stop loss statistics

[emmanuel forozis]

Hello, I am a newbie here, but have been reading the posts for 6 months or so, I have been sb'ing the dow futures with Ig for about 11 months now, I have reached my initial goal of minimum 15 pips a day (inluding 4 pip spread)so 9 net,for the last 4 months, yes I know its too early to guage, but thats all I have to go bye considering I havnt been at it for so long.
The question I have is... in the beginning after reading and reading and reading !!! I gathered that discipline is the name of the game, as far as your strategy, stop losses ,and human reactions etc... after researching my logs over and over, I have found that my stop losses did me much more harm than good, I even tried 2 months putting them back 10 points further, saw a 8% winning % difference, then these last 4 months I decided to go about it without a stop loss, and get out of my trade when my charts and mind told me I am out of this "dead trade", this is where I have been reaching my goal.The problem I am facing is ,I am not comfortable although I am more successful now. I mean all the books, most professionals, all the seminars all told me stop loss is a must to succeed. I cant be the one who is right trading for just 11 months, and these pro's who have been at it for years and years are wrong. So I am timid and find myself being less agressive having this in the back of my mind. I would bet 3 contracts ($60) and now I bet 1 contrat ($10), I think I am trying to justify that I am on a winning streak that will turn around and burn me without stop loss. Ofcourse this goes in the psyche of trading , and maybe I need to work on that more, but just knowing I am doing something that professionals preach not to do dosnt sit well with me. Anyone have this problem? solutions? thank you, and great site.

 

[bangkoker]

If you are netting 9, how long do you let a losing trade go before you stop yourself out? 10,20,50,100+ depending on the size, surely a series of bad ones would destroy quite a long string of +9.

Otherwise 9 points a day sounds good if consistent

 

[charliechan]

H I have found that my stop losses did me much more harm than good, I even tried 2 months putting them back 10 points further, saw a 8% winning % difference, then these last 4 months I decided to go about it without a stop loss, and get out of my trade when my charts and mind told me I am out of this "dead trade", this is where I have been reaching my goal.The problem I am facing is ,I am not comfortable although I am more successful now. I mean all the books, most professionals, all the seminars all told me stop loss is a must to succeed.

why?

you have reached a milestone.

you are right, all the books do suggest putting in a stop, but books are written by authors, not by successful traders.

stops are an invention of the brokerage industry. they are there to make sure you trade more so they earn more money. nowhere is this more true than in spread betting where the 'broker' will massage his quote to take out his customers stop, thus keeping your money.

hopefully, your next milestone will be to stop spreadbetting on the realisation it is a fools errand, and trade in a real market.

good luck.

 

[bangkoker]

If you have an exit strategy and you are not running your losses, I suppose it depends on personal preference. Of course you can still have a safety stop in case of computer blowing up etc but then decide a trade is no longer valid but if you are holding on for an age hoping the Market will cone back that is different

 

[rawrschach]

without a stop loss, and get out of my trade when my charts and mind told me I am out of this "dead trade"

dunno which professionals you mean, but the vast majority of intraday trader that trade for a living do this.

 

[tomorton]

Hi emmanuel - whether you have a stop and what sort it is (i.e. where you placve it) depends on what sort of trades you're making. Are you entering trades based on TA chart patterns?

 

[emmanuel forozis]

Looking at my log book,7 weeks ago I have been down 46 pips at one point, but my charts and system didnt tell me to get out just yet, I didnt make a profit on that particular trade as I lost 12 pips in the end, the end I mean when my trading system told me to get out,which I did. I dont look for 9 pips net to get out, I made up to 84 pips once, just that my trading system has been averaging 9 pips net after trading this way,and I never give back gains which has also burned me many times, but I can live with that . I have a mental stop of $1500 no matter what size contract. no matter what the charts say, but thank goodness didnt have to use it yet, Im sure the time will come , and come again. I guess I have to verify this method over a longer period of time, to really guage results and not a fad. Im looking at my log , and july I had 4 consecutive days I was averaging 33 pips of losses for those days straight, in the end of the month I averaged 8 pips net gain for the same month. In august I never was losing more than 28 pips on one trade during all of that month (123 trades) and yet averaged 11 pips net daily, go figure. Yes my trades are all based on Ta. Please dont take this as Im trying to advocate this, actualy Im trying to find the flaw.

 

[bangkoker]

Doesn't sound like you are doing too bad to me.

Good luck:clover:

 

[emmanuel forozis]

The saftey net advice is very good advice, I will put 100 pip stops as I continue this and see where it goes. Thanks.
I forgot to mention, I started spread betting live from the beginning, One broker advised me to do this while I was in a seminar in Buffalo New York, He told me that if I had $2000 to lose, go live and last as long as you can until you lose it "because you will lose it",I convinced myself that I was no going to lose it, because I will study and keep studying , but he mentioned it would be the cheapest education you could ever buy. The trip to the seminar and book and this and that cost me almost $3000 at the time, I opened my account studied and studied more, playing .50 a pip, guess what? I lost all my money after 4 months!!.I opened another account after 3 weeks with $5000, and still have my account at $7200,yes not great but last 3 months are much better. I never thought I would agree, but trading from the begining with real money was the best advice I have gotten, as crazy as it sounds, he was explaining no matter who or what , there will be bad habits born on demos.But the same gentleman told me to always use stops... I think trading is truly one of very very few business' where people can reach similar goals using so many different strategies. I am a newbie, and I never forget that.

