I Stopped Using Stops

[tomorton]

Btw. Have you ever considered your role in the market? As one of the participants I mean.

My role isn't even visible as a participant.

 

[darktone]

My role isn't even visible as a participant.

How you mean, you dont trade?
If you trade then you are a participant.
If youre a participant then must have role to play in the market no?

 

[tar]

Hi Darktone

I would agree with you on this part - P&Ping or scaling in and out every 50 -150 pips can work wonders if you can read intraday prices well.

But if you can read intraday moves well - you just get your timing right and buy at interim lows and sell at interim highs - all depending on how much time per day you have and how many trades you want to take

My - mate Marius the Private Fund guy as been even 5000+ pip out and still had an account making money - BUT his annual results - although positive - still are fairly low - normally around 15% -35% per annum - many would say that is good with a Capital Account size of $1 million +

I notice you might be taking 400 -500 trades per week - ie 80 -100 per day - a lot of trades - even if many just over a few minutes - with the possibilities of slippage ( both ways) on ever trade and a lot of trade management required

I guess you put in a 5 - 8 hrs + day - for that amount of time and effort surely 2% + a day is on ( non compounding ) - what ever way you play ?

Regards

F

Its all hypothetical cr@@ , why 2% why not 0.1% daily , and why +2% why not -2% or -10% daily ?! Based on what exactly ?

 

[darktone]

Its all hypothetical cr@@

Its not. These are executions for trade 2. 1% on tiny risk.
Its possible.

 

[Forexmospherian]

What you mean P&Ping F?
Cant say I read prices well F. Just sell when prices are high and going higher and buy when prices are low and going lower. As per the examples. You know how it worked, not hard is it.

I agree with the view about your friend. I wouldnt want to trade that way. Makes no sense when you can manage size. Its hold and hope at the end of the day isnt it. If youre small and the market doesnt totally spaz then it should work out ok but the returns as you say are low. Id guess he draws down a good whack too.

450 trades over 9 days was the number. You have to remember this the play account where I test. Id rather swing trade. Day trading is great practise for me tho. Gives plenty of round turns to explore ideas and test psych.
Only get positive slippage F, im a limit trader. Managing Is easy enough, you just put the limits out ahead of the price and wait for the dings to start. No need to watching every tick unless youre in play. even then I dont watch every tick. lol

2% on acc is certainly doable, depends on appetite for risk. The example I just did was sized 0.20. dax at 11100 x 0.20 = 2220. The account is 2630! so bigger than notional size lol. Max size taken on managing was 0.40. -6000 pts would be a hellova tick no . Being hedged in that example youre only at that extra risk while discovering the lows, for the seconds or minutes while you get em on and scratch em out. Then your back in the hedge. All interesting stuff to explore, if youve a mind to.

P & P ing is ( pyramid & peeling ) is the same as scaling in and scaling out - as far as I understand - in 1 to 3 -20 mins of. movement your way you add to your stakes and then you can use an "close all trades" in one if you just wanted to scalp and not stay with trade for a longer time.

In FX trading and in my first few years you would use a "swiss army knife" app on an MT4 platform that could be configured to exit trades after the order went anything above 3 pips your way. In fact you could set it up for a say a 7 or 10 pip win and then after it had gone at least 3 pips into profit - the stop would move up instantly to B/E or plus 1. This was a great aid if you were simultaneously scalping 2 or more pairs.

The theory being - as you do - pending or limit orders ever 1 or 2 pip apart and set up that once you hit your first target it peeled or scaled down to 20 - 50% size allowing you to stay with the trade.

Set up correctly - price could even go minus pips the other way from you entry - into a negative state - but you would still be in profit from the larger stake size already exited and banked.

ie imagine one order - 100% stake size - 5 pip stop - 10 pip first target

You enter and your timing is good and it only goes 2 or 3 pips against you ( spread say 1 pip included ) and then makes 10 pips. You exit 70% stake size

to keep it easy - $10 stake after 10 pips exit $7 stake size - so $70 banked

now the $3 size you have left on - could go 10 pips against your entry - and you have only lost $30 out of your $70 initial win - so you are still in profit

If this 30% then goes your way again you need it only go above your 70% exit price by 1 pip to be better off.

