Stoploss.......Theory of Failure.

Stoplosses.............
Have an interesting history. Now an integeral component of money management, they take their origin from professional gambling money management.

If that has never given you pause for thought, possibly it should have.
The acceptance of the stoploss as a valid adjunct to a "trading" system or methodology raises the logical conclusion that the underlying enterprise is subject to loss, and serious loss, so much so that the Stoploss is a necessary component.

Any business enterprise that relies on the ruthless cutting of losses to provide a "profit" has serious flaws.

Charts, P&V, Technical indicators, take your pick are all inherently worthless without the addition of the ubiquitous stoploss............what does that really tell you?

It says to me find something that guarantees you make money on aggregate, without the need to ruthlessly execute a tool stolen from professional gambling.

cheers d998

Ducati, do you have a suggestion for the alternative.

It seems to me that a stop loss says that this is a statistical game. And that the stop loss is your defined "worst case" loss for this trade and gives you one of the factors you need when you apply money allocation (management) to your trading.

I don't use stoplosses (other than the automated one provided by capital spreads).

My systm/rules of trading tell me when I should enter and exit a trade, therefore, my stop is indicated by the market, not a predetermined figure. IMHO it doesn't make sense to use them. each trade is different and consequently a stoploss can ruin what would be a good trade.

"Stops are for poofs"
- Famous last words.

Maybe we should do away with a profit taking strategy also.

Would make things a lot simpler to follow.

I'm not saying "stops are for poofs", just that sometimes a strategy showing that the decision to exit is correct rather than a predetermined maximum loss is better.

Same as with profits, I don't have a predetermined goal, the market shows when the exit is correct.

The compulsory use of seatbelts has been in force in the UK for a number of years now, it's introduction was designed to reduce death and serious injury on our roads, by your logic people should probably stop driving.
That aside, can you please provide a definition of a stoploss to whci you are refering, so we can be sure we are talking about the same thing. Probably sounds an odd request but you'd be surprised what variance there is between what people consider a stoploss as opposed to something else

Driving is something else.

I consider a stop loss something that cancels my trade at a set level.

The rules I use to trade tell me when I should be short or long. If I'm in a trade one way and I believe I should be the other, then I exit and reverse.

I appreciate why people use them and how it makes it easier to plan your profit / loss potentials and to keep your % in check, but I have a stoploss at 80 pips and very rarely take a loss of more than 20.

The markets are not straightforward and I don't believe a 'set amount' for loss/profits are a sensible ideal. Each trade is different and rather than cap my potential, I let the market tell me my next move.

Driving is indeed something else but the analogy holds up, both are designed to prevent catastrophic or overly undesirable outcomes in a situation where you realise you can be wrong, you can make a mistake with damaging outcomes. The question of definition does have merit as my definition is different from yours, as in my view you also use a stoploss, not necessarily as many books define them but a stoploss none the less.
A stoploss in my definition is a point in time or price, where the initial percieved outcome is no longer viable, or circumstances that prompted the entry of a trade have changed adversely.
I do not use fixed price stoplosses either.