I Stopped Using Stops

Perhaps it's a crazy thing to do but:

I stopped using stop losses and kept every other tactic of my strategy the same as it has been. The result: I have not had a losing trade since May 25, the day I stopped using SLs. I'm at 16 straight wins.

Sure, I have had entries that were ill timed and that is just me entering too soon into a situation that my charting indicated would occur. So at first the trade would go negative and would have hit the SL if I had set one up as I normally would. But in time, the chart proved correct and my trade became profitable. I started this because post trade analysis of the last year showed me that every one of my trades would have been profitable had I not had a stop or at least a really deep stop. But how deep? I had a trade a couple weeks ago turn 200 pips against me before coming back to 50 pips of profitability. It taught me some lessons about my timing that I have since improved upon. But my patience paid off.

Will it always work? Perhaps not. But in what appears to be a non-trending market - stops have proven to be an account killer. I've made more money in the past month than in the previous 4 months before May 25.

I'm curious as to what others do in this regard.

I hear you but u do have a stop ... its a bit far so your win rate went up .. market will take everything back later unless you quit .

Wicked_Daddy said:

Perhaps it's a crazy thing to do but:

I stopped using stop losses and kept every other tactic of my strategy the same as it has been. The result: I have not had a losing trade since May 25, the day I stopped using SLs. I'm at 16 straight wins.

Sure, I have had entries that were ill timed and that is just me entering too soon into a situation that my charting indicated would occur. So at first the trade would go negative and would have hit the SL if I had set one up as I normally would. But in time, the chart proved correct and my trade became profitable. I started this because post trade analysis of the last year showed me that every one of my trades would have been profitable had I not had a stop or at least a really deep stop. But how deep? I had a trade a couple weeks ago turn 200 pips against me before coming back to 50 pips of profitability. It taught me some lessons about my timing that I have since improved upon. But my patience paid off.

Will it always work? Perhaps not. But in what appears to be a non-trending market - stops have proven to be an account killer. I've made more money in the past month than in the previous 4 months before May 25.

I'm curious as to what others do in this regard.

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Hi WD, I used to trade without stops, having used them from the beginning a few years ago, then becoming (over)confident with my positions.

For me I found I actually became sloppy with my entries without the stops. The stops actually help me keep focus on my entry & potential exit. I will work out risk reward in far more detail with stops.

I see it as a more efficient way of trading to use stops, I actually do not let my stop get hit, I bail well before it gets anywhere near, it becomes clear when I've been trapped very early on in the move.

My particular instrument is Dax, many people will think a 20'ish point stop is far too small on this nutter of a rollercoaster, I disagree, I want to know if I'm in or I'm to be spat out, I certainly do not want to sit in a position too long.

The market will suck you down a very long way eventually with wide stops, I saw a guy posting on the dax thread not too long ago, he went short on the dax when it was at 10,000 ish ........ at 10,300 he suddenly found himself buried -300 in the hole & counting fast !!

If you are a day trader, efficiency should be high priority imho, maybe it is working for you at the mo, but I personally found it psychologically draining & it sucked large portions of my day sitting with, lets face it, hope & prayer that my minus became a plus.

Good luck with your trading whichever way you choose :clover:

Its a dilemma , tight stops = death by a thousand cuts . In this case entries quality matters ...

In the end, everybody has a stop on every trade. But the pressure is on us from those who seem to know (say they know) to always have tightest possible stops, smallest losses, highest r:r ratios.

This is getting the cart before the horse. Stops have to be set on relevant TA: the size of the position has to respect potential loss as a % of account size: not the other way round.

Wicked_Daddy said:

Perhaps it's a crazy thing to do but:

I stopped using stop losses and kept every other tactic of my strategy the same as it has been. The result: I have not had a losing trade since May 25, the day I stopped using SLs. I'm at 16 straight wins.

Sure, I have had entries that were ill timed and that is just me entering too soon into a situation that my charting indicated would occur. So at first the trade would go negative and would have hit the SL if I had set one up as I normally would. But in time, the chart proved correct and my trade became profitable. I started this because post trade analysis of the last year showed me that every one of my trades would have been profitable had I not had a stop or at least a really deep stop. But how deep? I had a trade a couple weeks ago turn 200 pips against me before coming back to 50 pips of profitability. It taught me some lessons about my timing that I have since improved upon. But my patience paid off.

