stop loss. why????

[jezek5]

Yes, the 100% claim seems rediculous especially with this averaging down plan. Averaging down can work but when it does its luck. Soon that luck will turn and you will lose more than you earn. Especially in a short trade.

"The market can remain irrational longer than you can remain solvent."

The market is just the market.
You can remain irrational longer than you can remain solvent,
hence stop loss.

 

[ZEN archer]

Tim,

This thread was never about stops Vs hedging, if it was, it was never made clear from the start.

I don't think he mentioned it before my post about hedging:whistling

 

[cup243]

Even better, how often has anyone's trade been stopped out and price continues to go against them such that their account would be in shambles if not for the stoploss? You only need to find 1 instance.

Peter

Exactly, exactly, exactly.

I think it would be very useful for the guy who opened this thread to read Larry Hite's interview in Market Wizards. In the long ran, it's all about risk control.

 

[cup243]

Just go trade without stops for a bit. Then you will find out what everyone else already found out.

It is true stops are like magnets attracting price moves and get knocked out. It is your job to make it so that it doesn't attract price moves. It's an interesting puzzle. See if you can solve it. You are damned if you use it, and you are damned if you don't. It's quite a paradox.

I would love if you could please be more specific? It sounds like you know a bit about how to solve that paradox.

 

[Lickyluciano]

Hi Split,
I don't want to be a killjoy but, if these first few trades are any sort of indicator of future profits on your winning trades, then you're going to need a success ratio of almost 75% just to break even!
Tim.

I agree. Risk 40 to make 17 is wrong risk reward.

 

[Splitlink]

I agree. Risk 40 to make 17 is wrong risk reward.

It's not a method that I would encourage others to do, I agree, but if I am going to try it, it had better be now!

Don't worry, if it goes wrong you'll hear me shout!.

As a matter of debate, is 29 points on two trades--- not together, BTW, one after the other--- a risk of 40 points or 80? The way I am looking at it is that the total profit must go against the 40 points, until I lose it. Then, it will become 80 points and my decision to continue. I think that I can afford that. It is not the same as having no stop loss, at all.

 

[FringFX]

The thing is, Tim, that my objectives are different. I'm 80, I don't need the money and I want to try to get away from the computer as a pastime. Sitting on a park bench on a sunny day, reading a book, has its attractions. You should try it, yourself!

amazing, 80 and still trading.
when did you start trading? I look forward to a similar lifestyle

 

[Splitlink]

amazing, 80 and still trading.
when did you start trading? I look forward to a similar lifestyle

Relatively recently, the last 25 years, or so. Before that I only used to invest in shares---more profitable, BTW.

 

[FringFX]

really amazing. so you've experienced and likely traded several rallies and crashes in many markets. not a lot can talk and boast about experiencing such occurrences.

 

[Splitlink]

One piece of good advice that I would give you all is


Don't take any advice from me without checking it out, first.

Sometimes, I think I'm great and other times I think that I have 1 year's experience, 25 times over.

Especially, this 40 point bee that is currently in my bonnet.

 

[timsk]

As a matter of debate, is 29 points on two trades--- not together, BTW, one after the other--- a risk of 40 points or 80?

Split,
It's either 29 point profit against 80 points risked, or 14.5 profit against 40 points risked - take your pick. Either way, just to break even, you'll need 74% of all trades to be winners.

Maybe you could call it the 80/80 method. 80% winners should see you into profit - executed by an 80 year old trader!

Tim.

PS. not in Andalucia yet - going at the end of the month.

 

[Splitlink]

Split,
It's either 29 point profit against 80 points risked, or 14.5 profit against 40 points risked - take your pick. Either way, just to break even, you'll need 74% of all trades to be winners.

Maybe you could call it the 80/80 method. 80% winners should see you into profit - executed by an 80 year old trader!

Tim.

PS. not in Andalucia yet - going at the end of the month.

If I have enough cash to cover 40 points plus margin, open a trade and close with 12 points, I have risked no more than 40 points.

If, later, I open a second trade with the same 40 points and take 17 points profit, I have made 29 points in total and have not risked more than the same amount of money. How can it be 80 points?

 

[wackypete2]

If I have enough cash to cover 40 points plus margin, open a trade and close with 12 points, I have risked no more than 40 points.

If, later, I open a second trade with the same 40 points and take 17 points profit, I have made 29 points in total and have not risked more than the same amount of money. How can it be 80 points?

Because you could have lost both for a max loss of 80. If that happened you would need 4 winners (at 17 to 29 pips profit) to make up for 2 losses. I'm not as big a believer in rr as most people are. If your method normally has more wins than losses then you really wouldn't have much to worry about.

Peter

 

[timsk]

If, later, I open a second trade with the same 40 points and take 17 points profit, I have made 29 points in total and have not risked more than the same amount of money. How can it be 80 points?

