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Trading without a stop loss!

  • #1
  • First Post: Mar 7, 2006 4:19pm Mar 7, 2006 4:19pm
1. Do you trade with a stop loss?
a. If yes: would you please describe it (how many pips away from entry; do you change it ...etc.
b. If yes: do you lock in any profit when the price goes in favour of you and on what criteria, do you use trailing stops?

c. If not: why? how do you manage risk then?

Regards
  • #2
  • Mar 7, 2006 4:24pm Mar 7, 2006 4:24pm
FxEmp,

I am not by any means an expert nor a professional at this game of gambling with currencies. I usually use a stop loss of 15 pips, when playing hourlies, adjusted based on my studies. I usually have a limit of 30 to 40 pips. Longer terms, 4 hours, daily, I use higher values. Remember Greed Kills. Best of luck.
  • #3
  • Mar 7, 2006 9:56pm Mar 7, 2006 9:56pm
I don't know where i read, but was really interesting. If one of you said that please rease your hand:
"do you do bunjee-jumping without a rope???"
I use stop loss. I put stop loss a little bit lower than the local minimum for a long position, and a little bit higher than the local maximum for a short position.
If the stop loss is too far from the price that means I'm getting in too late... so I don't get in , but you wanna get into a long position at the bottom, so the stop loss won't be far. The same for a short position
Try hard, think fast, die young
  • #4
  • Mar 7, 2006 10:10pm Mar 7, 2006 10:10pm
Quote
1. Do you trade with a stop loss?
Yes and No.
It depends on what you call a stop loss? at times, when i watch the market, I may have entry and exit criteria. exit @ profit or exit at loss. that may or may not be on the number of pips its gone away.


Quote
a. If yes: would you please describe it (how many pips away from entry; do you change it ...etc.
When ever i am not watching the charts I place them at a level just below or above what ever the case maybe of the support or resitant levels on a higer time frame.

e.g. I have gone long on + macd divergence on 15 mint. I look at the suport level on the 1 hr and place my SL just below that.


b. If yes: do you lock in any profit when the price goes in favour of you and on what criteria, do you use trailing stops?

Yes. However I lock my profits ussly using stcastics, and renter the trade.
e.g. I see the price going high on the 1 hr chart, I open the 15 mint or even the 5 mint chart and buy at all the dipd on the 15/5 mint chart and lock my profit as soon as the stocastics become over bought on the 15 mint / 5 mint chart.

Quote
c. If not: why? how do you manage risk then?
When I watch the trade, I like to plan my trade and trade my plan, and i dont base my trade based on spikes but on candle bodies, hence i cannot have predetermined "pips" based stop losses.
  • #5
  • Mar 8, 2006 12:12am Mar 8, 2006 12:12am
Sometimes I do but I have mental stop I mean I do not place it right away after entry
kiss the trend
  • #6
  • Mar 8, 2006 12:13am Mar 8, 2006 12:13am
Quoting forexemperor
1. Do you trade with a stop loss?
a. If yes: would you please describe it (how many pips away from entry; do you change it ...etc.
b. If yes: do you lock in any profit when the price goes in favour of you and on what criteria, do you use trailing stops?

c. If not: why? how do you manage risk then?

Regards
a. No, at least, not in the traditional sense of stop loss. I use specific values according to the framework, rather than a blanket amount for all situations. That way, you don't get knocked out half so much.

b. See above.

c. It's more profitable and the risk is managed more inteeligently.
The framework is there; we just have to work on our frame of mind.
  • #7
  • Mar 8, 2006 12:40am Mar 8, 2006 12:40am
In my earlier days when i used to have a SL say 30 pips away etc, I allmost ussaly dead right. I..e. my observations of the chart were correct but i would get stopped out and the market would go my way. Hence its better to have stops on technical analysis rather than x pips away.
  • #8
  • Mar 8, 2006 1:36am Mar 8, 2006 1:36am
First,
I like Huskin's use of schotastics to place/adjust his stop loss. I also think that FxEmp's statement should be a rule of thumb (Fx is not gambling and trading without a SL is just as terrible as gambling can be).

