses seem unable to grasp that to close a buy you sell, and to close a sell you buy... which is exactly what a nedge is with the only difference you pay more swap on a nedge and you get the warm and fuzzy feelings from seeing 2 so-called "open" trades on your platform, plus the warm and fuzzies from feeling like you are so edgy by going against common-sense and common wisdom by ignoring the patently obvious. It really is amazing that so many of you are so hell-bent on denying the reality that is right...
I disagree with your opinion but thanks for it anyway.
tradewith60
  • #1,926
  • May 4, 2014 9:05pm May 4, 2014 9:05pm
Quoting nubcake
{quote} And so many of you "no stop + nedge" geniuses seem unable to grasp that to close a buy you sell, and to close a sell you buy... which is exactly what a nedge is with the only difference you pay more swap on a nedge and you get the warm and fuzzy feelings from seeing 2 so-called "open" trades on your platform, plus the warm and fuzzies from feeling like you are so edgy by going against common-sense and common wisdom by ignoring the patently obvious. It really is amazing that so many of you are so hell-bent on denying the reality that is right...
exactly who are these smart super elite you talk of? is it you ?
tradewith60
  • #1,927
  • May 4, 2014 9:09pm May 4, 2014 9:09pm
if you have a large amount of capital that can "absorb" losses, trading without a stop-loss is ok, becos prices of most asset classes fluctuate (except equities which may go bankrupt.) however, without a huge amount of capital, you may be putting your trading account at great risk..... becos sometimes, it pours instead of rain.....it occurs to me twice.....and i call myself stupid for believing in myself too much......
  • #1,928
  • May 4, 2014 9:10pm May 4, 2014 9:10pm
Quoting 60minuteman
{quote} exactly who are these smart super elite you talk of? is it you ?
It took you awhile and the need to make an entirely new post before you could come back with your hilarious retort.

I'll let you do the math.
Congratulations ScalaFX for coming out of the closet!
  • #1,929
  • Edited 9:47pm May 4, 2014 9:21pm | Edited 9:47pm
I agree that hedging offers no advantage. However, if it is a technique that helps a trader's mental state while trading, then it has its place. However, when thinking about hedging, using a stop, or not using a stop, the main point should be ( or might be), which approach lets you maximize the resources available in your margin account? Any open trade that is not intended to make money, and instead is open to correct a mistake or protect something that you already have, is a misuse of resources. Unless,of course, this is the only way you can trade to make money. But, you must admit that your trading is not efficient.
  • #1,930
  • May 4, 2014 9:29pm May 4, 2014 9:29pm
OK I will explain it from price. Eur/usd 1.3000 a trade buy is taken and your account balance is 10,000 dollars. At 1.2900 it is 100 pips in the red. Original position is -100. A new buy and a new sell is placed. One is a sell hedge and you have a 2nd buy position. Price moves against your original position and is now at 1.2800 your hedge sell is +100, original is -200 and 2nd buy -100. You pocket the 100 as profit your balance is not 10,100 your original trade is -200 your 2nd buy is -100 you do a buy and a sell. Price now moves up 100 pips. You pocket the buy +100 your balance is 10,200. 2nd sell trade is -100, 1st sell trade is 0 and the 2nd buy trade is 0 and the first buy trade is -100. You are carrying a DD of -200 but you have pocketed +200. If you close out now you net 0 profit on the trade but you are now 100 pips lower at 1.2900. So your account balance if you close here is still 10,000 and this series of trades if over. The one in one out crowd is still at -100 and if they closed they would have 9,900 dollars in their account. So even though the market is now 100 pips lower than when this series of trades started the multiple trade traders is at 0 and not -100 like the one in one out person is. He actually is in better shape account wise.

Lets say the hedge trader continues the series of trades because fundamentals call for the eur/usd to continue to go up. After closing out and starting a new series of trades he now buys at 1.2900 and price hits 1.3000 or the original starting point he is at +100 and the one in one out trader is back to 0. That is how hedging can gain you 100 pips profit over a 0 profit for a one in one out trader.

