Never Lose A Trade (Theoretically)!

Trading Systems
1

Greetings everyone,

It is my belief that everything should be kept as simple as possible. Most people view simplicity as a handicap or a sign that something is incomplete. Not necessarily true. Some of the best theories are the most simple.

Anyways, enough of that crap. I was thinking of a very simple trading strategy that will never lose, in theory.

A simple question: Why do we lose trades?

Obviously, the trade moves against us and does the opposite of what we originally thought it would do. But the trade is not lost until one of two things happen:

  1. We hit our S/L and the trade is closed automatically.
  2. The trade turns against us so much that we use up all our available margin and the trade is closed out for us.

If neither of these two things happen, the trade is simply in limbo and we have an unrealized loss (of course).

At this point, the trade can either do one of two things:

  1. It can either turn around and move in our favor.
  2. It can continue on its current path until either our margin is used up or we hit our S/L.

Essentially, if we never hit our S/L or use up our margin, the trade can always turn around in our favor. It just has to have enough cushion to do so and it has to be given the chance to do so.

Theoretically, to never lose a trade, we would simply have to prevent our S/L from being hit (by not using one!) and be sure to have plenty of margin available so that if the trade takes an enormous swing against us, we will be covered.

This may sound impossible, but it’s actually very easy to do. We simply have to trade without a S/L and always leave an enormous amount of margin available.

Of course, margin levels depend on your account size and lot size. A large account size warrants a larger contract.

I’m not a number cruncher. I’ll leave that up to anyone else who is interested and would like to post such information.

–SYSTEM–

Watch only the Daily chart. Find out what the daily trend looks like recently. There are a number of indicators you could use for this, including parabolic SARs, moving averages, etc. It does not have to be anything fancy. Is the price moving up or down over the past few days?

Always trade with the daily trend. Place your order accordingly (maybe at the beginning of each day, but this is not vital).

Your lot size should be based solely on margin calculations. Leave a lot of margin available. You’ll just have to experiment with your own account size and which lot size works best for you. The goal should be to have enough cushion available so that you can withstand a very big swing the other way (in the ballpark of one hundred pips or more).

Do not set any S/L. Set a conservative T/P. For the daily chart, this could be in the ballpark of 50 pips.

I know that many of you are probably thinking: Sure, this method will work, but it’s not going to provide hardly any profit!!

Au contraire!

50 pips a day with a small lot value can certainly add up, but it won’t be extremely impressive.

The trick is to find the golden ratio. This will be that magical formula where you can have multiple pairs being traded every day with an appropriate lot size to provide enough cushion, all with a T/P of 50 pips or so.

This could provide you with around 200 pips every day or every other day (if they all move against you and it takes awhile to hit your T/P).

If you are trading simply .1 lots, that is still 200 bucks a day, and 4000 dollars extra per month. If you are trading .3 lots, that works out to be 600 bucks a day and 12,000 bucks / month.

Of course, if you have to trade very small lots (like .01), that’s OK, too. You could set up another trading account, use this strategy with very small lots, and use all your profits to pay your bills each month. Even just 400 bucks / month could be used to pay for food!

Another possibility would be to start with a small amount of money and use very small lots. Fund the account continuously every other week just like a savings account. As your account balance grows, you can start using bigger and bigger lots.

Eventually, you could be trading with standard contracts and more, reaping in over 1000+ per day.

If a skilled number cruncher wants to work out all the details, please feel free. It may turn out that this system is too slow to generate any real income. But, I don’t believe so. I think if you have a high volume of conservative trades based on the daily charts with lots of cushioning to support bad trades, you should win every trade!

Thanks for reading,

-ForexPhantom-

2

Apparently, there is no delete function for posts. This post has a good concept, but I don’t think it’s going to grow your account very much at all. I messed around with a demo account and looked at the margin after placing some trades. It would appear that to leave an extreme amount of cushion would limit you to 1 trade per day with a very small contract size for the vast majority of accounts.

I could be wrong, but I’m having some doubts now about 200 pips per day. You might be able to get 50 pips / day, but it’s going to be with a small contract size and it might not add up to much in the long run.

Of course, this would be much better than a savings account and the interest you would earn there. So I suppose you could use it for that purpose. :smiley:

3

yea…open positions for every pip to equal .01% of the account…depending on ur leverage…u should have 800-1000pips of cushion…before u know it, account will be compounded

at 400:1 …for every pip to be .5% of the account…you will have cushion in the lower hundred…i think its like 120pips…dependin on the currency…

for every pip to be 1%…ull have about 70 pips cushion

4

Lol finally i found The Holy Grails system…hahaha hold on IS IT TRUE ?
Can we predict human’s MINDS ? can we predict 100% right on News ?
if yall can answer those 2 questions. Then yall can create a HOLY GRAILS SYSTEM.

