I Stopped Using Stops

[mike.]

Not setting a stop doesn't mean not having a stop. Not setting a stop means your trading ends when your account is wiped out.

Technically, Your trading should be closed out once you drop below the required margin, Though most brokers will gladly keep the position open, just to squeeze that very last dime from you.

 

[Fugazsy]

Lol. Dont think most here wouldnt be familiar with eckhart tolle, your likely speaking in a different language to them.

Id guess people on here would think Jimmy Balodimas as having big balls.
Constantly fading the market with big size (for them, not him) no stops. I bet Jimmy wouldnt see it that way! When folks around him are panicking hes as ease.

No stop to me means ive no idea how far the market will go. In 1 tick Dax could go 0 or 10,000,000. I accept the market for what it is. As I accept any outcome of my actions in the market.

Placing a stop means you think you know something. You think you know where the market shouldnt go.

This stuff to me seems as plain as day to me. Every day is easy

No having a stop means that you predicting market going in a direction, means no taking responsibility for your trade and not accepting the market can do it anything at any time including swallowing your entire account, not only that but you will be placing yourself in the position not to see the real opportunities the market is offering you because you will be in that perspective to reason your trade instead to make yourself available.

Having a stop loss means I do not know what will happen, I am taken responsibility for my trade and if I am wrong I am out and I make myself again available for another opportunity which is also random knowing that a collectiveness of my trades will give me an edge to take money out of the market.

 

[Forexmospherian]

Why would you want to place a stop to take you out of a trade with a LOSS ?

Simple reason -

You are in control of your money management and accepting you will never be right 100% of the time

The Loss will be lower than your normal wins - and according to your system you wins will happen maybe 60 - 80% + of the time - because you have an edge - or two which will normally put probability of your trade making you a profit.

If you are Intraday short term trader - the quicker you can get out of a trade not working - ie within 1 or 3 or 5 or 10 ticks / pips / points - the more you can spend time getting into trades that make you 5 - 10 - 20 -50 - 100 + ticks / pips / points .

So 10 trades - 4 wrong losing say 20 - 60 pips in total - 6 win making you 40 - 150 pips - result - happiness - instead of 1 hr - 3 hrs - 10 hrs trying to get out of a losing trade with a break even - rather than admit you were wrong.

I have had over 4000 losses over my trading career - but nearly treble winners

Stops work well with the majority of winning strats - they are efficient - they are your protector - your psyche accepts that you are not the Holy Grail and losses are just a cost of trading.- just like I have to pay my electricity bill or broadband supplier to carry on trading.

Instead of calling them stops or losses - call them "costs" or a "staff costs" etc - just get your head to see sense and tell yourself -" I can never be right 100% of the time "............ according to my wife NO man can ;-)

Regards


F

 

[darktone]

Not setting a stop doesn't mean not having a stop. Not setting a stop means your trading ends when your account is wiped out. This means effectively you have a money-based stop, not TA-based. But that's still a stop and no amount of bluster means otherwise.

A couple of questions tom:-

Lets say a consistently profitable trader has a 25k bucket acc, trades long dax (currently 11500), no stops, no overnight positions, with a max size of 20 units at 0.10p per point.
1) Would they still have a stop of some kind?

Your sit down at your desk one day and take the trade in your DMA acc, as per normal, when an unprecedented event causes the market to yump your stop and fill you at an account busting price.
2) What would that mean to you, emotionally and financially?

 

[timsk]

Averaging down is a trader who want 20 units, buys 20 units.
then when it goes against he buys another 20 units! and so on.

Scaling, is when you want 20 units and work your way into 20 units.

Im showing a form of scaling, that is flexible and always always always seeking value. Nothing special in the non retail world.

Hi dt,
Your questions to Tom (above) reminded me of this earlier post of yours in which you make an interesting point. While many (most?) subscribers to the thread appear not to like your approach, I think it has merit.* However, it strikes me that one of the downsides is that while you're seeking value, you run the risk of only getting some of your positions filled. When the 'conventional' trader is all in at £2.00 p/p, you may only have a couple of your 20 limit orders @ £0.10p p/p filled for an aggregate of £0.20p p/p. If the market moves as expected then, all other things being equal, the 'conventional' trader will make ten times the profit you make on the same move.

Does that make sense!
Tim.

*For the record, I must stress this is my own personal view - I'm not endorsing it with my T2W hat on. Furthermore, darktone's ideas are not suitable for new or inexperienced traders - who are advised to always set stops on all trades.

 

[tomorton]

Hi darktone.

I don't understand your Question 1.

On Q2, the classic approach to managing risks in trading demands that the trading account not be the sole or main capital available to the individual. So let's suppose its 10% of his / her worldly worth. A 10% loss of my total wealth would be disappointing and make me seriously reconsider how I'm trading. After that, I would re-capitalise the account to 10% of my remaining wealth and get back into the trading.

 

[timsk]

Hi darktone.

I don't understand your Question 1.

Hi Tom,
I may be wrong but, based on the figures darktone has given, even if the Dax fell to zero you'd still have £2k left in your account. I think the point he's making is that the Dax will never do that obviously, therefore your account couldn't be wiped out.
Tim.

 

[tomorton]

Hi Tom,
I may be wrong but, based on the figures darktone has given, even if the Dax fell to zero you'd still have £2k left in your account. I think the point he's making is that the Dax will never do that obviously, therefore your account couldn't be wiped out.
Tim.

Thanks Tim, sad to say I was never going to get there alone.

Now I understand the maths but I still don't get the point. The stop in this example would be a financial default stop at -92% of the account size. I'm racking my brains to know:

a) what practicable strategy could be used to trade £2k back to £25k in an acceptable time period. And that would have to assume no (or negligible) risk of further 92% losses in the meantime. And if there were such a strategy, why it wasn't already being used to trade the £25k.

b) what strategy would recommend a pro-active stop set with the broker at -92% of the account.

 

[new_trader]

Hi dt,
Your questions to Tom (above) reminded me of this earlier post of yours in which you make an interesting point. While many (most?) subscribers to the thread appear not to like your approach, I think it has merit.* However, it strikes me that one of the downsides is that while you're seeking value, you run the risk of only getting some of your positions filled. When the 'conventional' trader is all in at £2.00 p/p, you may only have a couple of your 20 limit orders @ £0.10p p/p filled for an aggregate of £0.20p p/p. If the market moves as expected then, all other things being equal, the 'conventional' trader will make ten times the profit you make on the same move.

Does that make sense!
Tim.

*For the record, I must stress this is my own personal view - I'm not endorsing it with my T2W hat on. Furthermore, darktone's ideas are not suitable for new or inexperienced traders - who are advised to always set stops on all trades.

Tim,

It is conventional for newbies to want to trade with no stops or very wide stops. This is why experienced traders consistently emphasize the need and importance of using a stop, just as you have in your final sentence.

In the very early days I went through a phase of blaming stops for my losses and decided to abandon them, with disastrous results. Anyone who has been a member of this forum for a while must remember Spanish89 who also thought using no stops or extremely wide stops was sensible.

If it really was conventional to use a stop most experienced traders wouldn't think it was necessary to repeat the mantra "always trade with a stop".

If trading without a stop was wise, then trading must be the only profession I know of in which an inexperienced newbie is doing the right thing from the beginning. How many professions can you name where someone with 10+ years experience says "You know what, after 10 years of doing this I've come to the conclusion that the new trainee is right!"

People can invent all the idiotic hypotheticals they want to try and prove a point. I've been at this game now for almost 10 years. In that time I've traded through the global financial crisis, the flash crash, the US debt downgrade, the Greek "tragedy"...and I always used a close stop. No hypotheticals needed, just pure experience and an understanding of what is what and what is not!

 

[tomorton]

Ah, dear Spanish89 - Are you by chance back with us?

 

[timsk]

. . . People can invent all the idiotic hypotheticals they want to try and prove a point. I've been at this game now for almost 10 years. In that time I've traded through the global financial crisis, the flash crash, the US debt downgrade, the Greek "tragedy"...and I always used a close stop. No hypotheticals needed, just pure experience and an understanding of what is what and what is not!

Hi n_t,
I'm pretty much in the same boat as you, as my story is very similar to yours. However, this is a discussion forum and, as such, it's helpful to everyone to explore all possibilities, regardless of how 'idiotic' some of them may be.

Given your experience, I'm sure I'm preaching to the converted when I say that the only 'right' way to trade is the way that's right for you which, needless to say, may be the 'wrong' way for someone else. Tight stops are right for you - and that's great - but it doesn't follow that they are the best solution for everyone else. One man's meat is another's poison etc. The caveat being that a stop of some sort is essential for all new or inexperienced traders.
Tim.

 

[Fugazsy]

I agree, I would not trade without a SL but I think we need to respect others perceptions and experiences.

 

[Mr. Charts]

For me it's very simple, let the flowers bloom and pull out the weeds when they are small. Why anyone should sit watching themselves lose money in a trade is beyond me ! I've been trading for a living for 15 years and staying in good situations and getting out of bad ones fast works ! Having small losers is the cost of doing business, simple as that.
Embrace small losses, they come with the territory.

 

[itspossible]

For me it's very simple, let the flowers bloom and pull out the weeds when they are small. Why anyone should sit watching themselves lose money in a trade is beyond me ! I've been trading for a living for 15 years and staying in good situations and getting out of bad ones fast works ! Having small losers is the cost of doing business, simple as that.
Embrace small losses, they come with the territory.

what he says

 

[darktone]

No having a stop means that you predicting market going in a direction, means no taking responsibility for your trade and not accepting the market can do it anything at any time including swallowing your entire account, not only that but you will be placing yourself in the position not to see the real opportunities the market is offering you because you will be in that perspective to reason your trade instead to make yourself available.