Will it always work? Perhaps not. But in what appears to be a non-trending market - stops have proven to be an account killer. I've made more money in the past month than in the previous 4 months before May 25.

I'm curious as to what others do in this regard.

Click to expand...

Well done for sticking your head above the parapet.

Youll not likely find much agreement here re 'no stops' my friend. You see youre going up against some seriously deep seated beliefs.
Off to school we go at the age 5, ish and we start to learn. By the time were out of secondary school we understand that being right is were its at. All the smart kids are right and they gonna get the jobs and nice cars. Some of us go onto Uni were we get even smarter, the importance of being right is are further entrenched.

And then, some of us plebs stumble into the world of trading ..

Off we set reading a book or 10. You have to be right to win! Check! You must protect yourself from loss! Double check!!
And then the forums! Ahhhh the forums!
Every m*****f****r and their brother regurgitating the same mantra! 'If yo dont use stops, yo is an idjiot!'

Onto the trade. The markets at 50 and they wana buy, they cant buy it at 50 because they might be wrong. The market goes down 45,40,45,35,30. "Phew! Thank feck I didnt buy it! Ida lost, been wrong, how stressful! x10 if ida posted it on the forum"
So the market goes back up, 45, 50, 45, 55.. :| 60 65 :clap: 70 "BUY EM! With a stop at 55 of course, because,, everyone tells me I should use stops and they stop me from being wrong, by much. Which is good! and right!!"...70,70,75,70,65,65,60,65,60,65,70,80,90 "YEAH! I WAS RIGHT!!! :clap: Move stop 80 to lock in them profits! cos everybody tells me its what I should do, theyve liked my posts and everything!" ... 90,90,90,110,80... "+10 baby YEAH!!!":smart:

Then theres the Idjiot. He wants to buy. The markets at 50. He sets limits out down to 10. He gets filled 45,40. gives some back to the market at 45, then is filled at 35,30 and gives some back to the market at 45. Hes averaged at 35 with no damage from the scratches. The markets at 50. Hes limits out at 80,90,100. the market moves to 75 and comes back to 60, he moves the limits down 70,80,90. Ping ping ping and all out averaged 80... Then he makes an error. The posts about it on the forum.
"You fecking idjiot! You risk taking lunatic! Everyone knows you shouldnt add to losers cos PTJ says so!"

"Bottom pickers become cotton pickers! Someone fecker definitely said that as well!!"
"To not use stops is foolish and can only be rebutted with a post from SOCRATES":smart:

Neways, to sum up. Youre discussing no stops with folks who are largely unknowing victims of their own minds. Folks who build their strategies around distorted thinking.
You on the other hand, are following in the footsteps of some pretty top notch traders who didnt and dont use stops, Tom Baldwin and Jimmy Balodimas to name just two. Add learning how to manage the trade and getting your mind right. Well, you, along with them could be an idjiot too! :cheesy:

I love the market !

Tight stops is the way to go!

tar said:

Its a dilemma , tight stops = death by a thousand cuts . In this case entries quality matters ...

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Tight stops have allowed me to stay in the game for as long as I have. People in this forum told me it was impossible to trade the ES with a tight stop, that was almost 10 years ago. I'm glad I ignored them and instead 'listened' to SOCRATES.

FOREX may be a different world!

Wicked_Daddy said:

. . . I had a trade a couple weeks ago turn 200 pips against me before coming back to 50 pips of profitability. It taught me some lessons about my timing that I have since improved upon. But my patience paid off.

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Hi W_D,
As darktone commented - well done for starting a thread which challenges one of the pillars of trading wisdom: always use stops!

Speaking as an ordinary member (i.e. without my T2W hat on), I have strong sympathies with your view. Nine times out of ten, as the part of your post that I've quoted illustrates, your trade will return from a negative position to produce a profit. Time and breathing space often work wonders. However, as I know to my cost and, as others have commented, what really matters is how you handle the rogue b*****d trade that goes ever deeper into the red. It's imperative to have some mechanism to deal with these trades which will occur sooner or later and, when they do, have the potential to blow up your account. So, what to do?