STOP HERE FOR NOW

5

This doesn’t seem very realistic to me. A lot of people wouldn’t have the discipline anyways to let it run that far and it’s still dumb to even have a big loss. Why have a big loss when you can limit it. I rather take my 15 pip stop loss than have a 300 pip unrealized loss. Eventually humanity will slap you in the face and you’ll close the position. It can take up to months if it were ever to revert back to a previous price. If someone had shorted the EUR/USD at like 1.49 and had used your theory they’d have a helluva big loss. It’d take probably at least 6 months for it to revert back to that price.

Just my 2 pips

6

[B]This post is a load of rubbish.[/B] :mad: :mad:

I see you have lot to learn!!

You are simply violating all the money management rules!! :frowning: :frowning:

You are clearly dreaming.

By sustaining such large drawdowns, your emotions will get in the way.
You may yet lose the lot.

While your trade is in the negative, it is time out.

With a stop loss, you would lose one trade and then be on to new trades in the meantime.

Finally, you are not realising that one must trade only 2% of their total funds on any one trade.

7

this is my opinion, eventually being the KEY word here, eventually you WILL lose a trade, and when that happens i think its gonna hurt real bad, like blow all profits and maybe even your account. just my thoughts.

8

I did ever think of this method before. I tried it in the demo. I was thinking as long my capital can afford.
But i was lucky to see that it did not work out that well.

It was initially very good. I seems to be able to pick some pips here and there. However, i was caught one time that it seems to go very far away from my price. It did retraces but that it spike up even higher. From there on, it consolidate before slowly coming back. But it was too far away from my price to make it a positive trade. The next thing i know, it start moving away from me. I think i was caught in the major trend direction.

I believe you need to avoid the major trend change if you want to used this strategy. And you need to pick the correct currency.You could be trapped for years to come. just my opinions. But the main problem. You cant have one wrong trade. Its damaging to the account.

Are you for real using this strategy in your live account?:slight_smile:

9

There are actually 2 strategies running something very similar to your idea in the free systems holy grail forum, One is called scalping 100-200 pips a day. The other is the GBP/JPY equity building. Both have been running a long time successfully. They do have a Limit on there lose amount. One uses 1000 pips for total open orders. the other I am not sure. But you might check them both out…

I believe with the right Money Management. Something like this could work but with the economy the way it is. Price can go a long way before turning sometimes , So be careful, Also any skills you can learn to help you get into the trades correctly can only help…

10

I think that there are plenty of successful traders out there that avoid using a S/L and get along just fine. I think it depends largely on the system and one’s risk appetite. Common wisdom tells us to limit our potential for loss, but I can’t tell you how many trades I would have lost had I used a S/L that eventually turned around and retraced back on path.

If your system gives you 95% winners but it trades the Daily Charts, I think you can and should use a very large S/L that may exceed 2% of your account.

I agree with a S/L in general but I think it varies widely based on the system and personal risk appetite.

I’ve created a very successful new system which trades the daily charts. I currently have a 100% win ratio and I have not been using a S/L. What I’ve been doing is trading many pairs at once with a .01 lot size. It would take a huge huge amount of pips to make me break the bank. The system is so accurate that it doesn’t pose a problem so far.

-ForexPhantom-

11

As long as you have a respect for risk, and by that I mean, a real, real, heartfelt respect for risk, and a point at which you’re wrong, you can do without the SL. But unless you average down, to make this work long term, you must be good at trading longer timeframes, because at some point, you will be drawn into a long-term fight back for your capital.

Trouble is, trading out of a large losing position is a skill in itself, and most people don’t get to practice it until they need it. I know the theory - but couldn’t depend on executing it successfully. Question is, could you?

12

I’ve been trading on a demo account with a trading style similar to this. I have $10 000 at 10:1 leverage. I trade 1 lot at a time with up to 3 trades at one time. I use the 15min and 4hr charts to set my T/P at roughly 10 pips or $100, but the main idea is to keep the T/P below a minor resistance level and well within the normal intraday trading range. I let the trade go and come back to it in roughly 8 hours. If the trade is over, wonderful, if not I close out the trade for realized loss of between 600 and 1000 dollars. Using this system I have 37 out of 42 positive trades for a realized gain of $581 (on a demo account :frowning: ) and I had gained as much $2000. If I can manage to cut my losses by being more active in my trading I think I can achieve more sustained results. (My first 19 trades were positive for a gain of $2081!)

It throws the money management rules out the window, but if you use your brain I think you can do it successfully.

Any thoughts on how to eliminate those big losses?

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13

I can. I started trading on a real account around the time this post came to life. Over the past 6 months I’ve went through what every trader does psychologically. The hopes, fears, triumphs, brazen confidence, and if you’re good adaptable, and still learning within your first 2 years, humbleness.

I’ve adopted this system (as I thought it was my own, but anyone who has read plato can atest to not many thoughts being original) and and so far at a 100% win strategy over the past 3 weeks.

