How many people trade with stops?

I use a hard stop loss

  • Yes

    Votes: 41 74.5%

  • No

    Votes: 14 25.5%
  • Total voters
    55
actually im not sure if i had hard stop or what do you really mean with 'hard' stop? but i do have stoploss thou.. lulz
 
Hi Tom,
I'm a bit confused and surprised by your reply to apmf.
You make it sound as if the key qualities required to trade prop' are gonads made of steel and a total disregard for the conventional rules of risk management that many here regard as being fundamental to successful trading.
. . . Or have I misinterpreted your comments?
Tim.
 
everyonerich said:
actually im not sure if i had hard stop or what do you really mean with 'hard' stop? but i do have stoploss thou.. lulz
Click to expand...

Copy and paste from investopedia:

"A hard stop is placed in advance of an adverse move and remains active until the price of the underlying security moves beyond the stop level. Many traders will choose to set a hard stop once the price of their investment becomes profitable and will leave the order active until it reaches the price target."
 
the "conventional rules of risk management", as you put it, should not be disregarded, but it is essential to understand who they are targeted at and why...
 
Technically Fundamental said:
Yes but if you feel you need to notch up your risk for some reason (what that may be I have no idea) are you not able to?
Click to expand...

I think Arabians point is that the middle office probably know the level of risk that can be applied for the specific trader based upon what's going on on the book. It's not a hard boundary but it is limited. The trader also knows where these limits are.
 
Before I used to set the stop with the open order.
Now I open the position and keep staring the screen.
I'll set stops in two cases:

1. If i'm going to be far from the screen (excursions to bath, assaults on the fridge, or telephone...)
2. I reach a level of profits that make me happy. Then i set the stop and leave.
 
timsk said:
Hi Tom,
I'm a bit confused and surprised by your reply to apmf.
You make it sound as if the key qualities required to trade prop' are gonads made of steel and a total disregard for the conventional rules of risk management that many here regard as being fundamental to successful trading.
. . . Or have I misinterpreted your comments?
Tim.
Click to expand...

Tim, you haven't misinterpreted anything. Alll I am saying is they don't say to you "right, you have £5k in your account, off you go..." They say - "have a go...when you lose x amount per day we will stop you out and at our discretion we can put you back on the sim or decide to get rid of you if you drop too much or we think you're talentless ;)

So when you are starting from zero with no idea of how much you can drop, how can you use any kind of conventional risk management? I found it extremely difficult to fully accept that I could start digging a hole with no idea of how deep I could go before I reached the end.

The way a lot of prop houses manage risk is to start you out on 1's or 2's and when you are consistent, you up your size to 3's and 4's and so on and so forth. At the same time, you have a maximum stop out limit - this used to be £400 - £500 per day when I was around.

At the same time, I learnt the "conventional rules" like everyone else and right near the top of that hallowed list is never average a loser but its a fact that the best traders I know averaged there ars*s off. I'm not saying they did so recklessly but they still did it. It's like Arabian says. They don't use hard stops. Take a look at Gold today on the 1m for an excellent example. If you had a swing position long with a hard stop you did your cheeks in record time. Probably got slipped and filled near the low in the direct market! Without a stop, you see it dump $8 dollars in literally 1m and you know you are wrong but you also know with high probability that there is going to be a lot of profit taking so you probably average a bit on that massive down spike and then get out on the first rebound which is $5 back up. At the same time you are ready to get out if it carries on down. This is how a lot of prop traders would manage their risk if they were caught in that.

I would never say all you need is balls of steel. You need to be able to have the skills to get good entries and the skills to know when you are wrong and the discipline to take losers but its also about knowing HOW to take a loser and having the balls to take a risk. My failing as far as my prop career was concerned was, in my opinion, the fact that I play defensively. The first rule for me is don't lose money. Making money comes second. But those guys would tell me to put the f*cking calculator away, stop focusing on what you could drop and just take some good trades whatever the amount you could lose. If you believed in the trade they would let you crack it and that really was something that made them stand out as an excellent place but for me I just didn't want to drop too much too quickly.
 
Last edited:
Masquerade said:
Copy and paste from investopedia:

"A hard stop is placed in advance of an adverse move and remains active until the price of the underlying security moves beyond the stop level. Many traders will choose to set a hard stop once the price of their investment becomes profitable and will leave the order active until it reaches the price target."
Click to expand...

is that suppose to mean if price reach +pips zone then move the stoploss closer to entry point? if thats the case, not for me. once my stop is set, i didnt move it. its either TP or SL.
 
everyonerich said:
is that suppose to mean if price reach +pips zone then move the stoploss closer to entry point? if thats the case, not for me. once my stop is set, i didnt move it. its either TP or SL.
Click to expand...

