I Stopped Using Stops

[Wicked_Daddy]

F:
Yes, at the moment all trades are closed. I just closed my 48th winner a couple hours ago. I had opened it today at 1315 EST and closed it at 1440 for +23 pips. It closed while I met my wife for lunch. (I'm on central time).

And yes, I use preset take profit limits so that trades will close profitably in my absence.

Right now I am observing the Sydney open and determining my entry for an overnight trade. Today's candle has wicks on both sides, closed positive and is in a 5 day positive cycle in an otherwise down trend, although arguably ranging and possibly on a short term direction change. Either way, entering now for a 15 pip profit could be had either short or long. But I'll probably go short just because I like the near term retracement properties of the EU in these conditions. I wait for Asia to creep the price a bit before placing the trade and then shutting my system down for the evening.

The longest I've held a trade open waiting for a positive outcome is 6 working days. Bad timing on my part but that was all it was. My analysis was correct, just had to wait for it to complete the cycle and it took longer than I anticipated. My average hold time is 1 to 2 hours. My average pips is 14. (23 was rare for me but the conditions were perfect) I am VERY conservative in my trades and only take small bites of what I deem to optimal conditions. I take between 2 and maybe 4 trades in a day but 4 is very rare. My average is 2.

14 may not be a lot to some. But I don't lose pips. So I don't need to subtract from 50 pip winners to end up at the same or less average. I am averaging 2% per day growth of my account. At any dollar amount, 2% per day compounds into a very healthy annual return percentage. You can do the math. As my account compounds, so do the quantity of lots traded to maintain a margin usage that is consistent with the balance. Thus, my trades will get larger but my pip extraction will remain the same. Conservative, precise, controlled.

Thank you for the well wishes. With all due respect, luck has nothing to do with this. I used to wish for luck, get sweaty palms, heart thumping, curse at God then say I'm sorry, etc, etc. I did not have a system. Luck was my system. Then I developed my method and rules and I made sure luck was not part of any of that. Now I calmly place my trade, go to lunch, walk the dog read a book at my desk, whatever. I enjoy trading. I am lucky to have been blessed with the patience and commitment to have worked this thing out. Truly lucky.

I understand why traders swear by the use of stops. I'm just not in that group. I was but I like what I'm doing better now. And really, isn't that all that matters?

 

[ph_trader]

very interesting thread wicked, it does make sense, I havnt had the chance to read all of it yet, but ill keep an eye on this, I really like the Idea of not having stops if done the way i think you are doing it. really worth a shot thanks for sharing

 

[tomorton]

48 winners out of 48 trades for an average gain of 14 pips with no trades remaining open.

Not sure if I should be encouraged that it can be done or totally dismal that I'm not doing it.

 

[Wicked_Daddy]

very interesting thread wicked, it does make sense, I havnt had the chance to read all of it yet, but ill keep an eye on this, I really like the Idea of not having stops if done the way i think you are doing it. really worth a shot thanks for sharing

My pleasure. It's certainly not for everyone but then, neither is trading.

I take trades based on a mixture of price action and a hybrid indicator that I built out of using linear EMA data to create a stochastic that then become data for a form of RSI (I'm not a programmer!). I'm sure you've heard of the StochRSI. My system (FXCM) does not have that but in my attempt to create something similar I experimented using some linear EMA's an RSI and a Stochastic, I built a number of different iterations that I analyzed and ended up with one I like that works well on a 15m time frame. I compare that to price action on longer time frames, with directional strength supported by a 5,3,3 Stochastic. Basically, I am a counter trend trader. I look for a long 1 hr candle that is coming to a close with both Stochastic momentum and my 15m hybrid indicator being at their extremes. A 4hr candle that is also long and coming to a close is also part of my timing mechanism, if the 1 hr and 4 hr are complimentary. This tells me the next candle will have a slight pull back from it's open during it's lifetime. Depending on the candle length and strength of the move, I'll set my take profit and enter the trade at the opening of the next candle. Sometimes I'll wait a bit for the initial movement in the candle to give me an additional edge to my advantage. I usually go for 11 to 16 pips. My target net is 10 to 15 pips. The extra pip is to pay for the transaction. This is a very conservative amount of pips to extract. But my track record will show that it's relatively fast, easy and low/no stress.

