tar
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I Stopped Using Stops
- Thread starter Wicked_Daddy
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tar
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tar
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Wicked_Daddy
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As the OP, it is very interesting to read the opinions regarding this topic. I find that some are more subjective than objective, assuming that a trader that does not use stops is inexperienced, stupid, reckless, has no strategy, etc. Perhaps for some and maybe even the majority. But it's a pretty general statement that does not apply to all.
I have traded professionally over 10 years, trading equity options and never used a stop. The "stop" in options can be considered the fixed investment being worth $0 at expiration. So it is a pre-determined, fixed risk unless the trader wants to mitigate further with a stop. I began a transition to forex just about a year ago and learned quickly that this market is very different from stocks - actually the reason I made the switch but still a learning curve to be tackled. I built a strategy that included stops, to mimic the fixed risk I was accustomed to trading.
As I said in other posts, I tried varying degrees of stops in varying time frames as I evolved the strategy and my learning curve smoothed out. I then decided to allow trades to run without stops - as forex trades do not expire and I find them to be cyclical and my strategy is based on cyclical price action. Now I have gone more than a month without stops and have banked 22 straight wins (16 when I first posted this). It is true that some of these required patience as the trade went negative and tied up capital/margin that could not be used for trading. But I don't bet the farm on any single trade and I keep the risk proportionate to the account size, my tolerance and the strength of the strategy at the entry. I can always manually close the trade if my tolerance is tested. The recent Greek shenanigans certainly have tested my tolerance.
The bottom line for me is that I have extracted more profit from the market in the past month than in all other months prior, combined. I may return to using stops at some point. As I do see the value in cutting a loss early, freeing up the trading capital to take another position and leverage opportunity when it is present. I have missed a few excellent trades waiting for a trade to mature into profitability. But of course, That's easily spotted in hindsight.
If this thread continues I will be happy to post if/when my account gets wiped out so all those who are so passionate about using stops can rake me over the coals. I'll definitely need that level of encouragement at that point.
I have traded professionally over 10 years, trading equity options and never used a stop. The "stop" in options can be considered the fixed investment being worth $0 at expiration. So it is a pre-determined, fixed risk unless the trader wants to mitigate further with a stop. I began a transition to forex just about a year ago and learned quickly that this market is very different from stocks - actually the reason I made the switch but still a learning curve to be tackled. I built a strategy that included stops, to mimic the fixed risk I was accustomed to trading.
As I said in other posts, I tried varying degrees of stops in varying time frames as I evolved the strategy and my learning curve smoothed out. I then decided to allow trades to run without stops - as forex trades do not expire and I find them to be cyclical and my strategy is based on cyclical price action. Now I have gone more than a month without stops and have banked 22 straight wins (16 when I first posted this). It is true that some of these required patience as the trade went negative and tied up capital/margin that could not be used for trading. But I don't bet the farm on any single trade and I keep the risk proportionate to the account size, my tolerance and the strength of the strategy at the entry. I can always manually close the trade if my tolerance is tested. The recent Greek shenanigans certainly have tested my tolerance.
The bottom line for me is that I have extracted more profit from the market in the past month than in all other months prior, combined. I may return to using stops at some point. As I do see the value in cutting a loss early, freeing up the trading capital to take another position and leverage opportunity when it is present. I have missed a few excellent trades waiting for a trade to mature into profitability. But of course, That's easily spotted in hindsight.
If this thread continues I will be happy to post if/when my account gets wiped out so all those who are so passionate about using stops can rake me over the coals. I'll definitely need that level of encouragement at that point.
darktone
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Yep. I was buying every new low and scratching out the size i didnt want on the pullbacks, same deal as entering a position.
It went:-
1) Entry into shorts completed
2) Start to hedge 11180 odd (with buy limits)
3) Buying every new low and scaling out what I dont want to get back to 0.20 (hedge size)
4) This continues till the market made its final low at 11079.1
5) The -0.19 pence is what it cost me. The results the scratched trades.
Does that make sense?
Heres one for the risk manger situation.
