Spanish's Legacy Lives on

[ivantchourilov]

This is more of a tribute to the great man. The inventor of the legendary "spanish stop".

Lest we forget. He stays deep in out hearts as the greatest trader known to this website. Established as the true advisor to Paul Tudor Jones and Rocky Balboa.


Always in our hearts.

P.S. A little Spanish market forecast has ran through me - the DOW will go down then up again. Today. Maybe tomorrow. But if it happens it will be big. Just set a stop loss about 12000 from the current level. You will never lose. Be sure to trade big though. If DOW will go down, don't forget that FTSE will go down too. At some point. Maybe.

I miss him.

 

[Vaco]

Funnily enough spanish and his trading style has been on my mind lately, there is another thread where the thread starter trades in a simmiler way with regards to stops. She has not been attacked as spanish was for her trading style but thats more to do with how annoying spanish was. anyway back to my thoughts.

Under the never get hit stop loss set up most trades (maybe all bar 1) will be winners untill the blow up your account trade comes along.

My point is this and i would like a civilised discussion around it.

If you start with a £1000 account and write it off the moment you open it and you stick to £1 a point with no intention of increasing the account in order trade larger size but instead simply to withdraw gains (if any) each month. Then as long as you are not unlucky enough to hit your acount destroying trade before you have made at least £1000 is it a sustainable (short Term) trading plan for some extra cash each week.

AtlantaAnna seems to think so spanish thought so and there are others that have commented that they had substansial gains before blowing their accounts trading this method.

So what are your thoughts?

 

[ivantchourilov]

Funnily enough spanish and his trading style has been on my mind lately, there is another thread where the thread starter trades in a simmiler way with regards to stops. She has not been attacked as spanish was for her trading style but thats more to do with how annoying spanish was. anyway back to my thoughts.

Under the never get hit stop loss set up most trades (maybe all bar 1) will be winners untill the blow up your account trade comes along.

My point is this and i would like a civilised discussion around it.

If you start with a £1000 account and write it off the moment you open it and you stick to £1 a point with no intention of increasing the account in order trade larger size but instead simply to withdraw gains (if any) each month. Then as long as you are not unlucky enough to hit your acount destroying trade before you have made at least £1000 is it a sustainable (short Term) trading plan for some extra cash each week.

AtlantaAnna seems to think so spanish thought so and there are others that have commented that they had substansial gains before blowing their accounts trading this method.

So what are your thoughts?

theoretically it can work. but here is the deal. if you bought october last year, you would be looking at a massive loss at the moment. so sure, markets always go up. but here is the thing. you will be more profitable just learning to trade properly. there is still more risk doing this than putting money in a bank. year to year based on todays price, you would be look at a loss. whats to say the market has bottomed? in any case, lottery tickets have more potential for being rich

 

[Vaco]

I wouldnt take it to the extreames that spanish did but rather i was thinking of a position where your risk would be higher then the reward maybe by 2 or 3 with the benefit of it been more probable that your target is going to be hit rather then your stop.

this would still have to incorparated within a set up/pattern that had a good hit rate but it would stop u been taken out by spikes just before it moves in your direction.

I have yet to identify a pattern which has a better then 50/50 chance of playing out as expected, and a smaller target gives a better chance of success whilst the wider stop minimisses been taken out by fake moves.

 

[Lee Shepherd]

Funnily enough spanish and his trading style has been on my mind lately, there is another thread where the thread starter trades in a simmiler way with regards to stops. She has not been attacked as spanish was for her trading style but thats more to do with how annoying spanish was. anyway back to my thoughts.

Under the never get hit stop loss set up most trades (maybe all bar 1) will be winners untill the blow up your account trade comes along.

My point is this and i would like a civilised discussion around it.

If you start with a £1000 account and write it off the moment you open it and you stick to £1 a point with no intention of increasing the account in order trade larger size but instead simply to withdraw gains (if any) each month. Then as long as you are not unlucky enough to hit your acount destroying trade before you have made at least £1000 is it a sustainable (short Term) trading plan for some extra cash each week.

AtlantaAnna seems to think so spanish thought so and there are others that have commented that they had substansial gains before blowing their accounts trading this method.

So what are your thoughts?

Yo dude,

The clue is in your writing......"lucky enough".

If you wish to trade with luck then of course, it could work, but you wont be trading, you'll be gambling and living in the hope that you'll be lucky enough for you to pull a few quid from it. If you wish to trade with skill and call yourself a trader and earn a living from it then you need to trade not gamble with hope and luck.

