Crash Helmets and "Stop Losses"

Over time, I have been thinking about what “They” call “Stop Losses”.

Firstly, I wonder whether the nomenclature is correct ?

Then I was reading a book I bought some time ago. It’s a very readable book about the application of “Game Theory” to everyday life and a very useful read IMO.

However, one of the sections stated that in the US some states insist that motor cylists wear crash helmets, whilst in others the rule does not apply.

So when comparing the death rates for motor cycle accidents, the rather counter intuitive result was that in those states insisting on “Crash helmets” - the incidence of fatalities from motor cycle accidents was Higher, than in those which did not !

Which got me to wondering whether the “narrative instruction” to use “Tight Stop - losses” was in fact comparable to the wearing of these apparently worse than useless “Crash helmets”

What say we ? :slight_smile:


Hey Falstaff HNY… Being a motorcyclist, if I were to ride without a helmet, I would definitely be more averse to risk with the lessened protection available if it all goes wrong…

Similar results are being found in Australia with traffic situations…

A higher rate of collisions at intersections after red light cameras have been installed are occuring than when the intersection was camera free… Authorities don’t want the real statistics out in the open because of the possible hit on future installs and fine revenue… But the reality on the ground is that motorists are slamming on their brakes to avoid the camera’s and being rear ended or accelerating through once past the point of no return only to hit opposing vehicles.

“Narrative / Industry instruction” Hence my aversion to strategies that rely on fixed loss SL’s and profit limiting TP’s…


clearly i don’t have to give you the speech of "it depends on trading style blah blah blah"
so… there’s that

then in the spirit of @Trendswithbenefits and what he was saying.
i’m also from australia and back in the day we used to ride our motorbike and BMX bikes without helmets , we used to go on long drives while around 4 - 6 of us were sitting in the back of our mates UTES (by BACK, i mean, in the tray, not the back seat

and did anything happen… NO (at least not to anyone that i knew)
so was driving your mates in the back of a ute dangerous
well… if you were driving like an idiot then yes… and you were risking the lives of around 5 - 10 mates at the time
but, if you drove normally and just enjoyed the wind in your hair while cruising in the back of a mates ute
then it was fine
it was usually some other idiot who caused the accident by speeding

now back to trading
i thing tight stops come around as a result of wanting to (obviously) minimize loss / Reduce Risk.

now, Risk can also be reduced by having a larger stop loss with a tighter T/P
so… yeah
i’ts a question of how one trades in my opinion

but, interesting thought either way
thank you for you sharing

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I only remember one case where a crash helmet could have killed two of us ; Lovely sunny day, new “hot bird” on the back, going to the beach with a few mates and a really pissed off wasp which had just ricocheted off my face and slipped past into the back of my Crash helmet at 85 mph ! - :rage:

However, I also remember a lot of occasions where I have followed the advice to place "broker profit lock-ins", which got hit and then price reversed and continued to prove my initial assessment correct - very many times - I’m sure everyone who has ever traded, knows exactly whet I am talking about.

“Death by 1,000 cuts” springs to mind - and here is a recent couple of posts “from the other side”, which exemplify my point;

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Yeah… definitely remember that thread… I spent hours arguing my point against the 'brethren"… then along comes Elijah (rrrm2) and confirms my point… they dispersed pretty quickly after his post…

Unfortunately Falstaff… you are starting down the path to the dark side… I’ve left a welcoming light on for when you get here… :slight_smile:

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I’ll bring a bottle :relaxed:

I’m not intending to decry the use of self-protective measures per se - but more to investigate whether there is a place for the use of “stop-loss” and whether there is a difference between “Stop-loss” and "broker profit lock-ins" - especially when “Stop losses” will not be “honoured” ;

(My access point to that thread is arbitrary - there is much valuable discussion both before and after that point)

on another thread, a knowledgeable and creditable member was using “catastrophic stop loss” of 400 pips, which may or may not have been effective, in view of the above.


[Edit - in that thread you pointed out that certain brokers operate a system where they guarantee your loss will not exceed the value of the account - perhaps we need to maintain a list of such brokers.

I also wonder whether, in view of the facts revealed in my previous link, whether there is a place for insisting that brokers “Honour” stop losses placed in retail accounts ? and writing such a requirement into the regulations ? ]

[quote=“Falstaff, post:1, topic:127878”]
Which got me to wondering whether the “narrative instruction” to use “Tight Stop - losses” was in fact comparable to the wearing of these apparently worse than useless "Crash helmets"
What say we ? :slight_smile:[/quote]

Personally, I believe that stop-loss policy should be an integrally defined component of the specific trading approach that one is applying. And it can be very different in different situations.

Example 1:
The trader has backtested a method that produces a success rate of 50% with a 1:2 risk/profit ratio. In this case, he is not bothered whether any individual stop gets hit or not as long as it averages out at not more than 50% of his trades. His main concern is that the slippage on either of the exits (stop or limit) is minimal.

Example 2:
A position trader aims to hook into, and stay in, the long trends. He does not wish to get prematurely stopped out on spikes and would normally expect to exit all his trades manually from chart signals. His application of a stop-loss is only to limit his loss on a major unexpected and sudden move - the “air bag” survival stop-loss.

Example 3:
A discretionary trader who looks for moves of anything from a few hours to a few days (but rarely longer). He has three exit points. First, a pre-defined target, Second, a pre-defined chart-based exit/reversal signal, Third, a stop-loss at a price level that, if reached, nullifies the criteria for having entered the trade in the first place.

Of course, there are many more such scenarios…

But the more general concerns about stop-losses include the afore-mentioned issue of “reasonable” slippage, broker manipulation via spreads, and black swan events, etc. These relate more to the topic of forex trading as a business in general rather than how to apply stop-losses appropriately in specific trading situations.