So you started with a 5 pip stop - you have managed it to extra stop of 10 pips and then if the move goes say 20 pips your way - you would make $70 + $60 ( 20 x $3 ) - $130,

If you added to your 30% when it went higher than your 70% exit ( pyramid ) - you then could end up safely with 130% stake size on - but covered and not exposed with your stop moved up in some profit - ie 2 pips etc - no a win/ win situation what ever happens.

I have seen some traders do it all wrong - ie in a week they make say 200 positive net pips - but still lose money - simply because the pips lost were all at bigger size - ie 50 minus pips at 1 lot - minus $500 - 250 winning pips at $1 - $250 - net loss $250

This is were having "apps " or aids can help you. I am not a fan of MT4 - but you can add your own programs to some broker charts - like ctrader etc.

You need computer to work out all your configurations - ideally so it does all the work for you and all you have to do then is find / time a great entry - and then hope besides being as session high or low - its a day / week / month high or low as well.

I have not got a clue on indices and other instruments - on FX - but "noise" is "tradable" at certain times and basically you can follow ever pip or so through a busy 2 - 4 hr session - and then milk it.

I psyched myself out years ago on size on a live account ( with my own money) - now I am comfortable on stake size only a quarter of what I got up to - and like you always keen to look at every possibility - as long as it will bring me in improved results etc

Regards

F

 

[darktone]

P & P ing is ( pyramid & peeling )
Regards

F

Thanks for taking the time to write F

 

[darktone]

Tom. I think ive got an idea of your role in the market.

You like to use stops right, lots of people do. So that gives me half the picture. How do you enter though? You did mention about scaling in and adding to winners earlier to paszkman. So im guessing youre the type of trader who likes prices move in the expected direction before you pull the trigger.

Pretty sure tar trades that kinda way to.

His and your roles are pretty similar. You dont help each other as such because youre both trading in the same way.

My role is to help you guys. Yours and tars role is to help guys like me.

 

[darktone]

Let me explain.

Im the one whos averaging down, buying new lows and selling new highs, that we know. So me and guys like me, are the ones who are forming support and resistance, where the reversals are.
That helps you and tar giving you levels to work off, set stops etc.
I also help you out by providing the liquidity for your stops, when you want to get out of a losing trade.
Another way I help you guys is to provide liquidity when you want to enter a trade.

You guys help me to.
If there were no stops or other guys willing to sell low or buy high I couldnt operate. There wouldnt be anyone to fill my limits when I want to enter a trade.
You also help me when I want get out. I need someone to deal with when I want to scratch a trade, get rid of size I dont want any more. If there were no traders who watch for a move off support / resistance before they pull the trigger. How could I get out of the positions I dont want anymore.


We all just help each other eh. Everyones a winner.

 

[tar]

Its not. These are executions for trade 2. 1% on tiny risk.
Its possible.

Ofcourse and its possible to make 100% in minutes in Vegas .

 

[darktone]

Ofcourse and its possible to make 100% in minutes in Vegas .

tar, the orders are right there, for you to see. Right there mate.

 

[Forexmospherian]

Its all hypothetical cr@@ , why 2% why not 0.1% daily , and why +2% why not -2% or -10% daily ?! Based on what exactly ?

I for one know many day traders who can read PA very well they make 24% daily day in day out their max DD is 1% and their win rate is 80% plus , they aim for 10:1 R:R easily , they trade Euro while laying on bed and when they get up they trade the Emini and CL their sl is 3-5 pips max , and that's done on 8-9 figures accounts . And they compound regularly .

Morning tar

I will try and answer your first part - hypothetical cr@@ part.

There are so many variables in this equation - here's a few - ie the experience and knowledge of the trader - how much capital they have to play with - how rich they are themselves - the rules they stay within - the amount of time every day they have to play with - the world time zone they trade in - their own method and its own parameters etc etc

So let start with the capital side.-

If I had a capital account of just $1000 of my own money - I would happily use a stake size of 2% + per trade. Why ? - because its still small money in my world and if I had 10 losses in a row and lost a total of a total $200+ - its not life changing

Now if the capital account was not my money and it was large - ie several million dollars - I would not risk 2% stake size - because if I had 10 losses in a row and wiped off $200k + then it could be life changing and i would probably lose my job or clients etc etc.