Hi Split,
As Peter rightly says, had both trades been losers, you'd have lost a total of 80 points, not 40. As it happens, like Peter, I also don't pay too much attention to conventional risk / reward but, figures collated from past trades speak for themselves, and it is essential to have a positive expectancy to come out on top in the long run. Of course, 2 trades isn't anything like a large enough sample to determine any meaningful statistics. That said, IF it transpires that you're averaging a 14.5 gain while risking 40 points, then you will need upwards of 75% of your trades to be winners to make an overall profit.

At the risk of teaching grandma to suck eggs, you might like to refresh your memory about positive expectancy. If so, take a gander at the section headed Risk & Money Management in this link.
Enjoy!
Tim.

 

[safvan]

Has any genius tried hedging instead of using solid stop losses?

The rhythm the prices create makes it possible to hedge prominently provided the route being driven on has smoothly built road.

Hedge your position within the same currency. You expect it to go up and it goes down, sell it until it starts going up again. Then close your sell with zero profit and start earning notes on the up side.

For dummies

1. It is at 1.30. You expect it to go up to 1.40.
2. You buy at 1.30.
3. Instead of going up like a rocket it starts crashing like a stalled F-16.
4. Open the sell order.
5. It keeps diving to 1.29. Hiccup big mac deal, you are covered.
6. Finally it starts moving up like missile and destroys the 1.30 barrier.
7. Close the sell position.
8. Burn profits on hookers, booze if you are single or your soon to be ex wife's alimony checks.

 

[Splitlink]

Because you could have lost both for a max loss of 80. If that happened you would need 4 winners (at 17 to 29 pips profit) to make up for 2 losses. I'm not as big a believer in rr as most people are. If your method normally has more wins than losses then you really wouldn't have much to worry about.

Peter

Yes, I can see Tim's reasoning but the fact is that I am using the same money, which is the reality of the situation as it is now.

My method, until now, has been to use a maximum of 9 stops for FT. This is more generous and I am trying to see whether I can get away with less trades than normal while I do other things. I doubt whether I will allow myself to lose more than 120 points, my character would want to cut the experiment.

 

[Hoggums]

Has any genius tried hedging instead of using solid stop losses?

The rhythm the prices create makes it possible to hedge prominently provided the route being driven on has smoothly built road.

Hedge your position within the same currency. You expect it to go up and it goes down, sell it until it starts going up again. Then close your sell with zero profit and start earning notes on the up side.

For dummies

1. It is at 1.30. You expect it to go up to 1.40.
2. You buy at 1.30.
3. Instead of going up like a rocket it starts crashing like a stalled F-16.
4. Open the sell order.
5. It keeps diving to 1.29. Hiccup big mac deal, you are covered.
6. Finally it starts moving up like missile and destroys the 1.30 barrier.
7. Close the sell position.
8. Burn profits on hookers, booze if you are single or your soon to be ex wife's alimony checks.

This is beginners delusion - "I won't close the trade therefore I'm not making a loss".

There's no point in doing the hedge. It's exactly the same as closing the trade for a loss at 1.29 and re-opening it again at 1.30.

Your problem is that you haven't learned to take a loss and, as I mentioned before, you have no confidence in your trading to be able to take losses.

Learn it!

The once you've taken the loss at 1.29 you are no longer encumbered with the stress of the losing position and when to close the hedge. This will affect your decision making. Instead you have a clear mind to think about when is the right time to enter a completely new trade again.

 

[new_trader]

The once you've taken the loss at 1.29 you are no longer encumbered with the stress of the losing position and when to close the hedge. This will affect your decision making. Instead you have a clear mind to think about when is the right time to enter a completely new trade again.

Words of absolute wisdom! Keep your mind clear and your judgement trustworthy.

 

[cup243]

Has any genius tried hedging instead of using solid stop losses?

The rhythm the prices create makes it possible to hedge prominently provided the route being driven on has smoothly built road.

Hedge your position within the same currency. You expect it to go up and it goes down, sell it until it starts going up again. Then close your sell with zero profit and start earning notes on the up side.

For dummies

1. It is at 1.30. You expect it to go up to 1.40.
2. You buy at 1.30.
3. Instead of going up like a rocket it starts crashing like a stalled F-16.
4. Open the sell order.
5. It keeps diving to 1.29. Hiccup big mac deal, you are covered.
6. Finally it starts moving up like missile and destroys the 1.30 barrier.
7. Close the sell position.
8. Burn profits on hookers, booze if you are single or your soon to be ex wife's alimony checks.

Wrong. What if after step 7 it begins to go down again? In any case, it would be equivalent to just having closed your position. On top of that, with hedging is even worse because you pay spread per every operation.

 

[Splitlink]

To hell with this! I've been open footsie since 0920 and, after 6.5 hours have closed for 6 points.

Anyway! A profit is a profit as they say. This is trade 3 that gives me +23 net for the same 40 that I started with.