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Trading Without a StopLoss

  • #2,121
  • Jul 27, 2014 7:53pm Jul 27, 2014 7:53pm
Quoting nanningbob
{quote} An excellent summary, couldn't have said it better myself. The only place I have ever seen in trading where people use a SL of a fraction of a penny is Forex. It is almost like a religion. Can you imagine going to a broker and buying IBM stock and then asking for 1/8 or 2/8 penny stop loss on a 100,000 dollar trade. Yet people will take a 1000 dollars trade 400:1 leverage trade and put 100,000 into play and put a 20 pip stop loss or 1/5 of a penny. It is so silly and is the reason why people cant make money in this business. They use too...
Hit the nail on the head ... .

Wish I could convince more people that the tortoise method is the way to go. It's not dramatic, doesn't have pyrotechnics, etc., but it's realistic.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #2,122
  • Jul 27, 2014 8:01pm Jul 27, 2014 8:01pm
Quoting nanningbob
{quote} An excellent summary, couldn't have said it better myself. The only place I have ever seen in trading where people use a SL of a fraction of a penny is Forex. It is almost like a religion. Can you imagine going to a broker and buying IBM stock and then asking for 1/8 or 2/8 penny stop loss on a 100,000 dollar trade. Yet people will take a 1000 dollars trade 400:1 leverage trade and put 100,000 into play and put a 20 pip stop loss or 1/5 of a penny. It is so silly and is the reason why people cant make money in this business. They use too...
Also, like to see people using more than just one tool in the tool box.

I can't count how many posts I've seen from swing/position traders who are frustrated by current low market volatility and gripe about how market conditions are "difficult" for them. Well, adapt. Do a little scalping, for goodness sake. Try drilling down to something less than a Daily chart, will ya?

And, speaking of baskets, we got a basket thread here? Used to fashion a long dollar basket every so often ... . (Yet another tool in the tool box).
Fireworks are fun ... as long as you don't blow your fingers off.
  • #2,123
  • Jul 27, 2014 8:02pm Jul 27, 2014 8:02pm
There are trades where it is practically impossible to set a decent stop loss.
Lately I've been dabbling in trades in Eur/Try, mainly because the extreme high interest in Turkish Lira.
During the whole month of July i had 1 lot (100,000 Eur) short Eur/Try.
The spread has veried in that time from 3.5 to even 199.5. Go try to set a decent stop here, good luck.
The trade delivered $24.5 per day in interest up till 7-18-14. At that time I had to go to the hospital for 10 days and couldn't follow it anymore.
Anyway, on 07-23 the trade came to an end when it hit my target @ 2.8200.
Net profit in interest and target profit: more than $3000 on a margin investment of less than $7000. (Total balance in that account was $10,000.

Not bad after all.
New voice message: Why are you calling me? If I need you, I'll call you!
  • #2,124
  • Jul 27, 2014 8:24pm Jul 27, 2014 8:24pm
Quoting ZebraSquirl
{quote}Perhaps this would be worth a contest of some sort ... . You know, No SL folks against SL folks ... . See who comes out on top.
I'd throw ten bucks in a hat for this ... . An SL/No SL duel ... TO THE DEATH!!!
Fireworks are fun ... as long as you don't blow your fingers off.
  • #2,125
  • Edited Jul 28, 2014 8:24pm Jul 27, 2014 8:25pm | Edited Jul 28, 2014 8:24pm
I'm pretty sure that there are traders who are successful using stop losses as there are traders who are successful that don't use stop losses. Why keep arguing "who" is the better trader? It's pointless. For a "successful" trading approach, what works for one DOESN'T HAVE TO work for some one else, i.e. the system doesn't have to be universal. That's why there are successful scalpers, AND there are successful swing traders, AND there are successful long-term trend traders, AND there are successful fundamental traders. Each of these traders have their OWN approach on how they view and structure the market; each have their OWN "edge" that they use to be successful. And importantly, their edge may not necessarily be used successfully by another trader. Duh. Why not instead discuss "this is MY trading approach that works for ME and I'll be happy to discuss it with you" rather than "this is MY trading approach that works for ME and if YOU don't trade like me YOUR method sucks". Discussing "Pros" and "Cons" of different methods and then becoming nasty about it when folks don't share your viewpoint, is also pointless. Nothing is cut in stone.. there are NO hard & fast rules that dictate how to become a successful trader. NONE. Years ago, I knew one trader who started with $5000 (grain futures), used a 20% stoploss on all his trades, and margined 50% of his account per trade. A bunch of traders on a commodity forum constantly mocked him for his trading approach. Assholes. Not quite three years later he quit trading with over a million dollars in his account, nerves fried, but he achieved his goal. High risk? Indeed. Most traders would blow out their account, but HE didn't. It worked for him. Lucky? Maybe. Was Marty Schwartz (a Market Wizard scalper) or Ed Seykota (a Market Wizard trend trader) lucky? Maybe, but each exploited their respective market(s) in their OWN way. May be everyone should read/re-read the Market Wizards books and chill a bit. Bottom line, if there was a set way of trading successfully, a single set of rules, then we'd all be doing it, and there would be no need for forums because we'd all be millionaires

