Trading Without a StopLoss

bicycles use 5mm so if you have more than one bike, well, this just means you don't have to swap that single 5mm anymore...so...there is a bright side...one of few probably...but it's there....

I, too, believe in the relative persistence of physical objects...

It helps, when you close a trade in loss, to think of balance as a fictional notion, and Equity as the real thing. Equity does not change when you close a trade in loss, so you now have an opportunity to close more trades in profit.

Watch out , though, for the closing binge.("I just closed one. Why not close them all?").

Remember Rap"s rule on closure: The longer you wait before closing a trade in loss, the sooner it will rebound into what would have been profit.

What I did this week:
%change in equity:+5%/annum(hid by p/l)
%change in balance:+25%/annum
%change in P/L:10%
Margin Level %: 519.47
no of weeks since last taking a loss:1
no of trades open:15, 4 pending

I fail to understand the thinking of those who advise you to avoid the news. That appears to me to be when I make the most money!

I agree ... . It either assists me in hitting my target price or, in the alternative, offers another buying/selling opportunity to add to current positions.

When I used to roll "old school" (single position positions, stop losses and such), economic announcements were generally fraught with nervousness ... . Is my stop loss too tight? Is it going to whipsaw, take out my stop, and then roll over the other way, in the direction of my original trade? Now I go "Great, it hit my target price" or, in the alternative, "Oh, well, went the other way ... . I'll wait for it to settle down and then consider adding to my position ... ."

What a great informative thread and many great pips and good Karma to the upbeat positive posts very inspiring & helpful .
I am a newbie started with Binary's ( that is so hard !) . But I won't give up down $100.
Then tried forex demo's only with stops and struggled with them . So rarely use them unless overnight I set an emergency stop I like the emerging markets .
I am addicted as I have been with horse racing and blackjack ( card counting) in the past I noticed some of the writers of those books are successful forex players wonder where there stops are like showing the dealer your hand.
No price on learning this craft and will continue to demo until I can prove my ''edge '' works , trading live in binary's is enough .Psychology is so important and you can't buy live emotional experience.
Good luck to all as the dream is to be in the 5% and if I am I will not forget to donate to charity all good karma.

I used to trade this way also and for the longest time it worked as long as I had enough money in the account to cover everything, had I continued trading this way I would have lost everything when the Euro started its march from 1.22 to 1.37 without even stopping for good US news bad Euro news all because Draghi said he was going to save the EURO.

Trading without stops will come back and bite you one day when the market trends for weeks or months and you've waited to long to exit your position. If you can't make up your mind now how big of a stop to use what makes you think you're going to know when to exit your position?

Not if you use proper MM and space out your trades properly EURUSD is a great one because as you see on weekly, it just goes in a big range! And will likely do so moving forward! I dunno man there are so many ways to do it

100 pip stops in this market should cover most retracements so why wouldn't anyone want to use them?

300 pips, maybe: As long as my margin is good and healthy and I can trade whenever I want, Why let some arbitrary number stop me out? While some pairs are going deep into debt the cash I get from their complimentary correlatives covers that debt easily, When it doesn't, margin shrinks to an uncomfortable level and then I look for something to close.

With a margin % level above 800, I am looking for new opportunities to make money. Since I trade with the swap and with the long term trend, my losses generally have taken care of them selves. A fixed stoploss at any level that is not ridiculous interferes with my trade plan and results in my making less money.

It is not the use of stoploss or lack of that that determines success in this market.

If you are going to take a single, one time position and rely upon those types of trades to be profitable, then you are going to have trouble working without a stop loss. However, I take multiple, comparatively small positions over time, taking advantage of the dips and bounces that inevitably occur in an overall, long-term trend.

Are there trends that seem to go on and on against my original trade direction? Sure. Do they go on forever? No. Do I ever get caught in a trade that I have to hold longer than I'd like? Definitely. Money management for no stop lossers like me, however, does not take the form of my cutting short inevitable adverse intratrend movement (which I view as golden opportunities to take additional positions in the direction of my original trade); it takes the form of incredibly small (some say ridiculously small) positions that, in total, are generally comparable in size to the positions that the vast majority of single entry traders take.

Secondarily, my MM for overall exposure to the market is generally the exact same rule of thumb that Stop Lossers are supposed to follow: < 10 x total equity exposure at any one time. Although I violate that rule from time to time, I more frequently am no more exposed than approximately half that amount, and I never even get close to approaching a margin call.

Thirdly, I let positive swap be my friend. Good positive swap (like I'm experiencing now with a EUR/NZD short) gives you the patience to ride out brief adverse movement without the concern that swap is eating into your modest target price.