I also have a strategy for making an extra 10 to 15 pips overnight. This one is a no brainer. On a daily chart, I wait for the close of the day's candle. For me, that is 1700 EST. This begins the new day, the Asian open. Tuesday through Thursday of any given week, the EU will move +/- 10 pips (minimum) from the close of the previous day. You almost don't need to even pick a direction. But since there are no guarantees (there have been days that only back up 7 or 8 pips) and I like to grab those pips sooner rather than later so I apply the same principles of trend and momentum to determine whether I'll go short or long. At the opening of the next day's candle, I take my position, set my 11 pip target and wake up to my first win of the next day. I don't do this on Sundays or Fridays.

As I said before. these are little trades but only from a pip perspective. my goal is to get my margin percentage to a point of comfortably trading 5 lots. $50 per pip would be very nice. I am just recently transitioning to 2 lots. I trade to extract a 1.5% net profit of the account size daily. I'm averaging 2.1% currently. As the account compounds, so will the trade size - the 1.5% will become a bigger result and so on.

I have had to get over the feeling of missing the boat when the market swings 50+ pips and I've already closed my little 11 pip trade. But I sure don't miss the feeling of being on the losing side of the opposite occurance. Greed and fear go hand in hand. I have found that it does not matter which one you feel first, the other is close behind. I've let go of them both. Small, reliable wins feel good after while. I still envy those those guys that can bang out 50 pips a day. Maybe I'll get there. But if not, I'm just super happy and thankfully blessed to be growing my account consistently.

...50 closed and banked as of this morning.

 

[Wicked_Daddy]

The EU is in a range that's why it was easy , but check long term charts and tell me what you see . Look at the drop from 1.40 to below 1.10 ...

GL

Some would say that range trading is the hardest. But then, trading is hard...period. It's funny, I have found myself saying everyday; "Wow, crazy market today". So I've resolved that it's just crazy every day so it's silly to think that any other day was more or less crazy then the last.

True, EU has been in a range and someday that will change. Then the strategy will need to adjust as well. Adjust to what? Well, therein lies the mystery... until then!

 

[Forexmospherian]

F:
Yes, at the moment all trades are closed. I just closed my 48th winner a couple hours ago. I had opened it today at 1315 EST and closed it at 1440 for +23 pips. It closed while I met my wife for lunch. (I'm on central time).

And yes, I use preset take profit limits so that trades will close profitably in my absence.

Right now I am observing the Sydney open and determining my entry for an overnight trade. Today's candle has wicks on both sides, closed positive and is in a 5 day positive cycle in an otherwise down trend, although arguably ranging and possibly on a short term direction change. Either way, entering now for a 15 pip profit could be had either short or long. But I'll probably go short just because I like the near term retracement properties of the EU in these conditions. I wait for Asia to creep the price a bit before placing the trade and then shutting my system down for the evening.

The longest I've held a trade open waiting for a positive outcome is 6 working days. Bad timing on my part but that was all it was. My analysis was correct, just had to wait for it to complete the cycle and it took longer than I anticipated. My average hold time is 1 to 2 hours. My average pips is 14. (23 was rare for me but the conditions were perfect) I am VERY conservative in my trades and only take small bites of what I deem to optimal conditions. I take between 2 and maybe 4 trades in a day but 4 is very rare. My average is 2.

14 may not be a lot to some. But I don't lose pips. So I don't need to subtract from 50 pip winners to end up at the same or less average. I am averaging 2% per day growth of my account. At any dollar amount, 2% per day compounds into a very healthy annual return percentage. You can do the math. As my account compounds, so do the quantity of lots traded to maintain a margin usage that is consistent with the balance. Thus, my trades will get larger but my pip extraction will remain the same. Conservative, precise, controlled.

Thank you for the well wishes. With all due respect, luck has nothing to do with this. I used to wish for luck, get sweaty palms, heart thumping, curse at God then say I'm sorry, etc, etc. I did not have a system. Luck was my system. Then I developed my method and rules and I made sure luck was not part of any of that. Now I calmly place my trade, go to lunch, walk the dog read a book at my desk, whatever. I enjoy trading. I am lucky to have been blessed with the patience and commitment to have worked this thing out. Truly lucky.

I understand why traders swear by the use of stops. I'm just not in that group. I was but I like what I'm doing better now. And really, isn't that all that matters?

Hi WD

I really do wish you well - and whilst the EU is in the range its not to bad

How I look at it if you average say 2% per day and take 2 trades on average a day and just had you 48 th winner with an average win 14 pips then -

1. Your total pip count is approx 670 - 700 pips and if say 14 pips averages 1% of your account - then

2. You are up say 45-50% on your capital or more if you have been compounding

3. So to lose all the gain you need the EU to either go over 1600 with you still holding sells in the 800 -900 area - or

4, EU to drop under 0300 whilst you have buys on at 1000 -1110.