Dave
  • #2,126
  • Jul 27, 2014 11:54pm Jul 27, 2014 11:54pm
Quoting Rap Skallion
... Most of us in this thread have started out using fixed stoploss, given it up and found ways to do well without.
+1
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #2,127
  • Jul 28, 2014 12:03am Jul 28, 2014 12:03am
David Rodriguez is one of the few worth the occasional read at that site.

Quoting ZebraSquirl
... Unfortunately, I am of the opinion that the results of this study are limited to use of SL's in conjunction with the RSI, a lagging indicator. It is entirely possible that the hard limits of the Stop and Limit Model captured gains that the RSI indicator lagged on for the no SL model and that resulted in that model's therefore having a lower ATP than the Stop and Limit Model.
I find it interesting that the same trading system is not used when making the comparison, voids the whole comparison IMHO. I did not read the detail so I am taking your word, but I have seen those graphs before and they are difficult to argue against.

Also interesting is that they have used an RSI system. A couple of years ago the Daily Fix crew warned that RSI is a cause of loss when traders fail to capture the shift away from ranging (which suits the use of RSI) back to trending.
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #2,128
  • Jul 28, 2014 12:28am Jul 28, 2014 12:28am
Quoting Exodus
David Rodriguez is one of the few worth the occasional read at that site. {quote} I find it interesting that the same trading system is not used when making the comparison, voids the whole comparison IMHO. I did not read the detail so I am taking your word, but I have seen those graphs before and they are difficult to argue against. Also interesting is that they have used an RSI system. A couple of years ago the Daily Fix crew warned that RSI is a cause of loss when traders fail to capture the shift away from ranging (which suits the use of RSI)...
Well, I guess, to give DailyFx the benefit of the doubt, at least they're making an effort to quantitatively identify what works and what doesn't, but I am really picky about analyzing stuff like that. You need to be comparing apples with apples, and I'm not sure that's what they're doing there using RSI as the trigger. That being said, awfully tough to set up a study to compare and contrast the two methodologies, since there are so many subjective aspects involved in trading. I don't think, for example, I'd ever take a trade on the basis of an indicator alone without looking at S/R, MA's, or multiple time frames first ... . Also hard to bundle up all my various mental processes that go into a trade, package them in an EA, and just let them run.

It's like DaveLansing says, there's more than one way to skin a cat ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #2,129
  • Jul 28, 2014 12:35am Jul 28, 2014 12:35am
Quoting davelansing
I'm pretty sure that there are traders who are successful using stop losses as there are traders who are successful that don't use stop losses. Why keep arguing "who" is the better trader? It's pointless. For a "successful" trading approach, what works for one DOESN'T HAVE TO work for some one else, i.e. the system doesn't have to be universal. That's why there are successful scalpers, AND there are successful swing traders, AND there are successful long-term trend traders, AND there are successful fundamental traders. Each of these traders have...
I'd pay good money for a single set of rules that worked or for Marty Schwartz's brain to be transplanted into my head ... . But, ain't gonna happen ... . Thanks for the no-nonsense perspective ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #2,130
  • Jul 28, 2014 10:01pm Jul 28, 2014 10:01pm
Quoting nanningbob
{quote} An excellent summary, couldn't have said it better myself. The only place I have ever seen in trading where people use a SL of a fraction of a penny is Forex. It is almost like a religion. Can you imagine going to a broker and buying IBM stock and then asking for 1/8 or 2/8 penny stop loss on a 100,000 dollar trade. Yet people will take a 1000 dollars trade 400:1 leverage trade and put 100,000 into play and put a 20 pip stop loss or 1/5 of a penny. It is so silly and is the reason why people cant make money in this business. They use too...
Thanks Nanningbob.
Yourself, Bilstein, Rapskallion and few others have altered the way i think about trading with your well reasoned posts. I have followed many of your threads both here an other forums and pick up nuggets of insight here and there which have been invaluable.
I have been doing testing with forextester2 and the difference NOT using a SL makes to a trend trading system is astounding. For example, last night i tested the GU on the dailies for over 250 days to see if a trend trading system is profitable. Using stoplosses i still was profitable and managed to make a good 30K from 10K using way too large 1 lot sized trades and moving to breakeven after a few hundred pips etc. and always adding on further trades as the trend progressed. However when i removed the SL i made a cool 100K from 10K even after manually closing out losing trades of -9K, -5K, -7K etc. that had gone against me. But these were dwarfed by the 24K and 27K winning trades that were taken and would have been lost with the breakeven or SL's i was setting in the first instance.
What does this prove? - Nothing. It was a quick and nasty effort and should in no way be taken as a good trading system. But unless you do stuff like this you cannot see the differences that SL/Money management makes to certain methods. Would i trade like that in real life - no. Using too large lot size and leverage for my plans.
Some might say that we should be a professional risk manager first and foremost - if we can still make 200% in a year (in my gung-ho example above) with stoplosses that reduce the risk and maintain a very small drawdown at worst then that is good enough. But gee, i am human and cannot ignore that the alternative without SL was a 900% return.