I and six friends started FX trading with no experience what so ever; In 5-month time, all of them lost more than 40% (of their capital); I lost only 25%, most probably because I kept using SL orders with every trade.

Like dof's, I like to use local tops and local bottoms near the support or the resistance I have entered into.
I never enter a trade without a stop loss order already set up.
Even if you do not want to set up a SL as you enter, I think it is a great idea to palce a temporary stop, i.e. (if your usual hourly stop range is 15-30 pips, then put a temporary stop like 50 pips), you never know what can happen; certainly, most of us could see how a currency might move against us on an unfavourable and unforseeable geopolitical event.

When I reach 33% of my target profit, I lower my stop to break even (if technicalities support that action)... but I always move my stop when I reach 50% target profit, no matter what. This can make you happy at the end of the month.

Trade fair.
  • #9
  • Mar 8, 2006 3:07am Mar 8, 2006 3:07am
Quoting forexemperor
1. Do you trade with a stop loss?
a. If yes: would you please describe it (how many pips away from entry; do you change it ...etc.
b. If yes: do you lock in any profit when the price goes in favour of you and on what criteria, do you use trailing stops?

c. If not: why? how do you manage risk then?

Regards

a. It depends on which time frame you are in, your limit, your equity and your money management rules.
On a daily chart, I would typically use between 25-50 pips if I'm looking for a gain of 100-150 pips.

b. Several techniques can be used. The simplest is a trailing stop based on pips (10-20, etc...) Another would be to put on original under a recent low, then follow up with the next low, etc... The important is to cover your loss ASAP and raise your stop to breakeven point.

c. A great way to manage loss (hedge) is buy the Euro and the Swiss in a way they cover each other. One mirrors the other at 98%. It's like buying the red and the black at the roulette. Main difference: you will receive interest every day. That could mean a 40%-60% return at the end of the ear.
  • #10
  • Mar 8, 2006 6:23am Mar 8, 2006 6:23am
I do trade with a stop loss.

The stop loss must be related to the time frame I use to set up the trade. If I set up my tech analysis (fibos, trendlines, moving averages, etc) off the daily chart, then the stop loss gotta be dictated by the daily chart's key support/resistance levels, such as for example a trendline, or a previous high/low, etc.

If the stop loss is too large for my taste, I reduce the lot size accordingly.
  • #11
  • Mar 8, 2006 7:12am Mar 8, 2006 7:12am
I have been trading for a very long time now and my stop loss strategy is different from most.

I have tried all sort of methods and the one that I have found works best for me is using a 40 point stop (I only trade cable) but the difference is that once I am in front and profitable by 20 points to 30 points I change the stop loss to zero. This is based on Mark Douglas's book "Trading in the zone" and what he talks about a zero risk trade. I have found that once I am in this profitable area I become a lot more objective and calm about the trade.

Everybody on these forum's talk about this strategy and this technical and gann and blah blah blah but have forgotten the people that drive this market , and it is certainly not the traders on here , it is the bank traders who will trade up to $50 Million in a trade (500 contracts), they are working on time zone strategy , ie they have to make money for the bank in the working hours they are there. Have you noticed the market moves at 7am London time and 8.30am New York time ?? They come in a sit down and take a trade. They will not be in it for an hour , they will take the trade and then let it run so long as it is profitable over the course of the next 4-5 hours. These are things that you should be keeping in the back of your mind when you are up 35 points in an hour, ie the move hasn't finished.

