So… i was led to believe (i think from this site) that you should ALWAYS use a stop loss. That is what i started to do and i tended to lose a lot of money when stopped out only to see reversals happen not much later.
So i am trying out the strategy of a fellow that posts on another forum. Don’t use stop losses. Of course this is not day trading. It is swing trading and some of your positions could be open weeks. The theory is if you can identify a longer term trend (4hr, 1 day for example) and you are quite certain that you are in it then simply place your trade (at the best entry possible of course, i use a 1hr for this).
The other trick is to have plenty of margin. For example on a 5k account i am using 1 lot per trade even on the major pairs. This is of course quite foolish as in real life i would not use more than a minlot (10K) on a 5k account. However i have not found a mt4 brokerage that will let me do this yet. At any rate even at my high leverage i have only one losing trade in my last 10 and i closed that one because i wanted to free up my leverage for other good looking trades, i could have closed with a profit by now i believe had i been patient.
So am i heading for disaster this way or as long as i have lots of margin and i am quite accurate at finding the trends should i be ok? My demo should tell the story i think but really i need like months or a year of doing this to make sure it works out in the long run.
I don’t use stop losses all the time but I do use them more then not. But I think before entering a trade you must have an idea of how much your willing to lose if the trade doesn’t go your way?? Even if you dont use a solid stop loss.
And if your losing trades from your stop losses, they might be a bit too conservative or you might be entering your trade at the wrong time.
But like hobbit said, it all depends on you trading style and ultimately your personality.
well…i would say that initially for a newbie like myself would use a STOP loss…wait till more experience i got then might consider without stop loss:eek:
When I first traded the Mini-Dow I did not use a stop/loss. The market made a major move against my position and I lost 60% in a week. I use them religiously when trading the Dow anymore.
I have been using a stop/loss in my FX Demo trading and will also use them when I go live even though so far it has hurt me more than it has helped.
In the last week alone I have been stopped out of three trades only to see them to turn around and make a huge move immediately after being outed. On one of the trades it hit my stop/loss right on the nose and then turned around and made a 100+ move. :mad:
The other two if I would have had my stop/loss just 5 points higher I would have still been alive in my trade and made a nice paper profit. I almost feel like not using them, it is like they know exactly where my stop/loss is, like there is a spy in my computer, and then as soon as it hits the market collectively laughs at me and then turns right around for a major gain.
But then I think back to the big hurt I put upon myself with real money by not using them.
When you are talking no stop losses are you saying you will never close a trade at a loss? Or just when you place the trade you never put an auto stop on?
Personally I think the best method is �if it trades below a certain level for an hour I�ll close� but it very hard to mentally and logistically do so I use auto stops.
Good trading is all about preservation of capital� sorry I�m in that camp!!! If you were to use a more complex risk system such as VAR though I would say you�ll be ok but I don�t know any retail punter which does!
The main players in this market often stop-hunt to elongate a certain trend or reversal.
If you can imagine various peoples stops, mostly around zero’s and five’s.
121.35, 121.10, 322.65 ect… The major players know this all too well, they put pressure on the markets to exploit these stops, thereby utilising a catapult effect on price flying the other way…Then gratefully pulling their trades (and profits)after most of the retail traders have lost their money.
With this in mind, i always have a MENTAL stop in place, no matter what, rain or shine, night or day…if it passes that point i get out.
4 out of 6 times this proves to be the correct decision.
I tried not using stops back in January. Look what happened to GBP/JPY. It went down like the Titanic. Since I had a small balance I was killed. After the next few months it came back and turned a profit. You can trade with out stops if you want and make a profit everytime. It is only a matter of waiting out the trend. However if you want to that way make sure you have a large account or use a mini account so you can ride out a 1000pip down swing.
If you do not use a stop loss and if the trade goes against you then you have to wait for the trade to go your way. Before then you may incur a rollover.
No problem if the trade goes your way again but if your trade is still in the negative by the time you incur a [B]second [/B]rollover you will then incur the debit of the first rollover and this may be huge. :eek:
Therefore,CAUTION.
The other practical matter to consider is if your computer breaks down, your ISP fails or you have a power blackout.
Unless you are well capitalized, you could be up for a margin call in the time it takes for you to be online again.
The answer here is to have good telephone access in case of these emergencies.
Or a stop loss.
By the way, could someone tell me what the letters “LOL” stand for?
This really needs some form of detachment that is nowhere near human. A thousand pips in the opposite direction and you’re still in the trade? I would be loosing it at 100 pips and the margin tied up in the position would just turn me hyper.
Mental stops are the best way to shake off those thieving stop hunting brokers. You also have to be aware that you will not always be right and have the discipline to let go of a loosing trade. Never trade hope. The idea of having a stop is to be able to stay in the trade by riding out the noise.
Tymen, LOL= Laughs Out Loud, or Lots/Loads Of Love
You should always use a stop loss if your swing trading or position trading. If your day trading and constantly at the screen then I guess you can afford not to as you just exit when you’ve lost enough. But i’d say if you have a trust worthy strategy that you believe will work 70% of the time or more then use a stop loss but place it a little further away from the pip battle field to let the move pan out.
My advise, newbie or not. Stops are essential for all small traders (under 1m). Bruce Kovner simply says if I was a small speculator I would always use a stop. Since he had more than 100m on the markets it was impossible to have stops as he is in the market forever and will never close his entire line ever until he dies.
Since you are not Bruce Kovner you must protect your capital at all costs. Someone said they put up more margin on the trade well that is only possible by decreasing the leverage so in effect a stop would be wiser keeping leverage ratios in tact but allow more exposure above your margin.
Stops set in the correct place should not be victim to retracements and shows that the trader needs more practice with placing stops. It also reveals that the trader is afraid to loose and would likely cut profits short hence the reason why the smaller losses are difficult to stomach as they equal the small profits.
Rather than the start a thread that seeks validation for a flawed practice go back and study support and resistance and how they are formed. This should hopefully help your trading.
Accommodating larger losses to make small gains or to avoid taking a small loss is a habit that will eventually wipe you out confirmed by the words of Jesse Livermore, George Soros and Bruce Kovner and several other trading greats.
There may be some truth in those conspiracies. Market makers do tend to work with brokers in terms of insight baring in mind that they are market making so they intend to profit at your expense by getting at your margin. Brokers ensure a steady flow fresh meat and the market makers have a market.
So on that level yes… However times have changed and the sheer number of brokers means there is no real incentive to connive with anyone broker. That said a few brokers are also market making and assuming risk and these are likely to have malpractices (conflict of interest).
This is the same however in all markets. Take the property market (my favourite), mortgage brokers worked hand in hand with banks to sell buyers bad loans. As was this case with Northern Rock. So you see it is quite common…