Lastly, even when I was using SL's, setting an arbitrary SL like 100 pips never made sense. SL's are to be set based on ATR's, swing highs/lows, obvious S/R, and the like. The added benefit in my not setting SL's in my trades is the fact that it is one less thing I have to think about (in addition to only looking for the set-up's that are 2-1 risk reward).

Moreover, and has been repeatedly stated here, SL's can actually cause you to lose money, especially around news events. Yesterday's Bloomberg's misreporting of New Zealand dairy prices that produced a huge 60+ pip wide candle (mostly wick) in EUR/NZD is an example of this; no doubt a bunch of people got stopped out for no other reason than the fact that some news algo-based EA's produced signals to take advantage of the incorrect report. That's incredibly dumb ...:

Agree 100%! I trade a very similar style!

Hi Yazzie and Zebrasquirl (what a name “Zebrasquirl” by the way, I love it!!!;o),

if I understand well, at least one of your approaches is to set some "traps", with a very small TP, and reopening straight away, on places where you expect a volatile break out might happen.

It SEEMS (like I said yesterday in another very interesting tread from Davelansing as well, I have no idea what you are really doing and I just guess, so the “SEEMS”) that Zebrasquirl´s traps are all pre-set with buy/sell stop (or limit if he expects a reversal, I imagine) and TP.
Whereas Yazzie you SEEM to do it "live" with market orders because none of your number is a round number. Moreover the spacing between the consecutive trades is not constant at all, even if always small which, like the “non round number”, is not “human brain” like, so I guess you “press the button” yourself (I am most probably wrong!!!;o)

I see it SEEMS Zebrasquirl is 1:4 to 1:2 leveraged (more or less) per each trade, and 10:1 maximum exposure if possible.
Yazzie you SEEM to be 1:1 per trade, but you trade only 2 or may be 4 pairs, which I guess can reduce your total exposure despite the fact that you are more leverage per each trade. Even trying to guess, I actually have no idea of your maximal exposure when it turns a bit sour.

To me (I am a total noob, so really know nothing “real”), I realize I "trade" with the same concept “at the background” than most of the guys from this tread, but my exposure is a lot less: so far, I start 1:10, and my mental "stop adding exposure" is 5:1, and on a single pair (that is stupid, and reading you guys I have realized the benefit to trade multiple pairs, without adding to my total exposure but spreading it), so that leave me with a lot less stress, really plenty of room to act, even with a volatile breakout the “wrong” way. Obviously the % return is as well less.

So my question is:
How do you proceed once you have a trade that enters the market, doesn´t hit the take profit and gets into volatile break out the other way into drawdown?
It is really a classic with big news announcement, so with a strategy without a stop loss, we obviously have to have a plan in place (otherwise it looks like “mental” and then possibly account suicide to me), and I know for sure that you have.

A- Especially for Yazzie and your 1:1 leverage per trade. It seems huge to me, for my actual beginner knowledge and personality, but I have seen from your posts that it works really well for you. What kind of approach/plan do you use, if you don´t mind.
By the way, no worries if you prefer not to talk about it. No problem at all, I understand it is not my business, and I respect that.

B- Zebrasquirl, I have kind of guessed from your journal/method that you trade quite a few different pairs, checking the correlation, so are less exposed on one single movement that way, and added to that your leverage per trade is lower than Yazzie. Please correct me if I have completely misunderstood your posts (which is a possibility ;o))

Thank you very much,
Cheers,
J-F

You pretty much have the gist of it ... .

Here's what I generally do at the end of the New York close every day (which is when new Daily Fib Retracement pivot points form):