Also the larger the Capital account and stake sizes in monetary terms the more problems you will have in the market place etc - not just psychologically - but also its not just exponential - ie what you can do and get away with on say 2 or 5 lots per pip - is not going to be the same if you were using 20000 or 50000 lots per pip - different ballgame - even with a lot lower numbers on many pairs.

You mention -

I for one know many day traders who can read PA very well they make 24% daily day in day out their max DD is 1% and their win rate is 80% plus , they aim for 10:1 R:R easily , they trade Euro while laying on bed and when they get up they trade the Emini and CL their sl is 3-5 pips max , and that's done on 8-9 figures accounts . And they compound regularly


I imagine that's very "tongue in cheek" - is it 0.001% of all the worlds traders ? ;-))

If its just on small capital account under maybe £5k - then not 24% day in day out with only a 1% drawdown max - even with no compounding at all - you would not keep it up on a live account for a year plus.

But to maintain 2% per day average ( non compounded) over a year on a retail account is doable - ie 450% + annum - and I am sure you could do as well as many other experienced intraday traders

With regards to the "Vegas" quote - ie 100% gain in minutes.

Yes its possible - but its not sustainable.

Using certain systems in FX trading - nominal results are sustainable - in any market conditions - day in - day out.

The only reason you have Hedge funds and other commercials bodies making profits for say 3 or 5 years and then having a year or 2 or more of losses is because their systems are fallible - ie predicting - rather than following - and as a retail in traday trader - I just follow - I never lead any market etc etc

Surely that makes sense to you ?

Regards

F

 

[tar]

But to maintain 2% per day average ( non compounded) over a year on a retail account is doable - ie 450% + annum - and I am sure you could do as well as many other experienced intraday traders

With regards to the "Vegas" quote - ie 100% gain in minutes.

Yes its possible - but its not sustainable.



F

You still talking hypothetical there are no basis for these numbers you could just replace it with any other number , so i would say the same sure its possible to make 2% daily but its not sustainable .

 

[timsk]

If you know what you are doing and you are worth your salt , you should be able to double your account day in day out or just quit trading . I for one make 500-1000 pips daily in FX not to mention other markets stops 3-5 pips most of the time no drawdowns at all no slippage ...

Hi tar,
My view is that the amount of profit that's achievable - or people claim to make - is a bit of a red herring and not really germane to the discussion. Whether a trader who uses stops (e.g. FoMo) makes a gazillion squids a minute or whether a trader who doesn't use stops (e.g. darktone) makes a gazillion squids a minute is neither here nor there.

What matters IMO - is the principle of trading without stops. The use of stops is so engrained in traders from the very start (and I accept I'm partly responsible for this in the official content I write for T2W), that it's rarely ever questioned. When it is discussed, the assumption is that they are always used and the only topic for debate is their placement: e.g. tight stops, wide stops or catastrophe stops. No stops is not an option.

Personally, I congratulate darktone for daring to poke his head above the parapet and outline an alternative approach that doesn't utilise stops at all. After all, isn't that the topic of the thread? That you and others think that trading without them is a seriously bad idea is fine and you make your points very well. But, equally, wouldn't you agree that it's important to encourage those who believe it's possible (to trade profitably and safely without using stops that is) to add to the rather paltry amount of content about how to go about it? I would like to see more posts that explain what's wrong with darktone's approach and why it's not safe, viable, workable and/or likely to result in loss. It may well be completely flawed but, to be fair to him, there aren't many explanations that I can see that clearly explain why.
Tim.

PS. In part, I'm being devil's advocate to stimulate debate and to encourage those who don't like / use stops to contribute to the discussion. As previously stated, trading without stops is an advanced approach and is not suitable for new or inexperienced traders.

 

[tar]

Hi tar,
My view is that the amount of profit that's achievable - or people claim to make - is a bit of a red herring and not really germane to the discussion. Whether a trader who uses stops (e.g. FoMo) makes a gazillion squids a minute or whether a trader who doesn't use stops (e.g. darktone) makes a gazillion squids a minute is neither here nor there.

