Thread: Real Fx traders do not use stoploss

Originally Posted by ;

As a reply to post 358, Since the timeframe is very restricted, and the transactions are predied on 1hr trends, I would say SL in the low of the previous hour will make sense. Particularly if the systems isn't paying attention to longer time frame support/resistance levels. As a means to protect yourself if a huge move occurs before the hour ends.

I am new to this - so I hope someone will answer.


Say you is trading about 1 hour bars. At the close of the bar Time 0, then you make a choice to trade in the open of the next bar. At the next bar, Time 1, you publish a buy market order. At the next bar, Time 2, you close the place opened at Time 1. Your trading system consistently follows the above scenario.

From the above instance, how would you open a stop loss? Would the stop loss be started in Time 1, together with the market buy order? Is that possible? Don't you need to wait till the market order is started before placing the stop loss?

Originally Posted by ;

quote I'm new to this - so I hope someone can answer. Say you is trading on 1 hour bars. At the close of the bar Time 0, you create a choice to trade in the open of the next bar. At the next bar, Time 1, you submit a buy market order. At the next bar, Time 2, you close the position opened at Time 1. Your trading platform always follows the above scenario. From the above instance, how would you open a halt loss? Can the stop loss be opened in Time 1, along with the market buy order? Is that even possible? Do not you need to wait until the market order...

Most platforms permit the setting of a halt (and a limitation or target price) at the time the order was made, even if it's a market order. You should not need to wait till the market order transports to specify a stop.

Originally Posted by ;

Not merely does a stop loss control risk, which is your main goal as a consistently profitable trader, it also gives you a metric for measuring the quality of trades you require in the form of expectancy and risk:benefit. I can practically guarantee that your failure if you are not pre-defining risk in a transaction.

I would to respectfully comment that stops do not control risk, position sizing does. If you place stops in the market at reasonable places, they are going to get run if you are unfortunate enuf to set your stops where large boys have placed theirs. Institutional traders have admitted as much. Better to reduce your position size and let the market do it's thing. Trade round the DD and be constant, and most traders will be OK.

Originally Posted by ;

quote I'm sorry but I can't agree with that. By not pre-planning a stop, your prospective risk is infinite and you are assuming you understand what the market will do next. Stop placement can be adjusted inline with what you've mentioned of course although not placing stops is a bad idea, especially to new traders. Position sizing is just another factor that controls risk, one used combined with orders. I understand we won't agree on this, but I think readers need to comprehend the risks.

The older school camp boosts SL's, 2-1 risk reward ratio, and basically only using Weekly, Daily, and greater time frame charts to make trading decisions (standing and swing trading). Being an FXCM customer, this doctrine is all within their web site DailyFx, and also the setting of appropriate SL's and proper lot sizing are principles of their eduional menu. I've read other forex web sites' eduional articles, and they market similar principles of thumb in regards to SL's and cease size. And I have no problem with that for those kinds of trading ... but I'm not a swing or position trader.

For a daytrader or scalper, I've discovered that SL's -- only as a practical matter -- get in the way of certain scalping and day trading methodologies I use that capitalize on relatively small motion, egies that were demoned to be more than moderately successful for the most successful traders (http://fxtrade.oanda.com/analysis/to...ers-statistics ; average commerce duration for Best 100 traders is lt;4 hours; APT lt;20 pips). It is as simple as that. For these extremely short term egies that are searching for a relatively few of pips, I simply do not want price wicking through (as it often does) and hitting what is a rule of thumb 2-1 risk-reward stop. Setting hard (rather than mental) SL's only doesn't work for this type of trading.

That being said (and I have said this before), you should not be going naked unless you understand what the hell you are doing and enjoy swimming that way.

Originally Posted by ;

quote I'm sorry but I can not agree with that. By not pre-planning a stop, your potential risk is infinite and you're assuming you understand what the market will do next. Stop placement can be corrected inline with what you have mentioned of course but maybe not putting stops is a bad idea, especially to new traders. Position sizing is another element that controls risk, one best used combined with orders. I understand we will not agree on this, but I think readers will need to comprehend the risks.

I wonder why traders feel the need to just give money to their brokers. I used to do that. Looking back, I always wonder exactly what was in my head.

Originally Posted by ;

quote I think readers need to comprehend the risks.

I don't believe I am alone in believing that the majority of traders criticize the failure to use SL's as basically crazy, dumb, etc. and that not having stop losses is contrarian. I'd be amazed if readers of the various threads on this site dedied to this subject came off with a lack of comprehension of risk, because that is a subject that's been repeatedly revisited and rehashed in the various discussions about SL's.

