Hi everyone, I�m trying a demo account for the first time and always use the Stop Loss. I was wondering if there are any downsides to it, has anybody had better results without it?
Thanks.
If you don’t use a stop loss, a power outage or internet outage could wipe out your entire account.
But you have to set them correctly and not too tight. I’m racking up astounding losses. Each time, price kisses my stop loss or crosses it for 2 or 3 pips and then turns around to move 100’s of pips, but I’m not able to trade because I’ve reached my loss limit for the day. So you have to really plan your stops correctly.
What he said is the downside. The market can be very wild and hit a sl and then reverse and go tottally your way. Happens a lot.
Right now I just use a mental stop loss of -20 pips and close when it hits it. This allows me to give it a little more room if I thinks it’s just a spike. I have had many trades go just a few pips past -20 and then reverse back in my direction.
The disadvatage of a manual stop loss is that you will justify letting it go even further sometimes, and lose more pips. IMO, when starting out, it’s best to do it manually as it helps with your phycology and gets you more into your own trading strategy. I never liked the idea of trying to automate trading. I’ve had many trades where I let it go well beyond -20 because other things in my strategy were telling me it was probable my trade would come back to me.
So, far I’d have a lot more losses if I had an automatic -20 SL set that the platform initiates for me. You do have to draw the line somewhere though and, recognize in your self, where you are just hoping and praying your trade will come back and if you are letting the SL go further because of real reasons from your strategy.
Must admit though I want to work in automatic stop losses. Just have to find a way to put them in that doesn’t get me stopped out all the time as above.
My internet connection rarely goes down. And I have two computers that I can connect with. So, if my account gets wiped because of the broker playing games and disconnecting me and not allowing me to reconnect, or other nonsense, I will not trade with them anymore.
On a different note, if you are also asking if stop losses keep your account from being a losing account and making it a winning account. No, stop losses are only one peice of the puzzle. You must have a strategy you trade that gets you more winners more than losers and or the winners are either equal to or greater than the losses. Stop losses without a good strategy/trader, will only make you lose your account more slowly.
From what I’ve read around here automatic stop losses seem to work better on longer timeframes, where the stop loss and the TP are relatively large and then the stop loss trails as the trade goes in your favor. On smaller timframes there is a lot of back and forth, often with no apparent rhyme or reason.
If your trading method is dependent on hoping the price ends up turning back around and going back your way eventually, then you probably won’t like stop losses. If you are trading based on something other than luck, you should have a reason for setting a stop loss at a certain point (support/resistance, average range, etc), past which point it is obvious you misjudged the trade.
There is no difference between a mental stop loss and an actual stop loss, except with the former you might end up ignoring it “hoping” price turns around, and you will be wiped out if your power goes out. You can adjust a real stop loss during a trade just as you can a mental one.
If you were replying to me? …No, how I trade isn’t based on hope. I have very definate reasons for thinking price will go a certain way. I’ve just about killed the hope and prey monster living inside that wants to come out on bad trades.
Sure you can adjust automatic stop losses. But, how could you adjust for sudden spikes or wierd gaps? I witnessed multiple spikes today that went against me, and then right back in my direction, in line with the overall trend. I also saw a sudden gap down and then right back on the candlestick chart? How do you adjust stop losses for that, on short term trading? Honestly, I want to know. Just set them, rediculously wide, to cover for a power/internet outtage? And keep your real stop loss manual?
No, just a general reply to the idea that stop losses kill trades.
“But, how could you adjust for sudden spikes or wierd gaps? I witnessed multiple spikes today that went against me, and then right back in my direction, in line with the overall trend.”
What if it weren’t a spike, but a sudden bullish/bearish push and price continued in that direction? It would be too late to get out at your mental stop loss, because by the time you decided it wasn’t just a momentary spike, price would already be beyond your mental stop.
"Just set them, rediculously wide, to cover for a power/internet outtage? And keep your real stop loss manual? "
Sure, although if it’s ridiculously wide it will probably still do a ton of damage to your account if it gets that bad.
Personally, I look at it like this: Say I’m scalping. Lots of trades each day. The trades are small and quick. Say I’m risking 2% per trade and my mental stop is 20 pips, as I’m only looking to get a relatively small amount of pips per trade. If there is one internet/power outage, even if it only takes a few minutes for things to come back on and get re-connected, price could have moved 100 pips in that time. That would mean a 10% loss on my account in minutes. And if power/internet didn’t kick back in quickly, by the time I grab my laptop and race to the nearest internet cafe or whatever, I could be completely screwed. I’m not at the point where I have UPS and satellite modems and whatnot, and I doubt the thread starter is, either. If you’re doing a lot of trades every day and keep it up long enough, chances are eventually there will be some sort of outage.
Anyway, to each his own, of course.
I wouldn’t say I do a lot of trades. 4 today. SL & TP of 10-20 pips. 9, yesterday.
You do have a point though, it could have very well gone that way. Although, it was obvious in hindsight that they were sudden spikes. The reason I held on is because according to the what I was seeing on the charts I got in very close to the end of a peak or a valley, when price was overbought or oversold and was just caught in the noise sidways for a bit…so probility was on my side as long as I was patient…at least that’s how I saw it.