Sherpa: Thanks for the Anton Kreil lecture link. Spent a good hour and watched all 5 of them. Most enlightening. I think maybe a lot of traders are trading for the 'prestige' not the financial rewards at IBs. Aim for a hedge fund.

Rap: Love your goal of donating to charity at the end of the year. Aim trying to do the same here as i have a family member who does social work in the slums in Thailand. and lives there permanently. Always inspires me with what we consider a little bit of money in the first world - and what it can do in the 3rd world.

Cheers
Matt / prophetable
  • #2,131
  • Jul 29, 2014 2:18am Jul 29, 2014 2:18am
Quoting Prophetable
{quote} Thanks Nanningbob. Yourself, Bilstein, Rapskallion and few others have altered the way i think about trading with your well reasoned posts. I have followed many of your threads both here an other forums and pick up nuggets of insight here and there which have been invaluable. I have been doing testing with forextester2 and the difference NOT using a SL makes to a trend trading system is astounding. For example, last night i tested the GU on the dailies for over 250 days to see if a trend trading system is profitable. Using stoplosses i still...
Just remember this figure and cool your expectations. If you make 7% a month you double your money every 10 months.
  • #2,132
  • Jul 29, 2014 2:36am Jul 29, 2014 2:36am
Quoting nanningbob
{quote} Just remember this figure and cool your expectations. If you make 7% a month you double your money every 10 months.
Absolutely NB.
Very much onboard with the "get wealthy slowly" philosophy.
Consistency is the key.
Remember: the above testing was done without position size management and without suitable risk control purely as an sample.

Cheers
  • #2,133
  • Jul 29, 2014 2:46am Jul 29, 2014 2:46am
Trading without a stop is like driving drunk while using your seat belts as a blind fold. It's not a question of if you will die, but merely when.
  • #2,134
  • Jul 29, 2014 3:10am Jul 29, 2014 3:10am
Quoting SaiLyfee
Trading without a stop is like driving drunk while using your seat belts as a blind fold. It's not a question of if you will die, but merely when.
This is an example of why Im only up to page 30 of this thread.
Got to sift through the chaff to find the wheat...
  • #2,135
  • Jul 29, 2014 3:14am Jul 29, 2014 3:14am
Quoting SaiLyfee
Trading without a stop is like driving drunk while using your seat belts as a blind fold. It's not a question of if you will die, but merely when.
Wrong, been doing it for years and years and will continue to do for years and years. It is a matter of trading small and not over leveraging. You have the Forex disease of over leveraging and trading too big lots to account size. Once you understand the concept you would not say what you said.

There was a convention of professional traders in London. They debated such topics as: is trading 6:1 or 8:1 leverage too big for Forex. Once you understand why they would even debate and the pros and cons you will then finally be able to understand how to properly trade Forex. There is a reason why for over 4 years in a row I have been profitable in Forex. It is NOT by following the often quoted proverbs heard constantly on this forum like the one you just said. I wish you well.
  • #2,136
  • Jul 29, 2014 3:38am Jul 29, 2014 3:38am
Quoting nanningbob
{quote} Wrong, been doing it for years and years and will continue to do for years and years. It is a matter of trading small and not over leveraging. You have the Forex disease of over leveraging and trading too big lots to account size. Once you understand the concept you would not say what you said. There was a convention of professional traders in London. They debated such topics as: is trading 6:1 or 8:1 leverage too big for Forex. Once you understand why they would even debate and the pros and cons you will then finally be able to understand...