I feel that the best way to resolve it would potentially be for someone to just code an EA that people could backtest ... .

Get on this, will ya?

Originally Posted by ;

quote The older school camp promotes SL's, 2-1 risk reward ratio, and basically just using Weekly, Daily, and higher time frame charts to make trading decisions (position and swing trading). Being an FXCM client, this philosophy is all over their internet site DailyFx, and the setting of proper SL's and proper lot sizing are staples of their eduional menu. I have read other Foreign Exchange internet sites' eduional articles, and they market comparable rules of thumb with respect to SL's and stop dimensions. And I have no problem with this for all those kinds of trading...

I do not even think it is the old college. They would like you to use SL and provide you 100-500:1 leverage. The message is trade big and place a SL. That is the way the broker receives your cash. If you exchange small and allow the market do it's normal thing, you do not only give money to a broker. You have to really be really wrong before you close a transaction. I exchange now 3 cents to 1000 dollars. It had been 1 penny. If am early, or late, then that's okay. I am able to trade around that place and if my account balance indies that I'd still be in profit after I closed the laggard out, I close it.

Originally Posted by ;

quote I don't even think it is the old college. They would like you to use SL and provide you 100-500:1 leverage. The message is commerce large and put a SL. That's the way the broker gets your money. If you trade small and allow the market do it's normal matter, you do not only give money to your broker. You have to actually be truly incorrect before you close a transaction. I trade now 3 cents to 1000 dollars. It had been 1 penny. If am early, or late, then that is okay. I am able to trade around that position and if my account balance shows that I would still be in...

Very good point, brokers want their clients to trade large. Employing a stop loss is the only responsible way a broker can promote trading large. I think this is the reason why trading with no stop loss is indeed contentious. But, the men and women who learn how to trade small accounts learn to keep matters in perspective and how to take the anxiety from the market.

Originally Posted by ;

quote I don't even think it's the old school. They would like you to use SL and provide you 100-500:1 leverage. The message is trade large and place a SL. That is the way the broker receives your cash. If you exchange small and permit the market do it's normal thing, you don't just give money to your broker. You have to really be really wrong before you close a transaction. I exchange now 3 pennies to 1000 dollars. Before it had been one penny. If am early, or late, then that's fine. I am able to trade around that place and if my account balance indies that I would still maintain...

I tend to concur with that. I'm currently trading around .5 times equity per leg of any position, which I am comfortable with. If there's anything I've learned is that my trade management instincts are fantastic, but my time is ... well, not such much. Trading in small lots enables me to play a little slop and add to an open position in a slightly more advantageous price if I'm somewhat off as to entrance.

Exactly what the vast majority of brokers tend to teach would be to allow the trade stop out and then do another entry in the more advantageous price in case a trade idea remains basically good and would criticize my adding into a lousy trade in an endeavor to obtain a profitable target price nearer to my web position (which, point in actuality, is precisely what I'm doing a lot of the time). The broker's way would arguably help save you money between the SL price and your second, more beneficial entrance, but I frankly don't have the time, patience, or desire to second guess my original setup, particularly if its only shortcoming is the exact time of this entrance and where hitting the SL would not possibly be the very best price where to exit the transaction (it is).

In the rare cases where I totally blunder or where price moves in a manner inconsistent with premature price action, I just exhibit patience and wait. I don't always expect it to recover fully, but I do wait for it to restart the management of my original entry or fall into a range or whatever that allows me an additional entry to cancel my earlier mistake. Naturally, if you are going to dive into get rich quick style and throw 5 x ray equity on the table with each place you exchange, you are likely to have substantial trouble doing things this way.

The overall sense I do gain out of broker's eduional posts (at least on DailyFx) is that they market 2-1 risk-reward trades coupled with lot dimensions that are equivalent to no more than 1 x ray equity using a cap on overall exposure to this market without more than 10 x equity, which would be rather conservative.

But the current environment pushes individual traders to go bigger, since their recommendations as to 2-1 risk-reward swing or standing trades are few and far between. There's at least one DailyFx analyst that has been virtually horizontal or believes there to be no actionable trades across virtually all of the major pairs for many weeks running. I cannot see a trader who is flat constantly on these swing/position trades making jack diddly unless their equity is enormous, and the two trades they created this month were equally good and had the follow-through required to meet the 2-1 risk-reward ratio. I would expect these guys get stopped out as much as anyone else, since they tout a 50% gain ratio coupled with a 2-1 risk-reward as good. I would go bonkers trading this way ... .

Originally Posted by ;

quote I, for one, would rather hand my money to that bum on the roadside ... . ... as purely a matter of principle.

It makes more sense to fork it over to the buttocks on the roadside..def a more pref option. .