When I say spike I mean a very sudden spike, from one second to the next, not just a quick move. So, far the same things I’ve experienced live have happend over the past coulple of weeks demoing, just to different degrees. We’ll see how it goes though I guess.
I’m not really argueing against stop losses. I just think someone new should trade manual for some time to really know where a good place for them is, and it forces them to study price movement.
Right now I havn’t found the best place for them as far as short term trading. It seems stop losses do kill trades if they are too tight for the trades required breathing room and only based on money management. I think that is where people get screwed on stop losses, when they base them only on the amount they think they should risk, instead of how their trade strategy behaves.
certainly a question I cant answer, but that wont stop me from writing my usual book on the matter.
understand that I DO NOT USE SL’s, because I trade the direction of the major trend, and can afford to leave a trade to come home tomorrow if need be — THAT is the luxury of a large account, AND the reason newbs should demo with only the amount theyre actually going to put into a live account !
because of the inordinately wide candle ranges out there these days, WHERE on earth would one place a stop and know they would be safe, because what youre witnessing with “spikes” is a stop loss grab many a time, with what had to be a severely high pip trade and a bank trader complete with cutlass, mask and jolly roger (or just that he/she saw a group of sl’s around the same place and went for it !
i was reading cadarkitek’s thread, and he was using a 400 pip sl ---- to my way of thinking, thats almost useless, and if one gets a news spike like that, we all know the price will come back down to where it was, so why bother with something so wide, and if you are using correct money management techniques, it should be of no bother at all, IMHO ?
i can only say this – [B]pros DONT use em[/B] cause they know where they be heading and newbs should never be without them, cause they usually dont have a clue !
as for your question, [B]i firmly believe sl’s are the reason newbs make so little — the stop loss actually robs them ![/B]---- they cant tell where the price is SUPPOSED to go, and so set easily taken out sl’s to protect themselves, and those sl’s actually end up reducing equity !
just WHERE to put the little buggers and survive, is beyond me !
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 – BUT I KNOW WHERE THEY HID THE KEY !![/I][/B]
Hi There! I’m a newbie myself - still using a demo account. I use the FX Trader 4 platform. I see a lot of conversation about setting up the s/l. How many of you are using an “expert adviser”? I guess I was lucky enough to be introduced to the entire system by a business associate and was referred an adviser as well as parameters that work well with certain currency pairs. My two brothers in law opened live accounts less than two weeks ago and both have tripled their money and are making a profit of 15% - 25% per day. I have played with setting up the s/l t/p myself, but have learned more about how the system works by watching the “expert adviser” do the trading for me. I realize that certain advisers only work well with specific currency pairs and one needs to diversify to see long term gains, but I feel like this is a great start for me. Am I just way off??
By expert advisor I’m assuming you mean an automated trading program. I sincerly hope it works for you and your brothers.
But, what is most likely to happen is that it may work for a while and then when the market decides to do something it’s not prepared for then it will stop working and lose your money. What then? You aren’t learning to trade with automated programs. Using an automated program, someone else programed, is for lazy brains who are hoping they don’t have to put in the work or are afraid.
The internet is littered with guys sellling automated programs. If it were as easy as that every trader would buy one and be a gazilionaire. Word would get out, way before you happened upon it.
As far as, “working with certain currency pairs,” that seems to make an assumption that those currency pairs always behave in a certain way.
IMO, if you think the automated system is good, figure out what it is doing and learn to do that manually. No system ever beats the super computer that is your brain, if you give it time. You really are learning very little by watching a program place trades for you. Might as well watch Nascar on TV and think you are ready to race in the indy 500.
Hi folks. Here’s my take on this.
Yes, a power outage on your machine or/and on the broker’s machine can be a possible source for one’s account disappearing. So being aware of this the only thing I can do is “trust” the stats.
I trade exclusively the GBPJPY, the BEAST I call it. I know that on average the beast will fluctuate about 220 pips in any given moment and that the probability of this is high. Sometimes it’s alot more but on the average this is what I have calculated. I enter trades with no stop losses. In following the Dragon MM plan one can lose as much as 200 pips and still have their account alive to continue. So then considering that the GBPJPY on average can move about 200 pips I can live with a powerloss or disconnect cause that stats and probability give me some confidence.
So far I have been ok. Lately on one of my machines winbloze is not liking my my wireless driver and consequently crashes. So far the crashes are only annoying cause the trades were already in profit. I usually place trailing stops when in profit.
Anything can happen but you do the best you can with the tools you have.
enjoy and trade well
mp
Remember some brokers use client side orders not server side orders. So if your machine goes off and you had a trailing stop loss, then it is not active until you restart your application.
The annoyance has been taken care of LOL. I iz using Linux exclusively. Someday I’ll deal with the card dll that is affecting windbloze.
How’s everyone doing with their trading this week? I started of with +105 last nite. Working on second trade for today.
a post seems to have wandered away, but i stated thnx for the information.
As I never use “sl’s” I had assumed for years they would activate the same as the “tp’s” i always use — interesting to find out they dont.
does that apply to the ECN’s also – i dont think so as theyre not using client side servers.
mp
Well, thank you all for sharing your experiences , it will certainly be very useful to have all these different points of view when I have to decide about my SL or TP.