The way I see it.
Lets say im following a larger tf trend, By definition in this moment the trend is up. I merely hope that that situation continues (hope, another taboo).
I view short term falling prices as my opportunity. Ive no idea or view as to how deep they will be but I dont need to. I can manage size in and out at favourable prices, taking full responsibility for the trade in that moment. There is nothing for me to right or wrong about.

Having a stop loss means I do not know what will happen, I am taken responsibility for my trade and if I am wrong I am out and I make myself again available for another opportunity which is also random knowing that a collectiveness of my trades will give me an edge to take money out of the market.

Like me, you dont know what will happen. Unlike me, you hand responsibility of the trade over to a stop, and put your self at further risk of bad execution. You are out, but you are at the worst price in that moment + any slippage, every single time. You dont give yourself the opportunity to turn -20 market into -10, -5, +5.
As far as being available, im still in what I see as the opportunity, you armt, subjective tho I agree.
As far edge goes, what is youe edge? Derived from price? You mean the same price that everyone sees? The same TA / patterns / profiles. That doesnt like much of an edge to me.

All in my view mate, no mallace.

 

[darktone]

Hi dt,
Your questions to Tom (above) reminded me of this earlier post of yours in which you make an interesting point. While many (most?) subscribers to the thread appear not to like your approach, I think it has merit.* However, it strikes me that one of the downsides is that while you're seeking value, you run the risk of only getting some of your positions filled. When the 'conventional' trader is all in at £2.00 p/p, you may only have a couple of your 20 limit orders @ £0.10p p/p filled for an aggregate of £0.20p p/p. If the market moves as expected then, all other things being equal, the 'conventional' trader will make ten times the profit you make on the same move.

Does that make sense!
Tim.

*For the record, I must stress this is my own personal view - I'm not endorsing it with my T2W hat on. Furthermore, darktone's ideas are not suitable for new or inexperienced traders - who are advised to always set stops on all trades.

For sure.quickie answer. Its down to the trader to manage size in any way they choose. Risk is proportionate to size tho, goes both ways.

 

[darktone]

-" I can never be right 100% of the time "............ according to my wife NO man can ;-)

Regards


F

Sorry F, but in my view, theres no being wrong or right in what I do. Most folks I reckon are so busy tring to right, they forget to play the game well. profitability takes a second seat, add a big ego maybe a third seat.

 

[barjon]

The way I see it.

1................Lets say im following a larger tf trend..............

2...............Like me, you dont know what will happen..............

3...............Unlike me, you hand responsibility of the trade over to a stop........

Darktone

The first two statements are contradictory aren't they?

It's funny but I see the third one the other way round. I think having the stop takes responsibility for the trade being "wrong" whereas you are taking the route of not accepting that you have been "wrong" and trying to trade yourself out of the "wrong" trade instead.

I get the argument that you can't always get your timing bang on and it's a perfectly acceptable strategy to build a position through a range of prices. ie: I'm gonna start buying at 250 through 225. It's also true that you will often finish up profiting when others have taken a loss, but that assumes that they have not re-entered (which, in effect, is pretty much what you are doing, reaction exits aside).

I think that the normal forward and back rhythm of the market will generally save you and mostly give you your profit, but the abnormal will likely be extremely painful and undo much that you may have achieved.

 

[tar]

Traders who don't like to use a SL should consider trading options instead of outrights ...

 

[Forexmospherian]

Sorry F, but in my view, theres no being wrong or right in what I do. Most folks I reckon are so busy tring to right, they forget to play the game well. profitability takes a second seat, add a big ego maybe a third seat.

If it works for you - then no one can say you are 100% wrong

BUT

By accepting a stop - and a loss - you are ADMITTING - that your are wrong - ie NOT right

You are admitting - you are not bothered about your ego - you take the punch and accept it - ie you are wrong and the stop as confirmed it - along with a loss of money in your account.

You are being humble

You are saying that the market can beat me - ie you are accepting a loss

AND

By doing that - you will end up with more profit and rewards over time than by playing the game of - "never accepting you are wrong"

The classic case for me is Marius the private fund manager already mentioned - ie waiting up to 12 months plus to get back into a profit on a trade and having to use extremely small stake sizes on trade entries to allow for massive pip drawdowns - and capital tied up - not making him anything and in fact costing him money.

The stronger pysch comes with the trader admitting he's got it wrong and living with it and accepting losses - knowing his strategy will still produce the gains to overcome any losses incurred.

It's a bit like going backwards - to move forward - its more efficient to do it if your strategy is geared to high RR's - low drawdowns - and not having to have a 97 - 100 % win ratio - when 65 -80% is more than adequate in the overall equation - especially if you are a retail trader with accounts under $250 k

Just my opinion - but like Fugazsy and timsk - I agree its good to discuss all the alternatives and to hear different opinions


Regards


F