1. Examine pairs using multiple time frame analysis (usually 1H and 6H time frames) to determine trade direction. If price in relation to the 200 period SMA is consistent with repsect to both of these charts I look to trade in that direction (e.g., if price is above the 200 SMA on both, look to buy; below, look to sell).
2. Traditionally I have used Fibonacci Retracement Pivot Points (Daily) to take advantage of bounces or dips, buying at the .236 (if multiple time frame analysis indicates I should look to buy) or selling at the .764 (if multi time frame analysis indicates I should look to sell).
3. Additionally, I have used grids above or below certain Fib levels (like the 1 or 0) to catch breakout moves or if I think the pair is otherwise set for long-term deep movement (such as EUR/USD; I don't bother with the Fibs, as I'm bearish all the way down to 1.3200).
4. With the Fibs, my target price is at the opposing S/R level. For example, if I buy at the .236, my TP is at the .764. If I sell, it is at the .764, and my TP is the .236.
5. When price doesn't hit my TP by the New York close, I examine whether the multiple time frame analysis that led me to trade in that particular direction is still good. If it is, I add to the position, buying at the new .236, selling at the .764. After any add order executes, I adjust my TP somewhat, usually either to the new opposing Fib level or to 10 to 15 pips in profit for the net position. If price is already outside the .764 to .236 box or the multi time frame analysis shows that the set-up is no longer necessarily good, I generally pass on adding to that position for that particular day, as I may want to take advantage of a greater bounce or dip if the pair is going to move that way going forward. I may also have to wait for a period of time until the 1H and 6H are again consistent before adding to the position.
6. With trades that are based on a grid that do not hit the next level, I sometimes consider adding to the position in the same manner. In that particular case, if the addition trade executes, I adjust the TP to fit in with the grid and squeeze in any additional levels in the grid to continue to take advantage of the pair's directional movement.
7. As far as lot size is concerned, I have experimented with various lot sizes, cycling through opening positions, adding to positions, etc. to see (1) what maximum exposure and drawdown were throughout the cycle; (2) assess what I was comfortable with in terms of total exposure and intratrade drawdown; and (3) look at how many pairs I could have positions open in while still remaining comfortable as to total exposure, drawdown etc. I started out with the smallest lot possible (1 microlot), ran than through the ringer, felt comfortable with that, and then gradually increased the lot size over time. Right now I am experimenting with lots that are equal to 1 x equity (e.g., if you have $10,000 in equity, you'll be using 10k lots for each position), although I am not sure that I'm going to be comfortable with that yet (my sense is not). Point in fact, I was more than comfortable with lots that were .5 times equity, as you need to keep in mind that you may eventually be opening four or five different positions in the pair's trajectory in order to be able to effectively profit from the net position.
8. Most of the time, I limit myself to having positions open in four pairs max, with an effort being made to represent all the major pairs in those four positions. It is usually something like: (a) EUR/JPY, GBP/USD, and AUD or NZD/CAD or (b) EUR/USD, GBP/NZD or AUD, and CAD/JPY -- you get the picture. This keeps things simple and uncluttered and prevents magnification of a single currency's movement over several different positions. This particularly applies to when you're doing a directional grid set-up and you've got 20 levels of grid to catch price movement for a pair or two; all of a sudden you've got 40-50 pending grid orders ... . Some people do hedge using correlated pairs, but that's more work, and I'm all about less ... .
9. Lastly, a good deal of patience is required. Sometimes your net position TP is not hit for several days. This is okay, as long as you respect the swap. I pay particular attention to positive swap, which is why I only want to go long AUD and NZD right now. If there isn't a set-up that will allow me to do that, I won't be trading those currencies, as the negative swap on going short AUD or NZD is onerous, and I don't want that eating into my modest TP and causing me anxiety if I need the patience to stay in the trade for a few days.

Hope this helps.

What I did this week:

%change in equity:+80%/annum
%change in balance:+83%/annum
%change in P/L 12%)
Margin Level %: 735.07
no of weeks since last taking a loss:2
no of trades open:13; 8 pending
I prefer to "set my traps" at the beginning of the U.S session
and review them around the time swaps are recalculated, (5pm. est.)
I was thinking to open a second account and may still do so, but as you can see, doing okay with a single account under FIFO.

NICE Rap!!!

Nice rap....

Yeh, FIFO isn't terrible...I'm not saying I like it, but, it's workable...just have to hone that first entry a bit is all...

Hey Zebrasquirl,

thanks so much for your detailed answer.

To me the problem with starting with 1x equity (1:1) is that you can get in a mess quite rapidly, just because when you average down, at some point you get “scared” at entering the market while your exposure has grown up.

It is why, with my beginner mind, I start with 0.1 equity (from your 10 000 exemple, it would be 0.01 lot in my case or a 1000). There you have really plenty of room, and don´t hesitate to enter when you think it is possibly the right place, averaging down if necessary, and play up and down possible scenario for medium and long term (at the day of today, we can still buy or sell the same currency in Europe. No FIFO) that you THINK could happen.
Obviously your return is less.
One idea to boost up a bit your return, without doing it proportionally with your risk, would be to do it in multiple pairs, as I have started to realize reading you guys in this thread and a few others.
At the end, despite the lower return, with a bit of common sense, it seems SO FAR, quite complicate to get stuck in a real scary mess, and not emerge positive in time.

I think (and I know I am most probably wrong ;o) the “secret” if you start with 1x equity entry is probably to start very close from a major possible supply/demand area: Monthly/ Weekly Fib, candle pattern, harmonics etc... whatever you arbitrary use, that make you comfortable with your “guess” that others will follow you.
Then not entering the market too aggressively when it doesn´t play your scenario: supper important in order not to get stuck with 10 entries and so a quite consequent total leverage for the total position, on a 100 pips move that doesn´t play out for you... or if so you would have to leverage even smaller all your entries I guess. I still do not know if I prefer to enter less position but bigger, or plenty of very small ones. Hummmm, we´ll see!