5. When the range does go - 400+ pips can happen in 2 or 3 days easily and therefore thats your worry

6. If 700 pips is say 45 -50% of your capital a 1500 pip move - say up to 2500 + would take your account out - unless you were hedging or buying against your sell or sells under 0900 say.

7. From what I understand if you are using no stops all the while 1% of your account needs to be over 100 pips plus - then a 700 pip move against you is only a 7 % loss on the account - instead of 45+% atm

8. If you are sticking winning runs with a mental stop or hard stop in profit - then you are safe - ie say you are up 19 pips and you say i would only exit if it goes 14 pips against me - you still have a winning trade that might make you then 35 pip or even 200+ pips etc

9 Pyramiding and Peeling would also help so if you had a trade say 200 pips against you instead of being down like 14% off you account as of now - then by peeling off - you might only be down 5% - but then really you have exited part stakes with losses

10 What ever you do - don't martingale when its not going you way - that's 99% sure to cause you big problems

11 - I think my main worry for you is losing all your 3 months gains in under 1 week. I would let you know if we are coming out the range ie - days when EU gets over 1350 and 1450 - or under 800 and 700 but for now although bull over 0900 and 0950 over 1160 might be a first clue

12. Everyday - you will end up reading price better - so therefore if we dont come out range until say 0ctober or later on - then I reckon you will be working on the next plan - due to your better understanding of PA

All the best


F

 

[Wicked_Daddy]

Hi WD

I really do wish you well - and whilst the EU is in the range its not to bad

How I look at it if you average say 2% per day and take 2 trades on average a day and just had you 48 th winner with an average win 14 pips then -

1. Your total pip count is approx 670 - 700 pips and if say 14 pips averages 1% of your account - then

2. You are up say 45-50% on your capital or more if you have been compounding

3. So to lose all the gain you need the EU to either go over 1600 with you still holding sells in the 800 -900 area - or

4, EU to drop under 0300 whilst you have buys on at 1000 -1110.

5. When the range does go - 400+ pips can happen in 2 or 3 days easily and therefore thats your worry

6. If 700 pips is say 45 -50% of your capital a 1500 pip move - say up to 2500 + would take your account out - unless you were hedging or buying against your sell or sells under 0900 say.

7. From what I understand if you are using no stops all the while 1% of your account needs to be over 100 pips plus - then a 700 pip move against you is only a 7 % loss on the account - instead of 45+% atm

8. If you are sticking winning runs with a mental stop or hard stop in profit - then you are safe - ie say you are up 19 pips and you say i would only exit if it goes 14 pips against me - you still have a winning trade that might make you then 35 pip or even 200+ pips etc

9 Pyramiding and Peeling would also help so if you had a trade say 200 pips against you instead of being down like 14% off you account as of now - then by peeling off - you might only be down 5% - but then really you have exited part stakes with losses

10 What ever you do - don't martingale when its not going you way - that's 99% sure to cause you big problems

11 - I think my main worry for you is losing all your 3 months gains in under 1 week. I would let you know if we are coming out the range ie - days when EU gets over 1350 and 1450 - or under 800 and 700 but for now although bull over 0900 and 0950 over 1160 might be a first clue

12. Everyday - you will end up reading price better - so therefore if we dont come out range until say 0ctober or later on - then I reckon you will be working on the next plan - due to your better understanding of PA

All the best


F

Hey F,
You are correct in your assumptions. And also correct that I would not hang on to a loser long enough to wipe out my profits or account. I do have a threshold or "mental stop". But as you say, I also put a stop behind my profitable trade as soon as it's crossed into profit by at least a few pips. I also have a preset TP order that closes the trade. Of course, it seems the smart thing to do is to put a trailing stop behind it at that point. My trades are small though and I am mentally comfortable with banking the trade while it's there, then looking for my next one or just being done for the day. I'm practicing discipline at not trading even though the temptation is there. When I hit my goal I'm done - that's a rule.

I know the market will shift to a solid trend at some point. Again, keeping my strategy tight and trades small helps me to extract profit on small moves that are extremely high probability. So far so good. I may end up employing this strategy well into the development of the oncoming trend. Then, once it's obvious, I may change the strategy to leverage the trend.

