There is a solution to your problem. If you can, imagine a trading scenario where you can have the protection of a stop loss, but rarely have it hit. That scenario is the Daily chart. On a Daily chart your average stop loss is not often less than 50 pips. There isn’t a shady broker in the world that will swerve a market, or widen the spread, 50 pips just to hit your stop. This means that if the trade is going against you, you’re just plain wrong; get out of the trade! And, because the Daily is a slower moving environment you have, in most cases, the opportunity to close early. Early closure has the benefit of increasing your over all Risk to Reward ratio. Even if you trade 1:1, closing early can increase your over all RR to a 1:2. I would further add that no body is hunting your stop. The problem is that your stop is IN THE WAY! Price does two things; it moves from fair value to a liquidity level and then turns around and heads back to fair value. If you entry is anywhere between those two points, your stop loss is likely standing in the way of the markets intended destination. Your entry should either be at a liquidity level aiming at fair value, or at fair value aiming at a liquidity level. It’s your job as a trader to identify those two things and then anticipate which way the market is likely to move. Sprinkle in some sound risk management and you have yourself a profitable outcome. Best of luck.
your heatmap example shows ES instrument from CME exchange which is high regulated and nothing to do with Other The Counter market which I am talking about, and we trade (most of us ). Even if you have a lot of cash, it is not possible to manipulate the market, CME or CFTC will quickly discover it, and you will be charged about manipulated the market. Regards Greg
@Sias Your problem is not the stop loss as a singular problem. Thats a typical beginner error in thinking. We all gone through it. Stop Loss saves you from insane debts when it gets volatile. Mostly the strategy in itself is not suitable or wrong and what is more important, your actual money managment is not working. A good working money management is often more important than the strategy. But in most cases they depend on each other.
You can of course trade without Stop Loss and some people do but the reason to add one is
When you take a trade you should have an idea what you think is going to happen, eg I am buying a dip on a uptrend and I expect the price to continue upwards
There should be a point where you think this is no longer true, probably the break of the previous low - at which point you no longer think the trade idea is valid.
If you assume that the market has turned then your losses could be significant ie in the example the Market reached a top and is now heading down.
The Stop Loss limits your loss at this point
Now it is tricky, other traders may spot the area of the last low and guess that many traders will place their stops here, so they put in stop hunting trades (its a perfectly legitimate approach), so you might decide to make the SL a bit wider to allow for this
If you are trading on an unleveraged account, you might decide to ride the loss out after all most markets recover and if you are patient it will come back in your favour
If you have a leveraged account your broker might make a margin call and stop your trade
For the record I always add a Stop Loss and (almost) never widen it
… but still a legitimate expression of opinion, however unorthodox. IMO it’s just a “conspiracy-theorist-type” belief that actually aligns fully and consistently with most of the poster’s other beliefs, as expressed in other threads. I think I’m glad, on balance, that he’s free to express them, although (like most people, obvs) I actually disagree very strongly with all of them. It would be boring, if we all agreed!
Hi Sias,
You raise a good argument for not using a stop loss during your trading. Your problem could be that you are using ‘too-tight’ a stop loss. You see what happens is that the Market-makers (MM), who control the direction of any given market whether it be stocks or forex, MM they place all of the Brokers’ bets from retail investors like ourselves, if they see a buy or sell order that is close to current price the MM want to get you in on the price you want, they don’t necessarily know if you are long or short but they see a buy or sell order and just like the old ‘pacman-video game’ of the '80s the MM want to gobble down as many buy and sell orders so that the brokerage firms are ticking over constantly with commissions (profits), the MM will temporarily make the market go in a direction that they know is only temporary to fulfil these orders from retail traders and then what they do is place down their own buy or sell orders, at a better price of course to maximise their own profits, then they will turn the market around for the intended direction. This is just the way it works and they try to fulfil as many buy and sell orders as possible. I hope what I say makes a bit of sense. You need to put your stop loss under strong levels of Support or on top of strong levels of resistance and/or do what I sometimes do, that is to use a much wider area for your stop loss but this will reduce your RR Reward to Risk. Quite often nowadays I risk only 0.5 or 0.33% per trade. So in summary, make the Stop loss much wider and place it behind ‘cover’ in key support and resistant areas and you should find that you get stopped-out much less of the time. This might also mean working out your SL on a higher timeframe as apposed to say a 1 minute chart.
The original postor didn’t say anything about a specific exchange. Heat map is available in many brokers and many exchanges.
Heat map is merely a visualization of limit order book.
It’s possible for whales to fool other traders by placing a limit order and cancelling it before the price reaches the limit order. Some inexperienced traders want to fill their own orders with the fake limit order, but they discover that the order is gone before the price reaches the order.
It is totally legal to cancel any limit order any time. You need to take this into account if you want to be profitable.
Because people can cancel their limit orders on limit order book any time, it’s dangerous to trust limit order book 100%.
The lesson is to learn how to spot limit orders that will be cancelled before they are touched.
Limit order book is also public information. If you leave visible limit order for any extended period of time, you have to risk being stopped out because everybody can see where liquidity resides. If your stop loss order is in the zone where whales are interested in, you can be stopped out.
This is why you should leave a visible limit order only when you are going to sleep or stop monitoring the charts. You can automate execution of stop loss via a trading bot, or you can manually place limit order when you want to exit your trade at a loss. If you are a beginner, then leaving a stop loss order on limit order book doesn’t hurt.
Manual/bot stop loss execution prevents traders from being stopped out by wicks.
Let’s suppose you are certain your broker is hunting your stops, and you’re long. I’m not agreeing this is a real thing but let’s suppose you’re convinced. If you are that convinced, why not put a limit buy order down there alongside your stop?
Everyone can see stop loss orders and is hunting stop loss orders for liquidity. You are hunting stop loss orders. I am hunting stop loss orders.
Some people are allowed to take much bigger bets than others, and they are called whales.
Whether a whale is a broker is not important. A whale is a whale.
You can hide your stop loss from others if you want.
Update: I discovered hidden orders, but hidden orders are not hidden from brokers because it is brokers that execute the hidden orders. If you want to hide orders from brokers, you should utilize a trading bot or execute the orders at the last moment.
If you risk small. Stopped out isn’t an issue. Aim high tp and you will make money. Daily bars weekly bars i trade. Big movement big sl big tp but very small risk.
Stop Loss saves you from insane debts when it gets volatile. Mostly the strategy in itself is not suitable or wrong and what is more important, your actual money managment is not working. A good working money management is often more important than the strategy. But in most cases they depend on each other.
