The Stupidity Of Not Using A Stop Loss

Hello there!! :slight_smile: :slight_smile:

Just passing thro while on holidays.

I will be back formally in February next year.

[B]I see that there are a lot of newbies here since I completed my work on this forum in November!! [/B] :smiley:

It is for this reason that I quickly post this thread, because I have seen new posters on this forum bragging that they can trade successfully without the use of a stop loss.

[B]I am severely limited for time here, and I have no chances to reply just now.[/B]

[B]I will deal with this subject properly when I return in February.[/B]

[B]Just a warning to all newbies[/B]

[U]To trade without a stop loss is to be an idiot.[/U] :mad:
You are courting financial disaster.

You must have a trading planā€¦and then you trade your plan.

It should include a stop loss - therefore a 2% risk rule.
That is, with a stop loss you only risk at most 2% of your equity account.

You can then correctly calculate the number of lots to risk on a trade.
Then you have a risk/reward ratio and a win/loss ratio.

The people who trade without a stop loss are risking 100% of their account on a single trade.

[B]But if the trade goes against you, it will come back to you!![/B]

Yeah!!..sure!!

How do you know???!!

What?!!
A drawdown of -$10,000 to win just $200.
Can you stomach that?

You have got to be kidding!!

What about the time wasting while you wait for the trade to return to you?
Could that not be better spent making further profits on other trades??!!

When you wait with huge drawdowns in the hope of a trade coming back to you, you are really operating at a loss (time wasting).

OK, so you do 5 years successful without a stop loss (highly unlikely).
You have built up a bank account.

Then after 5 years, suddenly things change and your trades do not return to you.
You hit a margin call and use up all of your equity.

In just one or more trades, you lose everything - 5 years work down the drain.
5 years of your life wasted.

Go to the casino - watch someone win for 8 hours, only to lose it all in 2 last bets!!
It happens all the time.

Learn from the Babypips school !!
I am a retired school teacher - [U]and I know about schools and teaching!!![/U]

[B]Learn grade 13 well - it should be written on your heart!![/B]

[U]Finally, read the following hyperlink to this thread from this forum.[/U]
Answered by all the FX Honorary Members on this forum.

See what we have to say in unisonā€¦

http://forums.babypips.com/forextown/11812-no-need-stop-losses.html

I totally agree with you. Not using stop loss is a straight way to the forex nightmare. I can trade without Rļæ½s, Sļæ½s, TP and, of course, SL. I felt little newbie cause I was using it, but now I read your post, I just agree with you.

The inability to correctly size the position without one is one of the best reasons to use a stop loss.

Not using S/L is quite careless or maybe you have a really good strategy that is going to assure you 100% of profit, which I think is impossible. Not even possible with the volatility these days, I mean not having a S/L determined on your trader is like walking on a fully transited highway blinded.

Just my 2 cents worth, I was in a coaching night with the traders I hang around with and the main guy stood up and shared that he had turned $2,000 into $4 mill in a short time (just over 12 months I think he said) and then in one trade he lost the lot and he put it down to one thing the inability to use a stop loss.

He said that the use of a stop loss is to protect your capital and if he ever saw anyone trading without one they would be wearing his foot on their ā€œbleepā€, his words.

We all had a laugh even he burst out laughing but then said it may sound funny but I also know someone in this room lost a big sum this month and they are not laughing now, but they have learned the importance of a stop loss.

So I use a stop loss out of fear of getting a foot print on my ā€œbleepā€ and this guy is over six foot with big feet.

cheers

Themandownunder

Right, another reason Iļæ½ve heard about to use a SL is that in case of a power or internet outage you could lose it ALL if you didnļæ½t set your SL properly, this may vary according to the broker too, Iļæ½ve heard. Is there any truth to this?

That is an amazing testimony [B]Themandownunder[/B] :slight_smile:
(I see that you are from OZ too :slight_smile: )

Amazing especially because it puts the warning of theory into actual reality. :eek: :eek:

If new traders do not learn from this testimony then they will never learn anything!!
[U]
Thank you so much for posting this material.[/U]

Because I teach on this forum, I shall put your post in my favourites section so that I can instantly refer to it when instructing newbies in the future.

I must go now (on holidays - I am an old man and resting)

See you in February!!

I think S and L may also be a part of the strategy you choose. Some traders going in long may avoid s and l. Iļæ½ve read something about it and they support decisions especially in fundamental analysis. Maybe you should now scalp on your strategy because the high volatile currencies in US and Europe crisis. Jess :slight_smile:

Tymen totally agree with that one 110%!

Anyone trading without a stop is just on borrowed time before an account blowup.

A stop should be placed at the point where u are wrong about your trade.