Yes my game is early, yes my game is small ($250), but staying true to my margin of 1% so far (400:1) it is all good.

For the nay-sayers, consider what I am currently acheiving by utilizing rollover. When it comes to any given day and trend (I spot maybe 2… 3 different short term trends since March 2009) that for those that are patient (proper swingers), you can with definite patience push a aud/usd long or gbp/jpy long and leave those to simmer (when I have a 25k account that would have been $48 over three weeks gone what I have acheived). And that’s for what? For cutting somebody’s lawn at the weekend? Don’t think so… When it comes to hedging (I’d like to see some comment on U.S. traders losing this ability) today is good example.

After watching lots of people’s behaviour on gbp/jpy and learning the dailly swing is around a 100 pips… well that to me says there, after investigating and verifying, a huge amount of pips to hedge any given EU morning on the whipsaws and huge announcements. Certainly enough that happens. Since the 24th of August taken this approach when I get time between getting my kids ready for school and leaving for my day job, I have returned home (checking on my lunch breaks) with a nice smile on my face knowing that so far my uber-conservative method in risk is putting more capital in my future freedom. over 10 days, 270 pips ain’t bad…

There is a nasty short gbp/jpy hanging out. I anticipate the bears to pull that back in for me within the next fortnight before I consider closing…

Till then I appreciate your comments criticism and used to be there done that wisdomism :slight_smile:

K

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14

That’s the problem with systems like this. They have a 99% win rate, so it appears, for a while, to be the perfect system. The problem is that 1%. When it hits you’re going to lose most or all of your money.

It’s just a matter of time before it happens. I can guarantee you’ll be broke within a few months (and probably sooner) if you trade this way.

15

I know of a person who has deposited $80,000 into an FX account GBP/USD after receiving advise that Sterling is going to hit a low of 1.36. There is no intention of actively trading the account. Just the heartfelt beleif that sterling is going to go through the floor.

That exactly what your doing here… no more no less!

If the trade/s go against you on the day chart it could be years before you even break even. Your better off on red or black at the casino.

Anybody who happens to read this thread. Please please don’t try this… there are far far better ways to trade successfully. :slight_smile:

16

I was just arguing the merits of having a larger SL with my wife, shortly after I chance upon this discussion!

I am agreeing that haviong a slightly larger SL due to the fact that many times, I have entered trades that shows a very strong positive sign in one direction. But the trades gets stopped prematurely due to the throw backs prior to the larger move in the direction of the trade.

The system laid out is not very feasible in one sense that it did not cater to trades that go the opposite direction to the point where it will margin you out of your account.
Using the recent movements in the USD/JPY as an example. Earlier in the month, when USD/JPY was trading in the 93 dollar mark, who would have been able to see the slide from the 93 dollar mark down to its lowest of 88.6?!?

If using the above system, those with small accounts would have margined out and suffer HUGE losses.

The trick to managing the SL such that it can buffer the throw back is to strike a balance between the SL and the TP with each trade that you put in.
That is the question that I am still trying to answer. And hopefully, doing some back testing will reveal some answers to tackle this tricky problem of putting in the “right” SL for each trade.

17

[B]AHGONG[/B]

If your heart is set on using this system, may I suggest the following:-

Put up a 1h chart, add a 2 std dev bollinger (20 period). Colour the center line red. Now add a 14 SMA and colour Green. Wait for a cross of the center line bollinger either way and trade Long or short accordingly with a trailing stop of 100 pips. Trade the green on top long. Red on top short, not price action. This is ‘not a set and forget’ strategy, so it will need looking in on regularly.

These trades will last long enough. Some times days but at least you will be trading with intermediate market sentiment. One more thing, don’t trade high impact news, NFP and interest rate announcements. This could very well hit your 100 pip stop in a matter of minutes!

Scale your stop so that it doesn’t exceed 2% of your account balance and your money management will be fine. Hope this helps. :slight_smile:

18

Hmm… this looks doable. I will give it a try on my demo to see how it goes.
Hope I can find time to post my findings.
Thanks for the tip!:wink:

19

[B]AHGONG[/B]

Doable! This strat has produced [B]1100[/B] pips since 17/09. :smiley:

If you want a more detailed picture of how to trade this method. Try visting “[B]Bollinger band trading with MA’s[/B]”. Post 746 on. Although an entire read through especially from the first post will be of great assistance.

20

If you are looking for a no loss trading system then you are correct it can be done and in fact it has been in existence for over a year and a half. Over 3000 trades, no losses. Live trading results are on the web, do a search for RoboMiner. The no loss method can not be used in the United States where FIFO is mandatory but works well on any MT4 platform allowing .01 lot increments.
The stop loss is not the only method of protecting against margining out, really, it isn’t even very good protection, in fact, it’s a guaranteed loss. Hope this helps.