Very true, thats the problem with this site. Herd mentality to the max.

Its up to you in the end its your money.
  • #2,137
  • Edited 6:52am Jul 29, 2014 6:35am | Edited 6:52am
A conversation between my wife and I:

See, the way I look at it is.. Well, think of all these people across the world on these Forex forums. They all want to be wealthy, they all want to run successful businesses through trading. Everyone thinks they're a bad-ass, everyone thinks they're on some amazing, ideological journey toward "financial enlightenment". But here's the thing, if I gave you a million dollars to start a cleaning business (my wife runs a large cleaning company) - how long do you think you could stay in business if no one ever paid for services? Or hell, what if 30% of customers paid for services? Not very long. There's this age-old philosophical debate about whether or not trading is gambling. When I think of gambling, I think of someone taking their fixed $100, $1,000, or their $100,000 to the casino, risking it, and either losing it all or making a bunch, right? When I think of managing a fund (or an account), I think of constant inflows. I make money from trades that are profitable, I make money from swaps, I deposit money into my account, at the end of a given period of time, if I've generated a profit, I pay myself. You think hedge funds, investment banks, or whatever say "Okay guys, we have a few million dollars, that's it, lets go see if we can make it in the markets!" Hell no they don't. They have entire teams of people clawing out for investor money. You think they're leveraging the shit out of what little money they can scrimp together and banking on "home run trades"? Hell no, they're holding instruments that pay interest and dividends, exchanging inventory constantly with other parties, banking fees and such. It's a machine that turns over inventory at a mind-boggling pace. This whole retail concept of taking a fixed amount of money, leveraging themselves to the brim, and expecting to reach "financial freedom" with it is, in my eyes, the source of so much pain, resentment and misunderstanding with retail traders. They look at themselves as rebellious cowboy bad-asses on some grand adventure towards something that goes against the "status quo" of day-to-day work. The reality is, if these people were doing it right, they wouldn't bother stopping to tell you that you're doing it wrong.

If I'm holding a trade that, say, pays me on the swap and, in the ridiculously unlikely event that the price of the pair returns to ZERO would only lose me $10,000 then what the hell is wrong with holding it forever and collecting the swap? Now, granted, when the interest rate differential changes and I have to unwind the position, things start to get a little nerve racking. But that's why you're always funding, adding money to the account, whether it's your own capital or - if you have the balls - other peoples' capital. At the end of the day, starting with a fixed amount of capital and hoping you can make a business out of it by banking that your only source of income is winning trades is gambling.

That's the way I see it anyway.
  • #2,138
  • Jul 29, 2014 7:10am Jul 29, 2014 7:10am
Quoting nanningbob
{quote} Wrong, been doing it for years and years and will continue to do for years and years. It is a matter of trading small and not over leveraging. You have the Forex disease of over leveraging and trading too big lots to account size. Once you understand the concept you would not say what you said. There was a convention of professional traders in London. They debated such topics as: is trading 6:1 or 8:1 leverage too big for Forex. Once you understand why they would even debate and the pros and cons you will then finally be able to understand...
I don't overleverage, I simply manage my risk effectively and know my limits before entering a trade. Trading without a stop is like living in a dodgy neighbourhood with your front door left wide open at night. It's only a matter of time before your belongings are taken. If you really feel comfortable leaving your account 100% wide open because you know the market 'can't' or 'won't' do this, then eventually it'll lead those people who think in such a way to ruin.

A wise man knows he doesn't know everything.
  • #2,139
  • Jul 29, 2014 7:30am Jul 29, 2014 7:30am
Quoting nanningbob
{quote} Wrong, been doing it for years and years and will continue to do for years and years. It is a matter of trading small and not over leveraging. You have the Forex disease of over leveraging and trading too big lots to account size. Once you understand the concept you would not say what you said. There was a convention of professional traders in London. They debated such topics as: is trading 6:1 or 8:1 leverage too big for Forex. .
Bob, would you mind telling me what leverage level you trade with?
  • #2,140
  • Jul 29, 2014 11:40am Jul 29, 2014 11:40am
Quoting nanningbob
{quote} Just remember this figure and cool your expectations. If you make 7% a month you double your money every 10 months.
And I think this is doable with 1 x equity or less (preferably less) per position ... .
Fireworks are fun ... as long as you don't blow your fingers off.
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