Many people try trading with luck and hope, they are what makes up most of the losers that never make it, the ones that stick to their plan and dont stray from the system are the rare ones you never hear of.

To play this way should not even be talked about, it would be the equivalent of playing russian roulette in the hope you didn't get the bullet before you made a few quid.

Remember, not anywhere in the history of trading does it mention anything about huge or no stops, no where has it ever been spoken of by a serious trader, or new trader to that matter (only idiots and reckless gamblers). There is an obvious reason for this. I'll let you work it out but I'll give you a clue:

The first rule of trading is to preserve your capital.

 

[Lee Shepherd]

theoretically it can work. but here is the deal. if you bought october last year, you would be looking at a massive loss at the moment. so sure, markets always go up. but here is the thing. you will be more profitable just learning to trade properly. there is still more risk doing this than putting money in a bank. year to year based on todays price, you would be look at a loss. whats to say the market has bottomed? in any case, lottery tickets have more potential for being rich

Interesting point you make with regards to 'the markets always go up' and if you 'bought last october'.

Concentrating on the ftse only here you'll find that this market has been higher in the last millenium than it has in this one. Also bear in mind another index, Nikkei225 which hit in the regions of 38000 before dropping back to its current price of under 13000. So the question is, how long do we or/and can we hold before being shafted and losing our capital.

So far the ftse100 would not have bought you a return since the turn of the century and the nikkei225 would be astronomical losses I cant see ever making a return from as long as you live. (take into account inflation and costs ect make it more unlikely to the extremes of impossible).

 

[ivantchourilov]

I wouldnt take it to the extreames that spanish did but rather i was thinking of a position where your risk would be higher then the reward maybe by 2 or 3 with the benefit of it been more probable that your target is going to be hit rather then your stop.

this would still have to incorparated within a set up/pattern that had a good hit rate but it would stop u been taken out by spikes just before it moves in your direction.

I have yet to identify a pattern which has a better then 50/50 chance of playing out as expected, and a smaller target gives a better chance of success whilst the wider stop minimisses been taken out by fake moves.

slightly different to what i originally understood it as. ill tell you what, i dont use stops in my trading, and i know there are very successful traders who talk about it. there were about 3 in the new market wizards.

The reason i DONT use stops is because they commonly stop you out at worse positions than if you held on through them. i think it all goes back to how you trade it and what your system is. i disagree with Lee on this point.

i believe you should have a mental stop, where you will go into the "cut your loss mode", however every exit should be weighted.

i do apologise, i thought you meant put in a position with a completely untouchable loss. ie. buy ftse at 5500 with a stoploss at 100

 

[ivantchourilov]

Interesting point you make with regards to 'the markets always go up' and if you 'bought last october'.

Concentrating on the ftse only here you'll find that this market has been higher in the last millenium than it has in this one. Also bear in mind another index, Nikkei225 which hit in the regions of 38000 before dropping back to its current price of under 13000. So the question is, how long do we or/and can we hold before being shafted and losing our capital.

So far the ftse100 would not have bought you a return since the turn of the century and the nikkei225 would be astronomical losses I cant see ever making a return from as long as you live. (take into account inflation and costs ect make it more unlikely to the extremes of impossible).

exactly. oecd markets got killed. the question is how long will this bear last. i think the difference between nikkei and ftse is that the ftse is more structured and has a better way of dealing with bad situations, whereas japan had major inflationary pressures, caused by the belief that they (the government) have infinite capital. this seems to be more of a temporary halt in progress, however ftse can still drop well below 5000. the question is, will there be anyone to stop it? :d

 

[Vaco]

Lee,

Yes i understand preserve your capital but others also say 'death by a thousand cuts'

i read an article on cbot where the trader was showing opening gap plays with the stoploss been 1.5 times the profit target giving an unfavourable R:R however the winning split was claimed to be in the 80s making up for the poor r:r.

I dont trade this way but i can see the temptation, losses that occur because your stop is hit only to see the market then move in what would have been your favour are hard to forget. so it goes that you make your stop a little further away from /support/resistance or the last high/low bar in order to prevent a repeat. I'm sure its something simmiler to this that led spanish to his extreames.

 

[Vrothdar]

Trading without stoplosses would only work if you could circumvent the one true stoploss - Margin calls. If you can't do that you're not really trading without a stoploss at all.

 

[ivantchourilov]

there is a way to do it profitably. the thing with spanish was:

put in oil contract. go long at 140 for example market goes to 110. he will stay. until it goes to 10. then after selling his last pair of shoes he will have to quit. the profit target for him was 140.10. slight exaggeration, but his R:R was just f*&ked.

