I Stopped Using Stops

[tomorton]

tomtaring - hey that's not bad.

Positions I don't want - they hit my stops. I make sure my stops on these trades are moved to where they will almost definitely be hit if TA tells me the situation has changed since entry and price direction is now unlikely to go / continue my way. But leaving some wiggle room is good, just in case either the in-trade TA was too pessimistic or in case external events unexpectedly take me back into the money. Either way, I don't ever scale out.

Do realise I'm not intra-day trading. So do not think I'm going to go off to sleep or off on hols without placing stops.

 

[tar]

1-Great trader trades the euro he knows what he is doing , 80 folds between 2008 and 2012 cant beat that ! so what if he is averaging down its called scaling in :clap:

 

[tar]

1-Great trader trades the euro he knows what he is doing , 80 folds between 2008 and 2012 cant beat that ! so what he is averaging down its called scaling in :clap:

2- Whyyyy i cant believe this

He was averaging down that's why you thought he's different , but its always ends the same way , its simple math ....

 

[tar]

1-Ok that one don't open your mouth he doesn't average down he just dont use SL he closes when he feels like it he is the real deal

 

[tar]

Ok that one don't open your mouth he doesn't average down he just dont use SL he closes when he feels like it he is the real deal

2-No no i thought he's a pro no thats fake

 

[tar]

Sure you can trade a very tiny size - without scaling in - , for example buy 1 dax cfd at 12000 with a 100000 account balance , no need for a stop right ?
Your problem here is you aren't going to make any decent amount of money for example to make 1% gain you need to make 1000 points !
Second : Hence you don't use any stops you are going to give away years of gains in one loss ! like this guy below .
And third : If you want to wait forever for the market to come back you may have to stop trading for years and not make any gains and when it does come back your gains will be very minimal not to mention that sometimes the market never comes back infact it happens more often than you think .

 

[tar]

ps. When we say a stop , we don't necessarily mean hard stop which is preferred for many reasons , but also a "mental/soft" stop will do .

 

[tar]

Martingale : google it . ( Bad )

Averaging down/semi martingale : Its when you add to a losing position - which wasn't your intention from the start - in the hope that it gets you out from the situation you are in by improving entry price . Buy 110 then 100 then 90 ... ( Bad )

Scaling in : Its when you make partial entries to the market according to your strategy up to a certain predetermined max size , so you don't scale in endlessly - even if your size is tiny like 1 share - otherwise its still called averaging down . Scaling in example : I want to buy 1000 FB shares 1/3 at 80 third at 79 and third at 78 . ( It depends : Bad/Good/Neutral ) .

ps. Even if you start betting at small stakes , martingale is still martingale and averaging down is still averaging down .

 

[timsk]

Hi Jon,

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.

Nice analogy. For you, tar, Tom and others this may well be the case. I agree it's the wisest course of action for most traders most of the time and, certainly, for all new and inexperienced traders. But can you honestly say that it applies to all traders all of the time? Take a gander at this interview with Jack Schwager in which he talks about Jimmy Balodimas. The whole interview is worth watching IMO but, if you don't want to watch it all, the bit relevant to this discussion starts at 14.03:

Jack Schwager presents: 15 Hedge Fund Market Wizards trading secrets & insights in their own words

. . . 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.

Yes, I agree absolutely. Whenever I've experimented with this type of trading in the past, it's always the extended abnormal move that has caught me out. darktone has - to some extent - already addressed this by saying that he puts on some sort of a hedge. Hopefully, if he provides some trade examples we can see how effectively (or not) he manages to deal with this issue.

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.

Again, I agree. Trading without stops is a complete non-starter if there isn't a sound and repeatable way of dealing with this very situation. Personally, I haven't yet found one and the solutions to it that I have found all appear to be flawed in some way. A good example of the latter is the Trade Recovery System (Lesson 4 video). This will work much of the time, except when price bobs about in a tight range and never hits the pre-defined targets. That said, my mind remains firmly open to the possibility that someone, somewhere, has solved this puzzle and can present a viable alternative to the conventional approach of always trading with a stop. Whether or not darktone is that person remains to be seen.

Tim.

 

[timsk]

Sorry about the hyperlink in my post above (to a non-existent page). It's something to do with the link to the 2nd video - and I can't do anything about it!

 

[darktone]

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

Regards

F

1) The way I see it, the methodology is about as technically simple as gets. For sure a certain experience is needed to cement what it is that youre actually trying to do.
Thats 10% of it. The main thing by far is sound psychology, without that, the emotional stress that the player puts on themselves makes trading this way a very painful experience. So you either have to have the mythical big balls and just stick it out, or puke up stops

2) Thats all in the psychology F. The idea is to be at ease when executing, in whatever market.