By all means use the other details but by using a zero stop and leaving it for a couple of hours and once up 70 - 80 points then take it. Go back and do some calculations on the currency you are trading and take 3 -5 months worth of data on what the maximum move over a day was (Number of points from the low to the high on the day) and then come up with an average over the period in question. Was it 60 points ? Was it 80 points? Was it 100 points ? If it is 80 points and the low was 60 points away from where you are now , then you have a good idea that the move won't be a great deal further. This will not work all the time , but used consistantly it will generate profits for you , and Consistantly being able to make profits is what is all about , not tops or bottoms or this wave or that.

Hope this helps.
  • #12
  • Mar 8, 2006 9:39am Mar 8, 2006 9:39am
Agree Bear73, moving stop to breakeven as soon as possible is crucial in this game. Capital protection is key!
  • #13
  • Mar 8, 2006 10:00am Mar 8, 2006 10:00am
Quoting Bear73
I have been trading for a very long time now and my stop loss strategy is different from most.
...

Everybody on these forum's talk about this strategy and this technical and gann and blah blah blah but have forgotten the people that drive this market , and it is certainly not the traders on here , it is the bank traders who will trade up to $50 Million in a trade (500 contracts), they are working on time zone strategy , ie they have to make money for the bank in the working hours they are there. Have you noticed the market moves at 7am London time and 8.30am New York time ?? They come in a sit down and take a trade. They will not be in it for an hour , they will take the trade and then let it run so long as it is profitable over the course of the next 4-5 hours. These are things that you should be keeping in the back of your mind when you are up 35 points in an hour, ie the move hasn't finished.

By all means use the other details but by using a zero stop and leaving it for a couple of hours and once up 70 - 80 points then take it. Go back and do some calculations on the currency you are trading and take 3 -5 months worth of data on what the maximum move over a day was (Number of points from the low to the high on the day) and then come up with an average over the period in question. Was it 60 points ? Was it 80 points? Was it 100 points ? If it is 80 points and the low was 60 points away from where you are now , then you have a good idea that the move won't be a great deal further. This will not work all the time , but used consistantly it will generate profits for you , and Consistantly being able to make profits is what is all about , not tops or bottoms or this wave or that.

Hope this helps.
Hi Bear,

I agree with you about an Average Daily Range and that without Fundamental Intervention, it should be within reason to expect that it would continue.

That was the reasoning behind developing the attached VT Indicator.
It is designed to read the loaded history of a Chart Timeframe of 1 Hour or Less.
Essentially, what it does:
Starting at the Opening Time of your Choice [You pick a 24 Hour Session], it calculates the Median Daily Range [(Highest 24 Hr Range + Lowest 24 Hr Range)/2] Note. This is not a Moving Average. It will only change if the Pair puts in a New HDR or LDR.

Then it says OK, After the Opening Time of My Choice, If the Price Moves "xx" pips away from that Open, It will have a tendency to continue to fulfill the Median Daily Range so I should be Entering the Market at that level. Green Line

As it makes New Highs for the Day Then the Projected Low Target Red Line {Remember, still the MDR away from the High} should be moved up accordingly and vice versa for New Lows}

If the Price hits the Projected Target Red Line, Plot a Dot on that line to let me know its time to Exit.
There are more details and explanation written in the code.
Attached Image
Attached File(s)
File Type: zip DORF.zip   2 KB | 1,411 downloads
  • #14
  • Mar 8, 2006 10:50am Mar 8, 2006 10:50am
Trading without a stop loss is like jumping from a plane without a parachute. With that said, stop loss placement can vary depending on the strategy or method being used. I will sometimes have a ten pip stop, sometimes a 50, or even a 100 pip stop.

What is important to keep in mind, if your stop is not in a favorable relationship to your profit target, why place the trade? If I have a 100 pip stop, you can bet I am not trading with a target of 50, I am looking for a 5-6 cent move.
  • #15
  • Mar 8, 2006 11:05am Mar 8, 2006 11:05am
Quoting RogueTrader
Trading without a stop loss is like jumping from a plane without a parachute. With that said, stop loss placement can vary depending on the strategy or method being used. I will sometimes have a ten pip stop, sometimes a 50, or even a 100 pip stop.