That's what the quote was getting at. But it was more the entering the trade with an order to stop you out at price x.

For the record - I favour your method instead of moving stops once in profit. Only time is huge profits, but this is more of a trade management issue and something different to the origins of this thread.
 
Last edited:
candles said:
so Spanish WAS right afterall!! :)
Click to expand...

I like watching traders on youtube.
I noticed this guy recently. He's only been trading live a few days. Seem to be making a grand or so per day.
He appears to go by the spanish89 philosophy from looking at his trades. If something is down alot he buys it - bargain. Likes Averaging in to trades etc.
Although he seems a lot more likeable than spanish.
I look forward to seeing how he progresses, but he's made a good start.

http://www.youtube.com/watch?v=vOw9hxD2BXw&feature=related
 
My 2c...

To me it's instructive to think of risk management differently at different granularities. For example, there's always a hard stop (however it's defined) at a portfolio level. On the other hand, it makes little sense to set hard stops on individual trades in the portfolio, as they will be mostly redundant.
 
Everybody should keep in mind that most traders, including most people posting here, most people having a go at prop trading, most hedge funds etc, ultimately fail, lose more money than they make.

So if you have a bunch of guuys who have been trading net profitably and successfully for decades for me at least it's obvious who I'd listen to, who I'd see as a bench mark, seeing as nothing succeeds like success haha.

Lots more examples out there like the following.

William Eckhardt:

The Win/Loss Ratio
“One common adage on this subject that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. …

What really matters is the long-run distributions of outcomes from your trading techniques, systems, and procedures. But, psychologically, what seems of paramount importance is whether the positions that you have right now are going to work. Current positions seem to be crucial beyond any statistical justification. It’s quite tempting to bend your rules to make your current trades work, assuming that the favorability of your long-term statistics will take care of future profitability. Two of the cardinal sins of trading - giving losses too much rope and taking profits prematurely - are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.
Market Wizards



-Billionaire hedge fund manager Bruce Kovner:

Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.

Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I'm getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis. I never think about other people who may be using the same stop, because the market shouldn't go there if I am right.
Market Wizards



- Richard Dennis (Turtles daddy, who turned 400 bucks into several hundred million):

When things go bad, traders shouldn't stick their head in the sand and just hope it gets better.

You should always have a worst-case point. The only choice should be to get out quicker.

The worst mistake a trader can make is to miss a major profit opportunity. 95 percent of profits come from only 5 percent of the trades.



- Bill Lipschutz (Biggest earning earning trader for many years at the then investment bank Salomon Brothers before he started his own hedge fund):

I don't have a problem letting my profits run, which many traders do. You have to be able to let your profits run. I don't think you can consistently be a winner trading if you're banking on being right more than 50 percent of the time. You have to figure out how to make money by being right only 20 to 30 percent of the time."
New Market Wizards

- George Soros:

I don't care when I'm wrong. I cut my losses and move on to the next opportunity. Trading is not about being right. It's about how much you make when you are right.

An observation echoed by Kenneth Grant, who in "Trading Risk: Enhanced Profitability through Risk Control", depicts his experience as risk manager for some of the best and most successful hedge funds, amongst others Paul Tudor Jones funds and Steve Cohens SAC Capital, that:

ACROSS ALL MARKET CONDITIONS, TRADING STYLES, TIME FRAMES AND TRADERS, ONE RULE HOLDS TRUE:

10% OF ALL TRADES INEVITABLY ACCOUNT FOR 90% OF PROFITS !

http://www.amazon.com/Trading-Risk-Enha ... 0471650919


Elsewhere in the book he goes on quite a bit about the pro traders at the hedge funds he was at being so disciplined in cutting their losses according to their rules and methods.

Quite obvious really.

A trader who doesn't know when he will exit his position isn't a trader but a gambler waiting to blow up.
 
That seems to say that if 9 trades lose 90 points, one trade must get those 90 points back , plus the gain for the week, which would have to be substantially more than the 90 points needed to breakeven, to make the whole thing worth while.

I get the impression that a lot is said in books that does not relate to real life. A trader who can only make a profit on 10% of his trades had better, seriously, consider getting a job, unless he is a George Soros.

With due respect to George Soros, who has proved his ability in trading, I would say that his book and his quotations were made after the sweat and tears that he suffered in making his fortune. I am willing to bet that he, a moneyless refugee from Eastern Europè, sweated blood and took severe risks in his attempts to get his fortune started. Most of us are not prepared to do that. If he was prepared to risk his future on 10% of his trades being correct it, certainly, puts him head and shoulders above the rest of us. That is why most of us get it wrong. We try to emulate brilliant traders and it is not possible to do so.
 
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