Typically behins support, a swing high / low etc

N

well lets see here ā€” since i was the one who originally stated that i DONT trade with a sl, and that ive been trading for 20 years, give or take a month, I guess i should put in a word here !

FIRST and foremost I stated that this is NOT a procedure for newbs, or even intermediates who are not so sure of how the market moves.

Forex is the MOST trending market there is, and while all of the equities people who have invaded our lives have made it a pain and whippier than heck, FOREX TRENDS and after a few dozen years, one can not only ANTICIPATE the trends, but if the account is LARGE enough, handle the drawdowns very nicely ā€” as an example, anyone trading the H4, DAILY OR WEEKLY has to, by the nature of trading, suffer thru intraday drawdowns and reversals (which occur at very specific times of day, btw and are remarkably easy to play.

Ive often played the WEEKLY, letting the drawdowns come and go because i can pretty much tell where the currency pair is heading ā€” not as braggado, but simply thats what EXPERIENCE in forex gives you. to put it even plainer, there is a set of channel lines known as the LRC, which shows you the support and resistance lines of the EXISTING TREND CHANNEL in whatever timeframe you choose to work in. The price invariably works itself from one side of the channel to the opposite, taking some time for consolidation at the midpoint ---- this is OBVIOUS and as reliable as the Moscow subway !

People gasp, they holler, they shout and they tar and feather me, but if one is working correctly and balances their account with currencies whose trend is UP as well as DOWN, the margin is automatically taken care of by the hedge situation, which can also be the SAME currency, both long and short.

My standard situation is to take a CORE position in a currency based on the H1 (just like pro traders working for institutions, or at least keeping it in mind as they scalp) and then to scalp the minute chart, the 5, the 15, the 30 and position trade the daily ---- in this manner, I have trades moving up and trades moving down, and being fairly good at support and resistance and freely giving away some pips by NOT being greedy, it works remarkably well for me as some traders have experienced on this site !

After midnite (although now doing it a bit earlier these days) I place my H1 and H4 trades and wake in the morning with profit ---- if not, its because the overnite market was waiting for news and when its released i enter into profit !

I do this because i set a tp point in advance, and even if im disconnected from their server (which i NEVER do) it automatically closes the positon no matter what !

IM NOT SAYING FOR NEWBS TO DO IT, but understand that once they KNOW the rules and adhere to them, theres another, better profiting, and much more fun way to trade ā€” took me years, but i found that way !

I certainly dont demand anyone trade my way and it would take a decent amount of time to learn to do it anyway, BUT there exists OTHER methods and they work if you have the experience and knowledge to use them !

Im enclosing a pix of the LRC in action ā€” if one OBEYS what one sees and doesnt try to ā€œoutthinkā€ it or get greedy, one simply rides the trends and moves with the market in a very zenlike manner, never fighting, never cursing, never missing that what goes up has to come down BEFORE it goes back up again !

I have little to no time to show this method in action, aside from some quick snaps of how im working the trades, but DOWN THE ROAD, be it yellow brick or not, there exists more than just my multi year accounts with NOT A SINGLE SL to its record !

Being as POLITE as I can possibly be, WHEN YOU UNDERSTAND, YOU UNDERSTAND and when you know, you know !

enjoy and trade well

mp

[B][I]Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !

As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence ā€“ BUT I KNOW WHERE THEY HID THE KEY !! [/I][/B]


Itā€™s a nonsense not using a S/L, I guess if you donā€™t use it, is because you have become an excellent trader capable to analyze the trend so you donā€™t lose your shirt, but for someone starting or even trading for a few months it would be a suicide.

Even if youā€™re a hell of a trader, the best of the best, you will always play with the risk of losing pips. The market will always play with profit or loses, no matter if youā€™re an excellent trader. The S/L is like your life saver just in case something wrong happens hehehe.

to me cuttie, and i REPEAT ā€” ā€œto meā€, a stop loss is an open invitation to lose money, especially in this wide range candle market recently ā€” if set too tight, you watch it hit and then you watch the currency go back the other direction. If set too LOOSE, then theyre useless to protect, so i simply DONT use them !

remember, THIS IS NOT ADVISED FOR NEWBS or even intermediates, but if we have pros on this site, you will see agreement ---- if youre a pro, you KNOW where the price is going and you have no need to protect yourself ā€” if youre NOT a pro, then its more than a bit dangerous.

foreinstance, we just got a major news move that dropped currencies like crazy and i was long ā€” immediately went short, left the long and will wait till next week when it comes back BECAUSE it WILL come back !

u need a large account and knowledge and experience, and this method is not something i teach, advise or often mention, but works for me and others that use it, so i can only go with that !