But the reality for me is this: I don't trust the market. Trusting the market assumes that I know what will happen over a longer term than an hour or two. If I knew that, you'd be watching me on CNBC! So even if the market looked like it was in a solid trend, even for a few weeks... How would I or anyone know that it wasn't going to turn, as it did on May 8, 2014?
As a side note: I just looked at the monthly chart and the Stochastic divergence during the rise going into May was a dead giveaway. I wonder how many long term traders made a killing on that one!

I'm sure you agree, as you are an intra-day trader and take your profits in small bites. Does it really matter to you what the long term trend is?

Anyway, good trading to you. I check in on your thread occasionally and have always been intrigued with your LR MAs. I can't make heads or tales of your charts but as it long as works for you, that's all that matters!

 

[Wicked_Daddy]

I don't know what happened to the guy that started the thread but if you stop using stops you are doomed. It might work for a bit until one day it stops and you could wave your money goodbye.

Still here. Was looking back over the thread and noticed your post. Just closed my 57th consecutive profitable trade since eliminating stops.

My worst anti-stop scenario to date occurred on 8/24 when the EU went 200+ pips against my short when all indications pointed to a decline - Obvious stochastic and RSI divergence in 3 time frames combined with an inverted 1 hour hammer for PA support signaled a solid short trade. I should have been stopped out if I had a stop in place. Rather then panicking, I held the position and waited for the technicals to catch up with the lack of fundamental support for the craziness. I closed the position well into profit the next day.

Truly, it's not for everybody and this recent action in the market would and probably has tested the resolve of many experienced traders.

 

[darktone]

Still here. Was looking back over the thread and noticed your post. Just closed my 57th consecutive profitable trade since eliminating stops.

My worst anti-stop scenario to date occurred on 8/24 when the EU went 200+ pips against my short when all indications pointed to a decline - Obvious stochastic and RSI divergence in 3 time frames combined with an inverted 1 hour hammer for PA support signaled a solid short trade. I should have been stopped out if I had a stop in place. Rather then panicking, I held the position and waited for the technicals to catch up with the lack of fundamental support for the craziness. I closed the position well into profit the next day.

Truly, it's not for everybody and this recent action in the market would and probably has tested the resolve of many experienced traders.

It was just another day. Just goto respect size.

 

[Jell02]

Still here. Was looking back over the thread and noticed your post. Just closed my 57th consecutive profitable trade since eliminating stops.

My worst anti-stop scenario to date occurred on 8/24 when the EU went 200+ pips against my short when all indications pointed to a decline - Obvious stochastic and RSI divergence in 3 time frames combined with an inverted 1 hour hammer for PA support signaled a solid short trade. I should have been stopped out if I had a stop in place. Rather then panicking, I held the position and waited for the technicals to catch up with the lack of fundamental support for the craziness. I closed the position well into profit the next day.

Truly, it's not for everybody and this recent action in the market would and probably has tested the resolve of many experienced traders.

I have seen traders with a similar style to you. Because you are making money it will be difficult to comprehended but I will try. There was a famous signal provider that managed people's accounts. He had the same approach as you, no stops. He made consistent profits for more than 4 years until one day out of the blue the market turned against him without correcting. This resulted in him losing 60% of the account as he decided to close his trade. The same fate awaits anyone who is not using stops, it is merely a matter of time. There alternative is to hedge the trades but it required a tremendous amount of skill and it is not for everyone.

 

[tar]

You don't have to win every single trade to be profitable ...

 

[darktone]

I have seen traders with a similar style to you. Because you are making money it will be difficult to comprehended but I will try. There was a famous signal provider that managed people's accounts. He had the same approach as you, no stops. He made consistent profits for more than 4 years until one day out of the blue the market turned against him without correcting. This resulted in him losing 60% of the account as he decided to close his trade. The same fate awaits anyone who is not using stops, it is merely a matter of time. There alternative is to hedge the trades but it required a tremendous amount of skill and it is not for everyone.

Nonsense, if that were true I couldnt do what I do.

 

[Wicked_Daddy]

I have seen traders with a similar style to you. Because you are making money it will be difficult to comprehended but I will try. There was a famous signal provider that managed people's accounts. He had the same approach as you, no stops. He made consistent profits for more than 4 years until one day out of the blue the market turned against him without correcting. This resulted in him losing 60% of the account as he decided to close his trade. The same fate awaits anyone who is not using stops, it is merely a matter of time. There alternative is to hedge the trades but it required a tremendous amount of skill and it is not for everyone.

