How many people trade with stops?

[BSD]

That seems to say that if 9 trades lose 90 points, one trade must get those 90 points back , plus the gain for the week, which would have to be substantially more than the 90 points needed to breakeven, to make the whole thing worth while.

I get the impression that a lot is said in books that does not relate to real life. A trader who can only make a profit on 10% of his trades had better, seriously, consider getting a job, unless he is a George Soros.

With due respect to George Soros, who has proved his ability in trading, I would say that his book and his quotations were made after the sweat and tears that he suffered in making his fortune. I am willing to bet that he, a moneyless refugee from Eastern Europè, sweated blood and took severe risks in his attempts to get his fortune started. Most of us are not prepared to do that. If he was prepared to risk his future on 10% of his trades being correct it, certainly, puts him head and shoulders above the rest of us. That is why most of us get it wrong. We try to emulate brilliant traders and it is not possible to do so.

Hi Split,

good points as usual.

Think the dispersion across say your 100 trades was that you don't necessarily lose on 90 trades, but that depending on how you skew your expectancy via hit rate on one side, and average loss and take profit ratios on the other, you'll get lots of small wins, lots of small losses, lots of scratches, and then make the bulk of your net profits from the said 10 % of trades.

Sort of like the Paretos principle, just a bit worse.

Pareto principle - Wikipedia, the free encyclopedia

Quite interesting read btw if a bit dry, the book above about those hedge fund traders.

 

[Xeno]

There's a difference between having a stop loss and using it. I always have one, I usually only use it when I'm away from the screen. That works for me.

Regarding the 10/90 profits thing. I want to make a point about the market wizards quoted. It is possible that the trading they're talking about is only the big millions stuff. It's probably easier to make that stuff by letting a few big stakes run, than say making millions from repeatedly being right on smaller trades.

I happen to think that it's a very good point to make, since it encourages good principles and psychology, but I'm always wary about saying anything is gospel. I seem to remember there was another market wizard with a mechanical system who was right 90%+ I'm sure I'll be corrected if I remembered wrong.

 

[GCC]

I seem to remember there was another market wizard with a mechanical system who was right 90%+ I'm sure I'll be corrected if I remembered wrong.

I think you are talking about Robert Krausz who wrote the book W.D. Gann Treasure Discovered:

Amazon.com: W.D. Gann Treasure Discovered: Simple Trading Plans for Stocks & Commodities (Book & VHS Tape) (9781592800667): Robert Krausz: Books

I agree that no one single saying from anyone can be a gospel. What makes trading exciting is that there are many millions of ways of making money. The school they have been talking about is the "buy on strength" guys who try to catch big trend. There is another school of "buy on weakness" who buy only when the price is low. Both can make money.

 

[GladiatorX]

All my trading is based around
- Volatility
- Averaging Down
- Pyramiding

Stop losses would ruin me.

I don't/can't forecast price direction, i just let volatility do me a favor.

 

[morgan_edge]

If Spanish was here, he'd be rubbing it in everyones faces. lol
He always said its all about not using stops and adding to positions if they are losing.

Where's New_Trader? Its boring if everyone agrees....im pretty sure he advocates/uses the tightest stops in the West!

 

[0007]

Real Men don't use stops.
.
.
.
.
.
only jokin'

 

[elitejets]

That seems to say that if 9 trades lose 90 points, one trade must get those 90 points back , plus the gain for the week, which would have to be substantially more than the 90 points needed to breakeven, to make the whole thing worth while.

I get the impression that a lot is said in books that does not relate to real life. A trader who can only make a profit on 10% of his trades had better, seriously, consider getting a job, unless he is a George Soros.

With due respect to George Soros, who has proved his ability in trading, I would say that his book and his quotations were made after the sweat and tears that he suffered in making his fortune. I am willing to bet that he, a moneyless refugee from Eastern Europè, sweated blood and took severe risks in his attempts to get his fortune started. Most of us are not prepared to do that. If he was prepared to risk his future on 10% of his trades being correct it, certainly, puts him head and shoulders above the rest of us. That is why most of us get it wrong. We try to emulate brilliant traders and it is not possible to do so.