And of course you need a terminal plan if it goes completely wrong, so that you do not panic (which everyone has here it seems, despite the "no stop loss" title... because everyone has a stop loss actually but not a "traditional" fixed stop loss order).

Anyway, to avoid the mess, it seem that one way could be (as repeated in this thread): low leverage, patience for the set ups and obviously common sense.

In the same way, I feel that your addings have to be proportional to the value you give to each set up. The higher you believe in it, the higher your leverage for that specific entry can be.
It just doesn´t seem logic to me to always enter the same leverage per entry, or to always do x2 or whatever.
That being said, I understand that with FIFO you might have to vary a bit your trade size for every entry, in order to give you more freedom to act.

Well... at the end I speak, but I really know nothing, and I probably do not make sense at all lol ;o))

Let´s wait and see how is Yazzie doing (if wanting to share a bit, no problem if not) starting with 1x equity.
May be you just need to be able to "stomach" the drowdown and that´s it ? :o)

To conclude, thanks again Zebrasquirl for your time and effort to explain clearly your approach and the different leverages you have tested at the day of today. I really appreciate it, and follow your journal.

Have a good day,
Cheers,
J-F

Well, I'm playing with 1 x equity for each leg of the net position now ... . Naturally, after you take 5 positions, you're already at 5 x equity for that position alone which can be a little daunting to some since that could involve what I would regard as significant drawdown if, for example, the trade moves against you by 100 pips. Frankly, I am more comfortable with lot sizes that are either 1/2 equity or 1/4 equity. With a lot size that is 1/2 equity, taking four different positions takes you up to 2 x equity; with 1/4 equity lot sizes, 1 x equity for a total of four positions. Small lot sizes for each of the legs gives you greater flexibility to take trades in more pairs at the same time.

Additionally, smaller lot sizes let you make bigger mistakes without it costing you a great deal or, in the alternative, without them being mistakes that you cannot fix with minimal effort over the course of that particular trade or over the next few trades.

That being said, I attempt to restrain myself from adding to the position if it appears as though the original set-up that made me enter the trade in the first place is not so good any more (although I confess that I sometimes add to the position too hastily); I wait for the trend to return to the direction of my original trade. Since I trade on somewhat low time frames (I generally look at the 1H and the 6H), this sometimes may take a day, it may take two, or it may take a week or more. That is why I emphasize the power of positive swap so much -- you never know exactly how long you'll have to be a position for it to become net profitable and a good positive swap (or at least one that is not negative) can help you get you where you need to go or at least not hinder you.

The reason why I generally use one, uniform lot size is, for me, a matter of practicality. I basically want to look at my equity, and then determine the lot size based on that without having to look at what the strength of my conviction in a particular trade set-up might be. That being said, there are certain pairs that I am particularly cautious with and, on occasion, go smaller with my lot size because these pairs' ATR's are higher and their movement tends to be more volatile. That can be great if you're on the right end of the movement, but horrible if you're not. GBP/NZD and GBP/JPY are two of the pairs where I, on occasion, use smaller lots due to the fact that their intraday movement is greater.

But if you go with less than .5 times equity for your lot sizes, you naturally can't expect huge, explosive growth in your equity. However, even with lot sizes of this size, I think that hitting between 3 and 7 % ROI per month is achievable, which makes doubling your equity each year also achievable (assuming compounding), which means that you could arguably make it to $1,000,000 from $10,000 in 7 years or so (assuming a monthly return of 7-8%; less may be required if compounding ... I forget).

I think that I made 7.76% ROI last month, although I screwed around with lot sizes between .5 to 1 x equity, which I think is sufficient to double my money every 12 months if I perform consistently. If I used 1 x equity throughout the month, the ROI number would be higher, but I don't think I need that to achieve 100% annually ... .

... I also use different tools depending on how I feel about the way a given pair is presenting on the chart.

My two major tools are Pivot Points and directional grids.

I use Pivot Point set-up's to catch bounces or dips a pair experiences intraday ... . But what if a pair isn't "bouncing"?

Recently, EUR/USD started to tick me off a bit and pivot point good for day entry orders to sell at a particular pivot weren't working. The pair was tanking big time, but I couldn't catch any bounces, well ... because it wasn't bouncing. It was dropping and then rolling sideways in an extremely narrow range. Finally, I threw up my hands and said to myself, "I'm just going to fashion a bunch of entry orders below current market price to sell the pair as it declines." Naturally, I'll return to using pivot points once the pair falls into a range or shows some bounce ... .