Based on what you've told us, my immediate impression is that you've been setting your stops too tight. As Tom rightly says IMO, it's important to set them where they make sense from a TA perspective and to adjust your position size accordingly, so that you're not risking more than X% on any one trade. If you're determined to do away with stops completely, then there are two main tools at your disposal that I'm aware of: catastrophe stops set a long way out or some type of hedging strategy. (If there are any other options members can think of - please add to this list!) The former means that every once in a while you'll take a really big hit; the danger here being that random distribution works against you and a second catastrophe stop is hit before your account has had time to recover from the first one. In my experience, the latter option takes considerable skill to execute well constantly. When it goes wrong, you can end up with two losing trades instead of one - plus all the associated costs.

There is no easy solution that I'm aware of: stop use and placement is a prime reason why this business is so tough.
Tim.

Re options he can protect each trade with OTM options ... but its not a solution .

Guys there is no such thing as "no stop" , your account balance is limited , your account balance is your stop , so technically this thread is about trading with a very wide stop 1000 pips 3000 pips , and aiming for 20 points or 200 points as a profit target !

@Wicked_Daddy you are not on your own. If you can manage your risk by mechanisms other than stops then I say go for it. I myself also trade without stops on occasion, for instance if I feel like doing a "cheeky long" on an up-trending index then I'll happily open a small sized trade (<=£10/point) walk out the door safe in the knowledge that my account is capitalised to the 10th degree, alerts are set and I have a proven capability of hedging and then pyramiding out of a losing position.

Allegedly to be good a trader you need to be a contrarian thinker, so I don't see why not having stop's isn't a valid contrarian route.

Hi tar - yes, options of course - thanks for mentioning them. I left them out as I've never traded them and have no wish to - so I forgot about them.

f2calv said:

[MENTION=529174]. . . and I have a proven capability of hedging and then pyramiding out of a losing position.

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Hi f2calv,
if you're willing to share, I'd be really interested to know how you do this. I'm familiar with the basic theory but, in practice, actually executing it successfully isn't that straight forward in my experience. An actual example, illustrated with charts if possible - would be really interesting and helpful.

Tim.

So basically we have a trader here who doesn't like to lose and cannot handle the mental ego-bruising of a set of losses so has decided that to avoid this he is not going to close a trade that isn't in profit.

As tar said ealier - you are still trading with a stop - it's your max margin level. And all the time you are paying interest and financing charges every night to keep those loss making positions open. Slowly over time those losers will build up to the point where you can't afford to keep them going any more, by that time it'll be too late to salvage any of those profits you've made up till that point.

The real point to all of this is that you don't have any confidence in your trading strategy, because if you did then you'd be happy to take the loss in the knowledge that over time you will win through.

So go back to the drawing board, test your plan, know how it performs, get an idea of the losses you can expect from it, gain confidence with it and then taking losses won't be an issue.

timsk said:

.................. Nine times out of ten, as the part of your post that I've quoted illustrates, your trade will return from a negative position to produce a profit. Time and breathing space often work wonders. However, as I know to my cost and, as others have commented, what really matters is how you handle the rogue b*****d trade that goes ever deeper into the red...................

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Aye, there's been many who defy conventional wisdom with great success since price all too often comes back until the one time - and you only need the one - when it doesn't and you watch many months hard work unravel before your eyes until you eventually cry uncle or your account is blown.

Short ftse in March 2008 at 3460 and it's only 7 years and 3400 points underwater now. Might have to wait a bit for the 50 point target to trigger

Certainly some interesting replies and I appreciate all the wisdom and input.

Of course it's true that my account size is the ultimate stop. So there is that.

I should have pointed out also that I do use a stop once the position is profitable - to lock it in and I'll often trail it and/or scale out as I move the stop with the trend.

I'm fine with losses and my strategy is solid. My timing isn't always right on (but whose is?), thus the removal of stops but again, I am comfortable with my charting skills and being able to determine market direction. Sometimes the trades just take a bit longer to mature than I anticipated.