Now lets do the same thing but how I trade. Since I am an American trader I cannot hedge so i cant run buys and sells at the same time.
My original trade is at 1.3000 it goes -100 to 1.2900 so I enter a 2nd buy and it goes to 1.2800. I am -300 down. I enter another and it moves back up to 1.2900 I am at break even at this point with on buy at +100 and another at -100 and one at 0. My balance is still 10,000. I can close out like the hedge trader or I can stay with the long term trend (which I explained how I did in an earlier post using the 2MA on a monthly chart) and let the trade run. If price moves back to 1.30 I have no losing trades and 300 pips profit sitting in the bank. So for a one in one out trader he is sitting on 0 profit while I sit on 300 pips profit. If price continues in the trend then at 1.3100 I am at 600 pip profit and a one in one out trader has his +100. Multi-level positions, stacking, what ever you want to call it is just so much better on the account balance than the one in one out method. At 1.3100 I am way ahead of the single concept trader. That is how you can trade 1-4 cents per thousand of you account and keep a steady increase of your account going month after month year after year. Low risk, compound winners adds up.
  • #1,931
  • May 4, 2014 9:50pm May 4, 2014 9:50pm
Quoting GEfx
I agree that hedging offers no advantage. However, if it is a technique that helps a trader's mental state while trading, then it has its place. However, when thinking about hedging, using a stop, or not using a stop, the main point should be ( or might be), which approach lets you maximize the resources available in your margin account? Any open trade that is not intended to make money, and instead is open to correct a mistake or protect something that you already have, is a misuse of resources. Unless,of course, this is the only way you can trade...
i agree with you on this, but it is quite difficult to find the 'optimal' entry or exit points, luck sometimes take precedent.
  • #1,932
  • May 4, 2014 9:56pm May 4, 2014 9:56pm
Quoting GEfx
I agree that hedging offers no advantage. However, if it is a technique that helps a trader's mental state while trading, then it has it's place. However, when thinking about hedging, using a stop, or not using a stop, the main point should be ( or might be), which approach lets you maximize the resources available in your margin account? Any open trade that is not intended to make money, and instead is open to correct a mistake or protect something that you already have, is a misuse of resources. Unless,of course, this is the only way you can trade...
Then your are saying there is room for a person to use a less than efficient method in a market and still make money. Isn't that the main argument for those who trade using a fixed stop loss as part of the equation?

Supposing you have two pairs, however, one pair is aaa/ccc and the other aaa/ddd. Now ccc is dropping like a rock and ddd is soaring like an eagle. aaa is just chugging along. Doesn't it make sense to buy aaa/ccc and sell aaa/ddd? Here it only looks like you are hedging aaa when in fact your focus is properly on ccc and ddd. You will make money on both these trades at the same time because you considered each on its own merits and entered correctly into profitable trades.

This seems to happen most often when the exchange whose currency concern would naturally be aaa is closed, so news is not pushing the currency around.

Good thread
  • #1,933
  • May 4, 2014 9:58pm May 4, 2014 9:58pm
Quoting Gumrai
{quote} If you are trading with a real account and putting your money at risk, then it's up to you really, isn't it? I have traded without a SL in the past and regretted it. For me it is important to know how much of my account I will be putting at risk when I enter a trade and that is not possible unless a SL is in place.
Trading without stop lose is just like giving your money to the trading company.
Its very dangerous. I knew I've been silly for not putting stop lose in my trade before But I've learn a lot.
  • #1,934
  • May 4, 2014 10:02pm May 4, 2014 10:02pm
Quoting Yeow Boon
{quote} i agree with you on this, but it is quite difficult to find the 'optimal' entry or exit points, luck sometimes take precedent.
Understand what Forex is, it is not about traders, it is businesses, govt., individuals, and banks exchanging currencies from one country into the currency of another. At any moment at any time a transaction can take place sending price up or down. There is no chance of getting an optimal entry unless you just happen to get lucky. You have no control neither does any indicator or fundamental. On top of this you face brokers that can enlarge the pip spread at any moment to take you out or prevent you from getting the optimal entry.

You are far better off breaking up your trading lots into multiple positions or entry points and getting into overall trend direction which only changes 1-3 times a year on most currency pairs. Just check your monthly charts and you can see this. Then keep entering into that long term trend and you will bank a nice consistent profit week to week, month to month, year to year. When the long term trend changes close out and then start trading into the new trend. Top down analysis, top down trading, multiple positions and give price room to breath. You can be profitable.
  • #1,935
  • Edited 10:56pm May 4, 2014 10:39pm | Edited 10:56pm
Quoting nanningbob
OK I will explain it from price.........
"Eur/usd 1.3000 a trade buy is taken and your account balance is 10,000 dollars. At 1.2900 it is 100 pips in the red. Original position is -100. A new buy and a new sell is placed. One is a sell hedge and you have a 2nd buy position. Price moves against your original position and is now at 1.2800 your hedge sell is +100, original is -200 and 2nd buy -100. You pocket the 100 as profit your balance is not 10,100 your original trade is -200 your 2nd buy is -100 you do a buy and a sell. Price now moves up 100 pips. You pocket the buy +100 your balance is 10,200. 2nd sell trade is -100, 1st sell trade is 0 and the 2nd buy trade is 0 and the first buy trade is -100. You are carrying a DD of -200 but you have pocketed +200. If you close out now you net 0 profit on the trade but you are now 100 pips lower at 1.2900. So your account balance if you close here is still 10,000 and this series of trades if over."

Many thanks Bob. Now I can follow your thinking more easily. I agree with your math 100%, and I will illustrate this by going through all of the blue text above, step by step. And I will also attempt to show how it is possible to achieve the same P/L, without hedging.

Eur/usd 1.3000 a trade buy is taken and your account balance is 10,000 dollars. At 1.2900 it is 100 pips in the red.
Agreed. The single-position trader (let's call him 'hanover') also bought at 1.3000 and at 1.2900 is also -100 pips.

A new buy and a new sell is placed. One is a sell hedge and you have a 2nd buy position.
OK. Since you are adding a buy and a sell, which will effectively cancel each other out, your net position does not change. Hence hanover does nothing at this point.