Now if things get really really bad, and i see an opposite trend developing, I of course take the same or larger counter trend and play that, and if things really turn bad (like one trade that gets to $3-4K loss, i will slowly sell off mini lots as i make profit on the counter side, ridding myself of the baggage but ONLY IF THE MARGIN IS ENDANGERED, not before and which rarely happens because i counter trade as soon as i realize ive goofed !

please understand that by using the channels, i SEE the top and bottom of NORMAL s + r and therefore i become VERY cautious of trading over them unless i have VERY strong medicine pointing that way !

thats how i handle the problems, and while the system is NOT unique to me and has some variations (such as gettiing out manually of a bad trade and then setting a stop order to get back in when it comes back (if using large lots that MIGHT endanger margin) its all pretty much the same trend trading idea ! In fact, its NOTHING but TREND TRADING and while certainly not simple, is a pretty easy discipline to learn !

its NOT taught in the schools, and never will be because there are a few secrets we keep to ourselves, but now you know how ā€œsomeā€ traders work, so it aint so secret no more !

enjoy and trade well

mp

mp1640, great post. I suspected when you first started posting you were a veteran trader. I now feel vindicated! I still canā€™t help feeling theyā€™ll be tons of people on here who go right then, Iā€™ll get rid of my stops and then will blow up spectacularly but like you say, experience is all here.

The whole idea of not using stops was alien to me until I read a very, very long thread over at FF by a trader called FTI (jonnykanoo I believe trades it) who was a currency trader for all the banks. The way he trades is scary, effectively averaging down into losing positions and similarly averaging up into winning ones. He was often brought in to fix losing positions by doing this, and it goes without saying, in order to do this, you need a lot of capital. For most of us retail traders, if you wanted to emulate it, you need to be trading incredibly small positions as your default.

And the variations you mention - infamous over at Forex Factory as an anti-hedge by Jacko, whoā€™s a long-standing trader like yourself and all round top man. He uses a set stop loss. When stopped out, he then leaves price to depart from his stop point for a set amount, before re-entering at the same level to bring all the pips back to the table.

Itā€™s really refreshing to see some ideas all linking together for me. I do use stops incidentally (and advocate them here) for the very reason you outlined. I donā€™t [I][B]know[/B][/I] - I believe price is [I][B]likely[/B][/I] to go one way, and if it doesnā€™t, Iā€™m out.

Trading like you, if a position went against you, and you immediately counter-trend, have you ever counter-trended and found the first position returned to safety, leaving you holding an unwanted counter-trend baby so to speak? Then what happens?

Anyway, good to have you around. Keep posting!

[B]thanx for the GOOD post, and may all the others understand ā€” AFTER YOU LEARN THE RULES, THEREā€™S STILL A WHOLE LOT TO LEARN ABOUT TRADING ! All i do is share some of them, but only the LRC is what I advise for EVERYONE ![/B]

enjoy and trade well

mp

[B]in theory, theory and practice are the same ā€” in reality, theory usually blows up ![/B]

I havenļæ½t seen this thread before, but now I know how much naked I was without this TP or SL when I was beginner. Hey Sr. Thank you for the advance. :smiley:

Ok, I wanna be part of this, just saying that I CANT LIVE WITH TP AND SL, these are some HELPS so USE THEM, believe me, someone made it for us, so itļæ½s good to use them.

Very good post Sir I even put a stop loss in and Iā€™m only looking for 25 pips a trade folks Iā€™m scared sā€”less that the trade will go against me and wipe me out just like the rest of you so far Iā€™ve been making 4 good trades a day using the cowabunga system on this site and I definetly use stop losses why would you want one bad trade to wipe out all those good trades you made that would be crazy and I would kick my own ā€” if that would ever happen so just do the basics and put in a stop loss and youā€™ll live to trade forever.

Well I guess a good advice for newbies would be the use of S/L, even though you get to develop a price action strategy and you know how to trade without protection, not everyone sticks on price action some other prefer indicators and S/L. Another always combine price action with S/R. Try everything and stick with what makes you feel comfortable as a trader.

Youre a newb ? Use a stoploss now ā€” down the road, as you get better and better, you may find what you do now to have changed completely (its like that with wives and husbands I understand !) and you MAY change your mind or become a completely different type of trader.

One constantly learns as one trades and as you move out of the small pool and into the ocean, you meet DIFFERENT kinds of fish, including sharks ā€” your EXPERIENCE is what will hold it all together, assuming youre SERIOUS about this forex game, as you move forward putting into play EACH and EVERYTHING youve learned over the years.(which, btw, is the TRUE description of intelligence as i understand it !)

enjoy and trade well and dont try these tricks at home !

mp

[B][I]Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !

As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence ā€“ BUT I KNOW WHERE THEY HID THE KEY !! [/I][/B]