I have used tight and wide stops with varying degrees of loss/win. But as I mentioned - not using them at all has proven (given my charting method/strategy) to be more effective. One thing I am getting comfortable with is the patience to trade longer time frames. I am/was an intra-day trader on 15m charts and some of these "no-stop" trades have confirmed the longer TF biases that I base my short term strategy on. So perhaps this is my evolution to longer TF trading. I must admit I like the reduced hours in front of the screens and a more relaxed mindset. I used to watch the price approaching my (for example: 50 pip SL) while chewing my nails and fighting my impulse to disobey my own rules - only to finally watch the trade close out at the 50 pip loss, turn and become profitable with no fundamental or even technical justification at all. I'm sure we've all been there. I have not felt that way in a month (during this crazy market) and my fingernails have grown back.

As this evolves I may go back to stops or the "catastrophe stop"... I've used those as well and have always exited the trade, based on my own loss tolerance, long before the stop was hit. Funny thing though; those trades would have come full circle as well.

As an added note, I only trade in favor of the carry interest. So that's not a concern.

Again, interesting points of view and all worthwhile. Thanks to all for engaging in this conversation.

Well at some point you have to cut your nails

time based stops can be really effective. many people are (well within their rights) uncomfortable with having undefined risk in each trade (or potentially 100% of their account value at least)

Larry Connors produced some good research on this

Stops - or no Stops

There is a guy on another forum - by the name of Marius - who is a genuine private fund manager who trades FX with a multi million dollar account on behalf of his own clients.

I got to know him over 3 yrs ago and he a lovely genuine guy - who never uses stops.

I keep telling him - its inefficient - and costing him and his clients money - but basically he thinks its worked for him for over 7 years and therefore don't change it if its not broken.

He survives on money management and extremely low stake size - ie under 0 1 % - so he can normally stand 2000 pip drawdowns.


He has actually had to wait over 12 and 15 months for some trades to come back into profit - and I know at one time he was down about 6000 pips - but maybe less than 10%on his account.

Meanwhile he make profitable wins carrying on with trades that work his way - with normal targets of 50 - 200 pips.

Trouble is a 200 pip win - still might be only a 1% increase on his account - and thats if he's added to it.

Now he might be very happy to make 25 -40% per annum on the account - and maybe his clients if they get 10 -15% per annum they are happy.

However - to me its inefficient - ie having trades stay in the red even 10 mins for me - I think inefficient - but 12 month plus - ??????

I am sure he will or has already written off some bad trades after 2 yrs or so - maybe costing him 2 % or more and I suppose of 60% of the time his trades work - he must have done the maths and thought - yes its OK

He is a day trader and trades normally 2 -5 pairs a day etc

Conclusion - OK if you stakes are super low and you are in the game for years with clever MM - but if on 2% stakes etc and wanting to be efficient and make proper returns on retail account size - ie over 100 -150% + per annum - forget not using stops - learn to read price better and dont waste time staying with a "bad un"


Regards


F

Wicked_Daddy said:

Perhaps it's a crazy thing to do but:

I stopped using stop losses and kept every other tactic of my strategy the same as it has been. The result: I have not had a losing trade since May 25, the day I stopped using SLs. I'm at 16 straight wins.

Sure, I have had entries that were ill timed and that is just me entering too soon into a situation that my charting indicated would occur. So at first the trade would go negative and would have hit the SL if I had set one up as I normally would. But in time, the chart proved correct and my trade became profitable. I started this because post trade analysis of the last year showed me that every one of my trades would have been profitable had I not had a stop or at least a really deep stop. But how deep? I had a trade a couple weeks ago turn 200 pips against me before coming back to 50 pips of profitability. It taught me some lessons about my timing that I have since improved upon. But my patience paid off.

Will it always work? Perhaps not. But in what appears to be a non-trending market - stops have proven to be an account killer. I've made more money in the past month than in the previous 4 months before May 25.

I'm curious as to what others do in this regard.

Click to expand...

A chap the other day was telling me he likes his sb firm as they insist on stops with every trade...