I am not sure if I am in right ball park as to what you were looking to investigate here but at least its a few thoughts on the topic! :slight_smile:

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Holy crap…
yeah, i can just picture that hehe
that sux

Indeed i do … and how.

when i started trading everything was about
Tight stops
1:1 risk vs Reward minimum

well… times goes on and my initial assessments were also correct.
and flipped the numbers and i saw that if i didn’t take the advice, i actually made more money
so i stopped following those rules that we get taught to do
and i made up my own rules based on calculations

i still consider the other rules, but so many times am i still able to disprove them as being as effective.

oh well, you live you learn

Some information on the product below… not offered by many Brokers, but it is offered by some of the big ones ie: FXpro, Pepperstone, IC and I believe IG Markets as well.

Yes, with regard to protection from “flash events” my mention of this product was completely “bypassed” by RiskonFX on the Stop Loss thread and although you mentioned it in the post above, wasn’t raised at all by Manxx in his post on this thread either… kinda makes you wonder if the “Emperor” now has control of the senate…

Hey Martin, I think this is where Falstaff is heading with this…“His training is nearly complete…

.” Sorry… So jet lagged…

I did kind of address it but I wasnt really sure if that was also something here to actually talk more about because I understood the main concern here was the problems with tight stops, but I will happily address your issue too! :slight_smile:

yes indeed



Not at all. A guaranteed SL is a fictitious product designed for the retail market, as is negative balance protection. If you actually happen to open a Direct Market Access account you will realise these do not exist in reality. So why discuss the potential benefits of these ‘tools’ when they are removed as you progress within your trading career?

On what planet! …Now you are severely misleading members reading this thread…

See here’s the thing James… In a situation such as the Swiss Franc unpegging, the price moved so fast and so far that even if you just had a $1000’s in your account, the price went right on past most stoplosses by such a distance that even margin protection triggers were missed… So effectively any trader would have not only lost his $1000, they could have been negative $3000 after an event like this… exactly what the negative balance protection function should protect you from… the buck stops at $0… not substantially more than your initial investment…

“Trading is not suitable for everyone and may result in you losing substantially more than your initial investment…” Pepperstone…

The elephant in the room at the present time is the Korean Peninsula issue… If that kicks off (even in a small way) the markets will go into flux…Last years missile launches spiked the markets…

I’m on this forum to try and make traders think about the dangers of “playing” in such a malevolent market. Not blow sunshine up their backsides and tell them there is nothing to fear…


In extension to my last comment with the yoda picture, i now have a million ideas

we could all make a movie series


the opening scene would look like this

the episodes would be

Episode one - The Forex Menace
Episode Two - Attack of the Scammers
Episode Three - Return of the Brokers
Episode Five - The Market Makers Strike Back
Episode Six - Return of the Newbie

Swear to god we could make a movie series from this… hehe

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You are absolutely right in this TB and it is a very serious subject. That was really why I mentioned “black swans” as a topic associated with the issue of trading as a business per se and not part of stop-loss as tools.

People should really be far more aware of the total risks they take with trading and not just with how to manage stop-losses per trade…but I am just not sure whether that was what @Falstaff was after here - but youraise a very important and valid issue which is not just for traders and brokers but also for the authorities too.

Apart from those traders who had a GUARANTEED stop-loss, because their stop-loss was honoured by the broker, as contractually obliged, regardless of the state of the market and whether the broker could protect themselves … because that’s what a guaranteed stop-loss IS, and that’s what it MEANS: it means that your account with the broker is settled AS IF the broker had been able to honour your stop-loss, when they weren’t.

At the time of the Swissie debacle, some traders were saved by using guaranteed stop-losses.

That’s all guaranteed stop-losses are for, and that’s why they exist: for black swan protection.

It’s all very well pointing out that if you have direct market access a guaranteed stop-loss won’t be available to you anyway, and that’s perfectly true, but 99% of this forum’s members are never going to get that far, so guaranteed stop-losses ARE actually relevant to them.

Whether they’re worth paying for, overall, is another matter altogether. Many feel they’re not. But they do exist, and they do protect customers against disasters like the Swissie, and that’s ALL they actually do.

For the sake of completeness, it’s also true that a couple of brokers went under themselves on that occasion, and their guaranteed stop-losses (if they offered them) were worthless. But that, again, is a different matter, and just shows the importance of using a properly regulated broker with a government-backed guarantee for the funds in your account.


It seems that the whole bloody “Retail Sector” ia a fictitious product, without a backing in the real market except to the extent that the broker feels at such risk that he hedges. - so there is not any “Real spike”, just opportunities for Brokers to lock in profits ! Hence my suggestion that it would be advantageous to the retail traders and confidence in them, for a statutory limit to be imposed on the “spike losses” which they could impose on those unfortunate enough to their “sitting targets” in such a case.

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ARE YOU UNABLE TO READ… these do not exist outside of MM retail brokers. Jesus, this was my point.

your not even trading with retail MM brokers? Do you understand this?

I have no “Agenda” here at all @anon46773462 - just to investigate the real (if any) advantages of a “Stop -loss” at any level at all - placed in the broker’s software.

THe thread will go where the dscussion takes it mate - but I am somewaht sceptical as to the real advantages of actually having one, when they give “Market makers” targets and can be ignored at will, if the market moves quickly.

I am also wondering whether in a case where the “Stop loss” is gapped through, whether it woud be triggered on the almost universal retracement which follows - thus locking in the loss due to the spike, when it is clear that the market is coming back ?

Not my words…

Ahh… James last time I looked, nearly everyone here is trading retail and through a “Market Maker”…