No Stop-Loss System

shadowninja

Well-known member
Jul 22, 2007
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#16
SN: yes, I have been here since 2004, but no, rejected grids because of all the reasons stated. The idea of adding to losers and holding on never appealed. But surely the flip-side, adding only to winners, would reverse the notion, resulting in near-term losses, and longer-term account-growing?
I was purely talking about not using stops.
 

meanreversion

Well-known member
Jan 20, 2009
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#17
It's usually worth testing all commonly held beliefs with historical data. Some truisms are borne out by stats, some are revealed to be bogus. E.g. always move your stop to breakeven when you can simply doesn't work over time (according to my analysis). The trend is your friend - this one does seem to help.

The problem with trying to backtest with no stops is that it's impossible to know what percentage of your account you're risking. I've tried removing stops with a couple of my systems (just betting a fixed amount each time) and the results are not particularly encouraging. You will make money sometimes, but in the long run it's not overly profitable, i.e. expectancy is close to zero.

Another saying is "cut your losses, run your winners".. this rule does hold up well in testing, so my conclusion for the moment is that trading without stops is statistically ineffective.
 
Likes: SvenFoster

Rossini

Well-known member
May 20, 2008
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#18
I don't use stop losses as such when swing trading or trading over a fairly long TF. I find them a pain tbh.

I think its widely accepted that not using stops increases profitability, but eventually that one trade will cause you to blow up. So I use a strategy that enables me to exit with hopefully and usually (small) losses without having to use a SL. Having said that regardless of whether its day trading or longer term stuff I always enter a disaster stop to protect me in the event of a market crash, or if the first system should for whatever reason fail.
 

Rossini

Well-known member
May 20, 2008
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#19
It's usually worth testing all commonly held beliefs with historical data. Some truisms are borne out by stats, some are revealed to be bogus. E.g. always move your stop to breakeven when you can simply doesn't work over time (according to my analysis). The trend is your friend - this one does seem to help.

The problem with trying to backtest with no stops is that it's impossible to know what percentage of your account you're risking. I've tried removing stops with a couple of my systems (just betting a fixed amount each time) and the results are not particularly encouraging. You will make money sometimes, but in the long run it's not overly profitable, i.e. expectancy is close to zero.

Another saying is "cut your losses, run your winners".. this rule does hold up well in testing, so my conclusion for the moment is that trading without stops is statistically ineffective.
Good post.

Removing all kinds of SL's will obviously make it very tricky to calculate the total risk on any one trade, but if one is using a crash stop then you can at least work out in a disaster situation what % of your account you will lose.

Also you will have the knowledge of your average loss without using a SL and some kind of conservative position sizing formula could be used with this information.
 

SvenFoster

Active member
Dec 4, 2003
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#20
Good post.

Removing all kinds of SL's will obviously make it very tricky to calculate the total risk on any one trade, but if one is using a crash stop then you can at least work out in a disaster situation what % of your account you will lose.

Also you will have the knowledge of your average loss without using a SL and some kind of conservative position sizing formula could be used with this information.
I think thats even more so with stop and reverse type systems that are always in the market or use the inverse signal to liquidate and reverse. Often you'll have to base your position size on somekind of historical stats.

When it comes to manual/discretionary trading I think as long as you understand your risk you should do whatever sits comfortably with you. No point in putting SL on if it messes with your head, esp if your happier with less leverage and managing exits yourself
 
Likes: Rossini

meanreversion

Well-known member
Jan 20, 2009
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#21
I don't use stop losses as such when swing trading or trading over a fairly long TF. I find them a pain tbh.

I think its widely accepted that not using stops increases profitability, but eventually that one trade will cause you to blow up. So I use a strategy that enables me to exit with hopefully and usually (small) losses without having to use a SL. Having said that regardless of whether its day trading or longer term stuff I always enter a disaster stop to protect me in the event of a market crash, or if the first system should for whatever reason fail.
Am I missing something here? You have an exit strategy which enables you to exit with small losses, and in addition you have a disaster stop.. how is this trading without stops :)
 

Rossini

Well-known member
May 20, 2008
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#22
Because im not relying on stops to get me out with a loss. Which is different to a strat that frequently uses stops to exit positions.
 

kimo'sabby

Well-known member
Apr 3, 2010
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#23
It's usually worth testing all commonly held beliefs with historical data. Some truisms are borne out by stats, some are revealed to be bogus. E.g. always move your stop to breakeven when you can simply doesn't work over time (according to my analysis). The trend is your friend - this one does seem to help.

The problem with trying to backtest with no stops is that it's impossible to know what percentage of your account you're risking. I've tried removing stops with a couple of my systems (just betting a fixed amount each time) and the results are not particularly encouraging. You will make money sometimes, but in the long run it's not overly profitable, i.e. expectancy is close to zero.

Another saying is "cut your losses, run your winners".. this rule does hold up well in testing, so my conclusion for the moment is that trading without stops is statistically ineffective.

I have to agree with you. Stops not only dictate how much a trader will lose but also how much a trader will make using a method with a positive expectancy.

A stop is just one end of the trade parameter, without sounding too obvious, the target the other. The full range of the trade parameter, ie stop to exit should fit inside the volatility range preferred by the trader, otherwise the trade parameters are too big.

No trader can seriously trade with just targets.
 
Apr 3, 2017
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#24
I am fascinated by systems developed by people that have no stop-losses.
I have been googling grid-trading style systems.

I am curious to deconstruct such ideas. The basic idea seems to be to take small gains, and let losing trades accumulate until price returns and they can be closed out for BE or a gain. (eventually)

Are they simply a reflection of peoples inability to accept the fact they are wrong??
Are grid-trading systems fundamentally flawed?

I know that overnight charges can affect the end-result. Aren't there conditions where the overnight charge is positive, ie, you are paid? Could you construct a grid-trading system where losing trades result in the trader being paid positive interest charges?

I am a curious orange.

EDIT: being a trend-follower, I am inclined to add to winning positions. (although none of my rules use this facility)

What If:
We used Point and Figure as a starting point. A 30-pip box size. 3-box reversals. What if we added to each new box, ie, every 30 pips. but didn't close and reverse direction unless there was a 90 pip (30pip box times 3 box reversal) change of direction?
That is, the market would need to move 90 pips to change direction, but once changed, you add a new trade every 30 pips it moves in your favour???
This way, you are adding to positions in the direction of the trend, adding to winning direciton, rather than adding to losers??

I am thinking too much aren't I??
I use options in place of stops.

http://www.trade2win.com/boards/trading-systems/223496-trading-without-stop-loss-using-options.html