What is important to keep in mind, if your stop is not in a favorable relationship to your profit target, why place the trade? If I have a 100 pip stop, you can bet I am not trading with a target of 50, I am looking for a 5-6 cent move.
100% true
Try hard, think fast, die young
  • #16
  • Mar 8, 2006 12:47pm Mar 8, 2006 12:47pm
Quote
Trading without a stop loss is like jumping from a plane without a parachute. With that said, stop loss placement can vary depending on the strategy or method being used. I will sometimes have a ten pip stop, sometimes a 50, or even a 100 pip stop.

What is important to keep in mind, if your stop is not in a favorable relationship to your profit target, why place the trade? If I have a 100 pip stop, you can bet I am not trading with a target of 50, I am looking for a 5-6 cent move.

I disagree. This is one of the reasons why a lot of people dont get into good trades.

I would risk 50 pips for a 20 pips profit !!!!!!

Why ? Have i gone crazy??? the answer is you have to chk the probabilty of the target / stop loss being reached.

If past performace has showed that the sucess rate of such an event is 90% then i may be profitable risking
Lets say i trade 100 times

90 * 20 = 1800 pips
10 * 50 = 500 pips
Total = 1300 pips

Now if i say I tighten the stop loss however when i do that it may significantly affect my win-loose ratio.

The name of the game is not a tight stop loss. the name of the game I like to play is "Putting money into the bank"
  • #17
  • Mar 8, 2006 12:58pm Mar 8, 2006 12:58pm
Quoting huskins
I disagree. This is one of the reasons why a lot of people dont get into good trades.

I would risk 50 pips for a 20 pips profit !!!!!!

Why ? Have i gone crazy??? the answer is you have to chk the probabilty of the target / stop loss being reached.

If past performace has showed that the sucess rate of such an event is 90% then i may be profitable risking
Lets say i trade 100 times

90 * 20 = 1800 pips
10 * 50 = 500 pips
Total = 1300 pips

Now if i say I tighten the stop loss however when i do that it may significantly affect my win-loose ratio.

The name of the game is not a tight stop loss. the name of the game I like to play is "Putting money into the bank"
If you reach the point of risking 50pips for 20pips seamn to me that your are a little late, that means you could get in sonner, but you miss the signal. As I saw until today no signal came with a bigger stop loss than a take profit. Any analyse that I made have lead me to a bigger take profit that a stop loss.
Try hard, think fast, die young
  • #18
  • Mar 8, 2006 1:54pm Mar 8, 2006 1:54pm
Guys your debate is just practical and very useful indeed. it's getting terribly interesting.
I perfer reading with 'silence' for now.

I'm a euro bull this afternoon.
  • #19
  • Mar 8, 2006 2:17pm Mar 8, 2006 2:17pm
Quote
If you reach the point of risking 50pips for 20pips seamn to me that your are a little late, that means you could get in sonner, but you miss the signal. As I saw until today no signal came with a bigger stop loss than a take profit. Any analyse that I made have lead me to a bigger take profit that a stop loss.

It actually depends on the trade plan, what if my trade plan gives me a buy signal only after the market has moved a particular distance, and my trde plan is right more than 90% of the time, however my trade plan requires a lot of breathing space for a stop loss.
  • #20
  • Mar 8, 2006 2:23pm Mar 8, 2006 2:23pm
Quoting huskins
It actually depends on the trade plan, what if my trade plan gives me a buy signal only after the market has moved a particular distance, and my trde plan is right more than 90% of the time, however my trade plan requires a lot of breathing space for a stop loss.
Do you that system? Or you just say "what if i have..."
I would like to see that system. I think if you have that kind of system it can be improved so ypu won't have 50 SL and 20TP.
Let's say that the move is 70 pips. I hardly belive that the signal will came after 70 % of the move.
Try hard, think fast, die young
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