I disagree (sorry) and I am with Markus, those guys are who I try to emulate.
50% of my trades go for a loss, probably another 30% make 1:1, and the rest win big and pay for the losers. I don't count a trade that makes 1:1 a winner. I use hard stops and I don't move them to break even.
It was very hard psychologically for me to learn the discipline to trade this way but it is profitable.

 

[tenbobtrader]

Hard Stop

Hard Target

 

[Bloodhound]

I disagree (sorry) and I am with Markus, those guys are who I try to emulate.
50% of my trades go for a loss, probably another 30% make 1:1, and the rest win big and pay for the losers. I don't count a trade that makes 1:1 a winner. I use hard stops and I don't move them to break even.
It was very hard psychologically for me to learn the discipline to trade this way but it is profitable.

I completely agree with you. I'm currently looking at maybe 1 or 2 in 10 trades producing most of the goods, with the rest of my trades being testers, but only risking a tiny %age of account on each trade. Some of these may get me 1 or 2 times risk but most will fail - the 1 or 2 that do work win big though. I do use a hard (disaster) stop although my plan is that this never gets hit and I trade to reduce risk, first and foremost before increasing reward targets, via aggressive trailing and trade expectancy. Still early days and I will be the first to come back and say I am wrong but most traders I chat to seem to be more than happy with a 30% win rate as it's not the win rate that pays the bills.

 

[goose4]

I was a trader with open stops,lots of times it worked really well.MY problem was cashing on wins to early and re entering the market.For me I was a coward when my wins got big.I truly believe your wins must be bigger than your losses,if you have this the other way round you will eventually loose,may take a few years,but the market will finally punish you.

 

[GladiatorX]

The way i manage my risk; for example in stock trading is that i don't use stop losses (0 is my stop) but my position sizing is never more than 5% of my account... And i will slowly build that 5% through averaging down if needs be.
Therefore i get low average prices, 5% loss if a stock goes bust @ 0 and high win percent, very high indeed. If @ any point my position is up 10% from average price i will exit, unless i particular like the technicals and fundamentals of stock, in which case i will try pyramid a position

In more trending stocks, i will open immediate 1% position during a strong oversold pullback that doesn't look like a reversal and slowly build a position through pyramiding... In this case i wouldn't bother averaging down, i would forget about that stock and just accept a 1% loss and if it comes back great, if not, whatever.

I feel so different

I cannot see how anyone can falter such an approach - My risk is limited and i pretty much always win in stocks... Day-trading is different story i'm afraid

 

[MikeYass]

The way i manage my risk; for example in stock trading is that i don't use stop losses (0 is my stop) but my position sizing is never more than 5% of my account... And i will slowly build that 5% through averaging down if needs be.
Therefore i get low average prices, 5% loss if a stock goes bust @ 0 and high win percent, very high indeed. If @ any point my position is up 10% from average price i will exit, unless i particular like the technicals and fundamentals of stock, in which case i will try pyramid a position

In more trending stocks, i will open immediate 1% position during a strong oversold pullback that doesn't look like a reversal and slowly build a position through pyramiding... In this case i wouldn't bother averaging down, i would forget about that stock and just accept a 1% loss and if it comes back great, if not, whatever.

I feel so different

I cannot see how anyone can falter such an approach - My risk is limited and i pretty much always win in stocks... Day-trading is different story i'm afraid

I like that kind of approach, It's only viable if you have a large amount of capital though i guess.

 

[goose4]

The way i manage my risk; for example in stock trading is that i don't use stop losses (0 is my stop) but my position sizing is never more than 5% of my account... And i will slowly build that 5% through averaging down if needs be.
Therefore i get low average prices, 5% loss if a stock goes bust @ 0 and high win percent, very high indeed. If @ any point my position is up 10% from average price i will exit, unless i particular like the technicals and fundamentals of stock, in which case i will try pyramid a position

In more trending stocks, i will open immediate 1% position during a strong oversold pullback that doesn't look like a reversal and slowly build a position through .. In this case i wouldn't bother averaging down, i would forget about that stock and just accept a 1% loss and if it comes back great, if not, whatever.

I feel so different

I cannot see how anyone can falter such an approach - My risk is limited and i pretty much always win in stocks... Day-trading is different story i'm afraid

Very interesting indeed.An extremely intricate mechanisms your got going.

If you got time buddy ,could you explain pyramiding? And would your approach work for CFDs?

Cheers...

 

[Schixm]

hard stop.