What matters IMO - is the principle of trading without stops. The use of stops is so engrained in traders from the very start (and I accept I'm partly responsible for this in the official content I write for T2W), that it's rarely ever questioned. When it is discussed, the assumption is that they are always used and the only topic for debate is their placement: e.g. tight stops, wide stops or catastrophe stops. No stops is not an option.

Personally, I congratulate darktone for daring to poke his head above the parapet and outline an alternative approach that doesn't utilise stops at all. After all, isn't that the topic of the thread? That you and others think that trading without them is a seriously bad idea is fine and you make your points very well. But, equally, wouldn't you agree that it's important to encourage those who believe it's possible (to trade profitably and safely without using stops that is) to add to the rather paltry amount of content about how to go about it? I would like to see more posts that explain what's wrong with darktone's approach and why it's not safe, viable, workable and/or likely to result in loss. It may well be completely flawed but, to be fair to him, there aren't many explanations that I can see that clearly explain why.
Tim.

PS. In part, I'm being devil's advocate to stimulate debate and to encourage those who don't like / use stops to contribute to the discussion. As previously stated, trading without stops is an advanced approach and is not suitable for new or inexperienced traders.

We have explained with many real life examples whats wrong with trading without stops , its your money do whatever what you want , at the end its an odds game and your odds will kick in sooner or later , the market will take care of this .

"As previously stated, trading without stops is an advanced approach and is not suitable for new or inexperienced traders"

On the contrary its a simple approach and unprofessional and it is employed by all newbs and inexperienced traders and newcomers its not new , i've never seen a newb or an inexperienced trader that uses a clear SL .

Trading without stops shows that you don't know how much you are willing to risk per trade/setup and it shows that you don't know where your trade/setup will become invalid , in another words it shows that you don't know a thing about trading and you just punting "buy and hope" .

 

[darktone]

We have explained with many real life examples whats wrong with trading without stops , its your money do whatever what you want , at the end its an odds game and your odds will kick in sooner or later , the market will take care of this .

"As previously stated, trading without stops is an advanced approach and is not suitable for new or inexperienced traders"

On the contrary its a simple approach and unprofessional and it is employed by all newbs and inexperienced traders and newcomers its not new , i've never seen a newb or an inexperienced trader that uses a clear SL .

Trading without stops shows that you don't know how much you are willing to risk per trade/setup and it shows that you don't know where your trade/setup will become invalid , in another words it shows that you don't know a thing bout trading and you just punting "buy and hope" .

Belief hove albion, 2
What is utd, 0

 

[timsk]

. . .
Trading without stops shows that you don't know how much you are willing to risk per trade/setup and it shows that you don't know where your trade/setup will become invalid , in another words it shows that you don't know a thing about trading and you just punting "buy and hope" .

tar,
I understand you disapprove of trading without stops. You've made your view crystal clear. What is a slight shame - and very much your loss - is that your mind appears to be so firmly closed to considering other ideas. That's all I'm asking of you which, let's face it, isn't much. Please at least try to embrace the spirit of my last post and contribute without making generalisations ("it's a simple approach and unprofessional") and without attacking people's knowledge and understanding ("you don't know a thing about trading and you just punting buy and hope"). Such comments add little to the discussion and don't explain why trading without stops is flawed.
Tim.

 

[darktone]

"Averaging down and scaling in out are not the same thing." - Obviously. As long as you're scaling into a winning position. I think we should all agree scaling into a losing position is averaging down.

I agree, lets call adding positions to existing losing positions at lower prices, averaging down.
What shall we call getting out of the positions we dont want? what I mean is the positions that I scratch to get back to the size I want.

Tom ive got it. Im gona term trading out of the positions I dont want 'tomtaring'. Not only that, Im gona name the methodology the 'Tomtar averaging down' method.
In the spirit of traders helping fellow traders.

We can go through some trade examples a bit later to show how we all work together.