3) Again thats all psych to me. "Choose a method / system that suits your personality / mindset" is a another market wisdom that I dont subscribe to. Understanding what the market is, accepting it for what is and taking your mind out of the trade makes more sense to me.

Re firmly in profit:- Same here mate. But a little fact like that is no match for the runaway minds of some folk on here

 

[darktone]

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

Hey Mal, cheers for that. Ill put you down as curious till you say otherwise.
The amount of risk is down to the traders appetite for it imo. The way I see it is ask your self where you would you be in a 1 tick mama jama move against you and go from there. Be aware of the total notional size of your position (and potential position) at all times. Its one of the few things a trader have control over.

 

[darktone]

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.

Re engrained:-Id say it's engrained because it's one of the bedrocks for not so profitable surviving.

Re one way move:- A gap would be a good example of that. This is where your size, or rather lack of it helps you. We can do an example a bit later.
Btw. im not here to convince anyone of anything. Im here to learn.

Re campaign example:- Are we talking about trade 2 here? If so, sorry man but i musta missed you asking. The numbers are there though. Just take away the short position.
By the time I was all tomtard out after getting 0.20 on at 11079.1, the scratched trades totalled -0.19. In other words I improved my long position from 11180 - 11080, it cost me -0.19. I obviously would have then had a well placed long position to take profits on as n when.

 

[darktone]

tomtaring - hey that's not bad.

Top man

 

[darktone]

1-Great trader trades the euro he knows what he is doing , 80 folds between 2008 and 2012 cant beat that ! so what if he is averaging down its called scaling in :clap:

Theres the problem mate. He think he knows something

 

[darktone]

Sure you can trade a very tiny size - without scaling in - , for example buy 1 dax cfd at 12000 with a 100000 account balance , no need for a stop right ?
Your problem here is you aren't going to make any decent amount of money for example to make 1% gain you need to make 1000 points !
Second : Hence you don't use any stops you are going to give away years of gains in one loss ! like this guy below .
And third : If you want to wait forever for the market to come back you may have to stop trading for years and not make any gains and when it does come back your gains will be very minimal not to mention that sometimes the market never comes back infact it happens more often than you think .

Thats only if you buy the 1 dax and hold it. or scale in / average down and hold it,, with a broker called martin gale... Which is OT for what im talking about mate.

I wonder what the OP has learned so far? I almost darnt ask :cheesy:

 

[darktone]

ps. When we say a stop , we don't necessarily mean hard stop which is preferred for many reasons , but also a "mental/soft" stop will do .

Can you give a quick example. Id be interested to see your approach to that.

 

[darktone]

Whenever I've experimented with this type of trading in the past, it's always the extended abnormal move that has caught me out. darktone has - to some extent - already addressed this by saying that he puts on some sort of a hedge. Hopefully, if he provides some trade examples we can see how effectively (or not) he manages to deal with this issue.

The technical answer isnt in the hedging, its in the seeking value and managing. That hedge example was done as quick quiz giggles . But youve got have the psych or youre likely to

The thought process went something like:-
How can I ensure I get bottom tick on my shorts?
:idea: I can use the same process as I used to get top tick into my shorts!

I just wanted to see if anyone got it before I showed what I did. Was interesting.

 

[barjon]

Re engrained:-Id say it's engrained because it's one of the bedrocks for not so profitable surviving.

Re one way move:- A gap would be a good example of that. This is where your size, or rather lack of it helps you. We can do an example a bit later.
Btw. im not here to convince anyone of anything. Im here to learn.

Re campaign example:- Are we talking about trade 2 here? If so, sorry man but i musta missed you asking. The numbers are there though. Just take away the short position.
By the time I was all tomtard out after getting 0.20 on at 11079.1, the scratched trades totalled -0.19. In other words I improved my long position from 11180 - 11080, it cost me -0.19. I obviously would have then had a well placed long position to take profits on as n when.

If you were working for a firm your risk manager would pull the plug on you if you got too deep (ie: an imposed stoploss). Wonder why? Do you think they are idiots in running their business that way?

Yes, it was trade 2. I don't quite understand your answer here. If you were running a long campaign would you have been buying the lows all the way down and scratching on the occasional pullback, or have I got it wrong? Thus different numbers in play and not as easy as "just take away the short position"? Sorry to be dense.

 

[tar]