 

[bangkoker]

The saftey net advice is very good advice, I will put 100 pip stops as I continue this and see where it goes. Thanks

Sounds good, I did hear a story of someone who popped to the shop and got hit by a car. Meant to be out for 20 minutes and was out for days, so I suppose for a Black Swan event even, having the safety net can't be too bad an idea

 

[DionysusToast]

To the OP - if you widen your stop loss, it follows that your win ratio will increase. There is no magic in this, it is just the laws of probability at work.

For instance - 2 point target, 8 point stop will give you an 80% winning system if you enter at random. It will of course, not be profitable.

Similarly, you mention another 10 pips giving you an extra 8% winners. If this gave you the same PnL, then welcome to the laws of probability. If it gave your more profit, then it follows your stops were too tight but not necessarily that you should have thrown them away entirely.

It's impossible based on what you posted to tell if you've given this new stopless method a fair run OR what the impact on your P&L is. If you are making 20 trades a day, then we could say that you have found something significant. If you are making 1 trade a day, you need to consider the role of lady luck.

It seems odd to me that you can have a system that's not telling you to get out but that your stop loss has already been violated. It sounds like you have a disjointed method of trading, the parts don't add up to a coherent whole. Parts of the system disagree with each other.

My guess is you'll let a trade run too far one day and you'll become a long term investor.

 

[emmanuel forozis]

Thanks for the input , Your laws make sense, and thats why Im not so comfortable with this yet, time will show me. I was placing my stops at a money amount, say 15 pips ie. but I was seeing that most of the time I was being stopped out of winning trades. My strategy dosnt really give me a stop level, unless it happens at that exact time, then Im out, if it makes sense, same goes for the winning side. I dont go in preplanning my loss or win, I go strictly what my strategy says, if Im up $500 and my strategy says stay in Im in, but I will have a trail stop. On the losing side, if my strategy says stay I stay, unless I hit a loss of $1500. The ratio you provide is correct, but how do I give a ratio before hand if I dont know my stop? 3.1 I would have to know my stop and try and have my winnings exceed my stoped out loss 3 times, but this ratio is my result, not a predetermined amount, This is my dilema.

 

[MrGecko]

For instance - 2 point target, 8 point stop will give you an 80% winning system if you enter at random. It will of course, not be profitable.

Actually it is nearer 76.5% (market vs limit orders), assuming a normal distribution (lol).

 

[tomorton]

In one sense having a money-stop is a good idea - you know how much you will risk on that trade and a whole series of such losses should never be so heavy that you have to cease trading.

On the other hand, if you put on a trade using TA, the TA should tell you the ideal entry point or range. The self-same TA should show you, if price went the wrong way, at what level would it be more likely to continue even further against you than to come back, i.e. the earliest level reached that neutralises the signal / pattern that got you in, or if you like, the level at which you would not be a new player getting in (if you wouldn't get in there, why would anyone else, and it's only their trades that make the price move). That is your stop.

 

[emmanuel forozis]

Tomorton, that is a great post, along with the others. I will play with looking at my ta and deciding a point where I wouldnt be buying/selling at this point and get out there, if ta tells me stay in, I can get in again when i see things improving, paying the 4 pips rather than paying a hundred per say. good advice, something to try.

 

[advfntrader]

oh no - here we go again !!...another spreadbet vs direct access debate...
:whistling

why?

you have reached a milestone.

you are right, all the books do suggest putting in a stop, but books are written by authors, not by successful traders.

stops are an invention of the brokerage industry. they are there to make sure you trade more so they earn more money. nowhere is this more true than in spread betting where the 'broker' will massage his quote to take out his customers stop, thus keeping your money.

hopefully, your next milestone will be to stop spreadbetting on the realisation it is a fools errand, and trade in a real market.

good luck.

 

[MrGecko]

oh no - here we go again !!...another spreadbet vs direct access debate...
:whistling

I think you've missed the point.

 

[tomorton]

why?

you have reached a milestone.

you are right, all the books do suggest putting in a stop, but books are written by authors, not by successful traders.

stops are an invention of the brokerage industry. they are there to make sure you trade more so they earn more money. nowhere is this more true than in spread betting where the 'broker' will massage his quote to take out his customers stop, thus keeping your money.

hopefully, your next milestone will be to stop spreadbetting on the realisation it is a fools errand, and trade in a real market.

good luck.

Missed the point and wrong (twice), all in one post. Pretty impressive.

 

[MrGecko]

I kind of agree with charliechan here... or at least I can see how what he is saying isn't definately wrong.

The whole idea of "put your stop where you are wrong for cheapest" is only appropriate if your strategy considers that the market conditions will change enough for your trade to be invalidated if one specific price tick is reached.

If your strategy doesn't think that one tick makes all that much difference, then "stops where you are wrong" don't make any sense. On the other hand, "stops to stop you taking a 50% equity hit" do.

 

[amit1986]

Absolutely nothing wrong with having no physical stops in the market. Really depends on what type of trading you are doing. For those who swing trade and have multiple positions, stop losses would be more necessary. For spread betting or active intraday trading where you are closely watching your positions, having a mental stop is perfectly okay.

Note, you must have the discipline to stick to your mental stops. As you get more practice, you'll start to notice things that have not worked before and you'll quickly get out of them, just like how you've developed a sort of "sixth sense" now of when to get out.

If the physical stops don't work for you, then have a worst-case mental stop, but know when to get out if a position doesn't do what you want it to do.