Perhaps. I don't think this is a permanent strategy. But it might be. I trade in small increments so trend is not really a consideration but admittedly, the current strategy works well (for me) in this ranging market. When it becomes obvious the market has changed (trending?) I may adjust. Given also that I have done a thorough analysis of that trade I had to hold, I discovered a weakness in my method that I have now adjusted.

 

[Jell02]

Nonsense, if that were true I couldnt do what I do.

Many traders that don't use stops are using hedging to manage their risk. When you will get stuck in a trade it will prevent you from taking more trades. If you do take more trades and they turn against you it will turn into an expensive business because the interest will slowly chew your money. Trading without stops works until one day it is working no more. When that day happens and it will happen you need to be able to understand the market has changed and adjust. By adjust it means taking small losses before it gets out of hands. Mark my words on this.

 

[darktone]

Many traders that don't use stops are using hedging to manage their risk. When you will get stuck in a trade it will prevent you from taking more trades. If you do take more trades and they turn against you it will turn into an expensive business because the interest will slowly chew your money. Trading without stops works until one day it is working no more. When that day happens and it will happen you need to be able to understand the market has changed and adjust. By adjust it means taking small losses before it gets out of hands. Mark my words on this.

Do you think trading without stops means not taking losses and not getting out positions that have changed tack?

 

[tomorton]

Nonsense, if that were true I couldnt do what I do.

Hi darktone - I'd like to give your approach another look. Slightly annoyed at myself for this, but I guess I'm still curious.
Please can you reference any books / papers that sum it up?

 

[fxstrategist]

stops

Good posts, keep the thread active.

 

[Wicked_Daddy]

73 straight profitable trades to date. Averaging 10% growth per week. I took a couple weeks off and included that in my averaging at 0%.

I actually did make a single losing trade. But I'm not counting it because it was caused by a system error and although I recovered and closed the trade at a profit, the transaction fee put the trade at a total loss of $2.29. Still pissed about it though.

I recently upgraded my computer to Windows 10. I entered a trade with a single mouse click and nothing happened - no entry. So I clicked again, and then again. Still nothing. So I clicked it one more time and got an alert that I had used all my margin. But the system did not show that I had used anything. What?! I contacted tech support and they told me I had 3 open trades on the same pair, using all my account's balance. I FREAKED! I immediately checked my back up system (my phone) and saw the trades, closed them all and then did some push-ups to use up the adrenaline that had flooded my body. Incidently, that pair would have traded in my direction without any pullback after entry and would have been very lucrative with all those lots traded. But of course, it could have pulled back a little and margin called my account with very little effort. I was 100% in. Crazy!

 

[NickBk]

73 straight profitable trades to date. Averaging 10% growth per week. I took a couple weeks off and included that in my averaging at 0%.

I actually did make a single losing trade. But I'm not counting it because it was caused by a system error and although I recovered and closed the trade at a profit, the transaction fee put the trade at a total loss of $2.29. Still pissed about it though.

I recently upgraded my computer to Windows 10. I entered a trade with a single mouse click and nothing happened - no entry. So I clicked again, and then again. Still nothing. So I clicked it one more time and got an alert that I had used all my margin. But the system did not show that I had used anything. What?! I contacted tech support and they told me I had 3 open trades on the same pair, using all my account's balance. I FREAKED! I immediately checked my back up system (my phone) and saw the trades, closed them all and then did some push-ups to use up the adrenaline that had flooded my body. Incidently, that pair would have traded in my direction without any pullback after entry and would have been very lucrative with all those lots traded. But of course, it could have pulled back a little and margin called my account with very little effort. I was 100% in. Crazy!

So it seems one trade equals 33.33% of your balance.
You also stated a trade went 200 points offside before coming back a winner of 50 points. How did that work if a trade is 33.33% of equity employed please, did it exhaust the other 66.66% whilst waiting?
As a bit of a maths fan myself, on the basis of the above mentioned trade your 10% per week seems exceptionally low. Look forward to some more detailed explanation from you to give that example.
I am surprised you have not got more stick here yet.
Just found this thread will read it all when I get time.
Good luck.

 

[NVP]

Hey nick......guys

He's not getting stick,because many of us are on eggshells here at t2win

So I say good luck to him ......sounds a perfectly reasonable system not,using stops

And check out historic drain the banks TRO. Posts for a similar system.......although I think,TRO was using stops


N