 

[Forexmospherian]

I think my main concerns about trading without stops is threefold

1. Unless you are experienced at scaling in and out and maybe hedging then you could easily end up over a period of a few days or weeks - see you account just lose 30 - 60 - 90% of its money. With a stop you hopefully set it in stone - and make a decision the most I will lose on this trade is 5 -20 - 50 - 200 pips or whatever equivalent to 1 % - 2 % or even 5% of my capital account

2. It inefficient - ie you spend too much time in negative trades and your mindset it having to add another concern to your general decision making- extra burden. You are also equivalent to "bobbing about in the Ocean " with no lifejacket or aids - you might have luck - and the storm passes and you survive - or the storm continues - not for hours or a few days - but for weeks - and then one day - you die

3. I feel more psychologically comfortable or "safe" with a proper win ratio - and accepting losses as quickly as possible. I feel I am in the grove and focused if my win ratios are high in a session or day or two - but if I have lower win ratios - under 65% the market is telling me - I am not focused - my method/ strategy is not performing at best and i should either sit on my hands more and wait - or use lower stake sizes - it give me comfort

The only trades I am prepared to leave on open - for hrs or days or weeks are the ones firmly in profit with the probability they could go on in the same direction further and make more profit - but my stops need to be already in profit and then I can have 2 or 4 or even 8 trades all running at the same time.

Black Swan events - do happen - but are fairly rare - if one happened and gapped my stop /stops - then as far as I am concerned in a very worse case scenario - the most I will lose is my capital size - as broker guarantees no negative balance - what ever happens. That's why you need annual returns on retail accounts well over 100% - ideally 150 -300% per annum on account sizes under $100k - and then worse case scenario - and you lose all your capital - you know you can make it back within 3 -6 months - using your previous profits from the previous years - even if you just put 25% away every year as your safety net

That my main reasons - I am sure I could find more - and if someone could prove they can consistently make profits in any market conditions equivalent to the ones I have been making without using stops - I am all ears ;-)


Regards

F

 

[malaguti]

tar,
I understand you disapprove of trading without stops. You've made your view crystal clear. What is a slight shame - and very much your loss - is that your mind appears to be so firmly closed to considering other ideas. That's all I'm asking of you which, let's face it, isn't much. Please at least try to embrace the spirit of my last post and contribute without making generalisations ("it's a simple approach and unprofessional") and without attacking people's knowledge and understanding ("you don't know a thing about trading and you just punting buy and hope"). Such comments add little to the discussion and don't explain why trading without stops is flawed.
Tim.

Tar did make one point, albeit it was a little lost...
the calculation of your initial risk, and therefore how much you are going to stake £/point assumes there is an initial risk.
I'm quite impressed by darkie's feats to be honest, however I would just ask about this point. How do you calculate your risk, to then decide how mush stake to put down without any initial exit point?
@darktone of course, not to you Tim

 

[barjon]

....................What matters IMO - is the principle of trading without stops. The use of stops is so engrained in traders from the very start (and I accept I'm partly responsible for this in the official content I write for T2W), that it's rarely ever questioned. When it is discussed, the assumption is that they are always used and the only topic for debate is their placement: e.g. tight stops, wide stops or catastrophe stops. No stops is not an option..............

Maybe it's engrained because it's one of the bedrocks for successful trading. Suggesting otherwise is like examining the principle of driving a car without brakes - yes, it can be done many times without damage, but an occasion will arrive when you finish up as a crumpled heap at the side of the road.

Certainly, Darktone can be applauded for trading his way through many "campaigns" to a successful conclusion when someone using stops would suffer a loss or a significantly worse result. Because the natural rhythm of the market is to back and fill these sort of campaigns will generally pay off. However, it is not these that concern us .

The ones that concern us are the occasional abnormal movements where the natural rhythm of the market is replaced by a one way move of significant length without any meaningful backing and filling. These are the ones where Darktone needs to convince us that the damage on these occasions can be contained without some form of "stop the rot" type mechanism when he is on the other side of such a move.

Earlier in the piece Darktone showed us a "campaign" example that netted 25.54 which was good going and an excellent result. I did ask him to show what might have happened if he had been on the other side of that trade - ie: looking long rather than short - using his same methodology even with all the benefit of hindsight. I suspect that if he did that he would be carrying a loss far, far greater than the 25.54 profit he achieved and would have undone many successful campaigns. Of course, if he hadn't run out of money he could keep going until the more natural rhythm came back and allowed him respite if not recovery of his losses. Relying on that, of course, begs the question that it will happen before you run out of funds, but that's hope with a capital H.