Price moves against your original position and is now at 1.2800 your hedge sell is +100, original is -200 and 2nd buy -100.
Agree with your math again. Adding your numbers, the total net P/L of your open trades is -200.
Hanover's original buy position is now -200, which is the same as your P/L.

You pocket the 100 as profit your balance is not 10,100 your original trade is -200 your 2nd buy is -100 you do a buy and a sell.
Agree with all this.
Now you have closed a sell position. You are also opening a buy and a sell. The net change to your overall position is 1 buy.
Therefore hanover must likewise change his position by 1 buy. So he opens 1 additional buy position at 1.2800.

Price now moves up 100 pips. You pocket the buy +100 your balance is 10,200. 2nd sell trade is -100, 1st sell trade is 0 and the 2nd buy trade is 0 and the first buy trade is -100. You are carrying a DD of -200 but you have pocketed +200.
All understood and agreed. Price is now back at 1.2900.

If you close out now you net 0 profit on the trade but you are now 100 pips lower at 1.2900. So your account balance if you close here is still 10,000 and this series of trades if over.
Agreed, if you were to close out everything now your account balance would be 10,000.
Let's suppose hanover closes out both of his buy positions also. He makes a +100 gain on the one he bought at 1.2800, and -100 on the one he bought at 1.3000, at the start of the process.

So hanover's account ends at $10,000, the same as yours, and he didn't hedge at all.
How did he achieve the same P/L as you? By simply replicating your net position at every step of the process.

That is the point I've been trying to make. Multiple positions in the same pair can always be resolved into a single net position. For example, if you're 5 long and 3 short simultaneously (which is prohibited if your br0ker enforces the no-hedge rule), that's effectively the same as simply being 2 long (which is acceptable no matter what rules apply). Provided that a single-position trader replicates your net position at every point along the way, he will achieve exactly the same P/L, and without hedging.

David
  • #1,936
  • May 4, 2014 11:05pm May 4, 2014 11:05pm
Quoting shellsnail
But I think why people keep insisting that hedging works is because it actually does work for them. I would venture that it offers psychological benefits which can translate into monetary benefits. Hedging tricks the brain into thinking that there was no loss taken, and at the same time it gets us out of the losing position. Perhaps the clarity of mind that comes after hedging (as opposed to feeling bad about a loss) more than makes up for the transaction costs the trader incurs... Because otherwise I see no sense in so many people arguing for the...
Fair enough. I was addressing the math-based aspects only.
  • #1,937
  • May 4, 2014 11:30pm May 4, 2014 11:30pm
Let's suppose hanover closes out both of his buy positions also. He makes a +100 gain on the one he bought at 1.2800, and -100 on the one he bought at 1.3000, at the start of the process.

But you had to take multiple positions to do it. Which is what I do since I cant hedge. So you do understand. My other point is the one in one out probably would never do such a thing so we are back to square one in the debate. The difference being the person who hedges has either frozen his DD which you are still have an open risk to. Or he is taking constant profits on the trip down increasing his account balance while he waits for the reversal. So you are exposed and he is not.

Bottom line is this I havent hedged and cant. When I could the only use I found for it was a timeout to weather a reversal which wasnt in the plans. When it was over I would undo my hedges and begin trading again but my DD was frozen to protect my account balance. OR I had to go out and didnt want to leave my trades open but I didnt want to close them either. So that is my official position on hedging.
  • #1,938
  • May 4, 2014 11:32pm May 4, 2014 11:32pm
I cant get the edit to work but I wanted to add protect my DD or my profit by freezing it with a hedge.
  • #1,939
  • May 4, 2014 11:52pm May 4, 2014 11:52pm
Quoting Rap Skallion
{quote} Then your are saying there is room for a person to use a less than efficient method in a market and still make money. Isn't that the main argument for those who trade using a fixed stop loss as part of the equation? Supposing you have two pairs, however, one pair is aaa/ccc and the other aaa/ddd. Now ccc is dropping like a rock and ddd is soaring like an eagle. aaa is just chugging along. Doesn't it make sense to buy aaa/ccc and sell aaa/ddd? Here it only looks like you are hedging aaa when in fact your focus is properly on ccc and ddd....
I think you misunderstand him. He is saying that hedging is less efficient, not the other way round.

And the example you gave isn't really a hedge. In reality when we trade cross-pairs like GBPJPY, we are actually just buying both GBPUSD and USDJPY. (at least that was what it was like in the past; these days I think they have a market of their own perhaps)
Build good relationships with others.
  • #1,940
  • May 5, 2014 12:42am May 5, 2014 12:42am
i still think trading is not for everyone, i understand many here dont have a big acct size and losing 10k is a big deal to them mentally .the stress u have to go thru making that few hundreds bucks a day is not worth it, afraid that u might lose all ur acct in a single day you use SL.FX seems like easy money sometimes,but can u handle the losses is the qs.
u want to win u must also learn how to lose.mistakes makes us a better trader.

Size does matter.
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