--------------------------------------------
I traded my way into the low 11374 (orange tab), Joe bought the break out at 11445 with a stop at 11386.
Joe is 10x my size, he has to be to pay for the cost of his stops.
Shìt happens over weekend and the market opens 10951.
Who does the risk manage call into his office?
Joes out at that moment eating a whopping slice o slippage pie.
Im still in the position with 1 tenth of Joes loss as a floating loss, but in still in the game. This becomes realised as I start to manage the position. No prizes for guessing where id be positioned and id have the potential to make some back, at the very least.
Joe would have to renter and play again. Providing he hasnt been sent home already.
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tar
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Forexmospherian
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new_trader
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Straw Man Cases
darktone,
With all due respect, you are creating convenient straw man cases against stops with your hypothetical examples. I have spent almost a decade refining and mastering my methodology. Although you don’t rely on judgement because you think it is impossible for anyone to time entries with a high degree of accuracy, I know it isn’t at all impossible, which is why I trade effectively and efficiently with tight stops. I recall a post from SOCRATES in which he stated there were 3 goals that any aspirant should strive to perfect. They were:
Number 3 without a doubt was the toughest challenge and I personally think it is responsible for most of the losses for all traders. Sitting on your hands and waiting is something most traders simply cannot do...they feel the need to always be busy...Most traders believe that there is a profit in every fluctuation!
I know that the ES has gapped down massively over the last 2 openings after a weekend and that hasn’t worried me at all, because as I stated, I have spent the last 10 or so years refining and mastering the aforementioned goals.
darktone,
With all due respect, you are creating convenient straw man cases against stops with your hypothetical examples. I have spent almost a decade refining and mastering my methodology. Although you don’t rely on judgement because you think it is impossible for anyone to time entries with a high degree of accuracy, I know it isn’t at all impossible, which is why I trade effectively and efficiently with tight stops. I recall a post from SOCRATES in which he stated there were 3 goals that any aspirant should strive to perfect. They were:
- Knowing exactly when to go Long
- Knowing exactly when to go Short
- Knowing when to remain NEUTRAL
Number 3 without a doubt was the toughest challenge and I personally think it is responsible for most of the losses for all traders. Sitting on your hands and waiting is something most traders simply cannot do...they feel the need to always be busy...Most traders believe that there is a profit in every fluctuation!
I know that the ES has gapped down massively over the last 2 openings after a weekend and that hasn’t worried me at all, because as I stated, I have spent the last 10 or so years refining and mastering the aforementioned goals.
darktone
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no u dont
tar
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Im saying youre short and youre wrong in the the riser in any time frame you want. how u handle it?
In the faller. how you handle that chop any time frame you want
Jeez its hindsight. should be easy
Who said i will be short in such sitution ? And what about the other tools that i may be using .
Forexmospherian
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90% + of traders might not - BUT - I would - otherwise could not trade or be in any trade
However will give you my view for based on a small 1 min frame and the other instance being a day / weekly / monthly time frame
So I am in both charts with a short
On chart 1 on a 1 min frame - short within 2 -5 mins of first high and then exited within 21 min max would then wait 9 min to see if we are still under high and then short again under the hr from first short and then if LL's get out with 30 mins from the second short
Chart 1 on a daily / weekly / monthly time frame - multi sold from top or day 1 - left one stop in 5 pips of profit and moved others down as the days and weeks went on and then after 18 working days - exited all but a few shorts with stops in 5 pips of profit
Chart 2 as a 1 min chart - would be out with 5 pips on any short going up and review for buys with same rules as on chart 1 on a 1min
Chart 2 as a day / weekly / monthly chart - - out when it went 5 pips against me
So on chart 2 on any time frame - out of shorts under 5 pips - or maybe 7 pips if spreads large
Hope that makes sense
Regards
F
new_trader
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I don't trade using charts, I am a tape reader, an absolute purist. So now what? Do you have any convenient hypotheticals to cope with that methodology?
fxstrategist
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I agree with New Trader, in order to become successful in the markets you must become a professional, and no professional trades without stops.
tar
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