 

[ivantchourilov]

Trading without stoplosses would only work if you could circumvent the one true stoploss - Margin calls. If you can't do that you're not really trading without a stoploss at all.

haha margin calls are painful when they happen. luckily i dont have that many any more.

look ill tell you what i mean. imagine a market that has been trading in a range.

5050 and 4850 is the range. what i would do is be shorting 5050 and going long 4850 closing out somewhere in the middle of those two. now if there is a break to the upside, say market goes to 5120, there is your stoploss. you need to be thinking how to get out. the market has clearly started to trend upwards, and will be breaking out of the range. you start looking to prior resistance levels and seeing where you will be quiting. say there is a resistance at 5125 that has been tested 4 months ago several times. here is the thing. you look at this and say if it breaks 5125 thats a definite cut, regardless of what is happening. more often than not though it will reverse and you can cut your loss at a much better level than if you originally cut at the 5125 level. im not saying no stoplosses, im saying mental stoplosses with no panic.

 

[Vaco]

Trading without stoplosses would only work if you could circumvent the one true stoploss - Margin calls. If you can't do that you're not really trading without a stoploss at all.

Agreed which is why such a system does not work if you increase size as your account grows, the idea would be to remove profits in order to limit loss to your initial deposit.

That ofcourse is the ultimate stop loss and not something i would be comfertable doing but i am plaing with the idea of a set up which has smaller profit targets then it does stop losses. Is this reall such a devastating plan.

 

[Vrothdar]

haha margin calls are painful when they happen. luckily i dont have that many any more.

look ill tell you what i mean. imagine a market that has been trading in a range.

5050 and 4850 is the range. what i would do is be shorting 5050 and going long 4850 closing out somewhere in the middle of those two. now if there is a break to the upside, say market goes to 5120, there is your stoploss. you need to be thinking how to get out. the market has clearly started to trend upwards, and will be breaking out of the range. you start looking to prior resistance levels and seeing where you will be quiting. say there is a resistance at 5125 that has been tested 4 months ago several times. here is the thing. you look at this and say if it breaks 5125 thats a definite cut, regardless of what is happening. more often than not though it will reverse and you can cut your loss at a much better level than if you originally cut at the 5125 level. im not saying no stoplosses, im saying mental stoplosses with no panic.

I wasn't really aiming that at you. It was more of a general mind fart.

 

[ivantchourilov]

Agreed which is why such a system does not work if you increase size as your account grows, the idea would be to remove profits in order to limit loss to your initial deposit.

That ofcourse is the ultimate stop loss and not something i would be comfertable doing but i am plaing with the idea of a set up which has smaller profit targets then it does stop losses. Is this reall such a devastating plan.

i recall a convo on spanishs forum somewhere in the middle (page 5989723762723) that the optimal stop loss would actually statistically be in an unfavourable risk/reward.

 

[Vrothdar]

Agreed which is why such a system does not work if you increase size as your account grows, the idea would be to remove profits in order to limit loss to your initial deposit.

You're still trading with a stoploss though but rather than it being expressed in terms of drawdown in £s (when considering account balance and open P&L) rather than a particular price of the instrument you're trading.

That ofcourse is the ultimate stop loss and not something i would be comfertable doing but i am plaing with the idea of a set up which has smaller profit targets then it does stop losses. Is this reall such a devastating plan.

I'd say no, not at all. By defining the stoploss in terms of drawdown in £s rather than prices of the instrument you're trading effectively changes your activity from trading an edge to gambling an edge.

 

[shadowninja]

I do have a demo account long position on USD/CHF from early Feb 2008. At one point I was down 1372 pips. I am now 5 pips profit. Should I close?

 

[Vaco]

i recall a convo on spanishs forum somewhere in the middle (page 5989723762723) that the optimal stop loss would actually statistically be in an unfavourable risk/reward.

But that makes sense,

The markets move in a way to cause pain. lets take the example of buying at support in a range, the best moves up will not go as low as before and then not even stop for a breather making it hard to get in with a tight stop as theres no support in sight anymore. then theres the false breaks which catch out the break out players and stop out those that bought at support.

 

[ivantchourilov]

I do have a demo account long position on USD/CHF from early Feb 2008. At one point I was down 1372 pips. I am now 5 pips profit. Should I close?

thats the perfect spanish trade. i salute you as always

 

[fibonelli]

What about a long position in Silver in January 1980 without a stop. :clap: