You think “Oh, If I don’t place a stop-loss, I won’t lose any trades!” … Wrong! In fact… you are placing a very big stop-loss and thats your margain call.
You read all the information about money management, etc. but as soon as you begin live trading, you throw everything out the window and greed automatically kicks in. You say “Let me place a big lot trade… I got a 50/50 chance”. While this is correct, you could be on the losing side of that 50/50 for 10 trades in a row and then you’re out.
My problem was not placing a stop-loss. I was watching the USD/CHF and it has been real bullish up until a week ago or so. At first, It would go in my favor but then started to retreat slowly. When I woke up this morning, I was $20 away from a margain-call, I had to close the trade which ultimately put me at -62% from my starting balance. I was following a strategy but took a stab in the dark at this trade because the strategy didn’t fit my style. This trade was in play for a couple weeks and during that time, I had demo’d a new strategy that fits me and now I’m gonna slowly build my account back up following proper money management. You can head my warning just like I did with everybody elses warning but the truth is… You won’t play it smart until you experience something like this yourself.
I don’t use a stoploss. I’m autotrading on eur/usd and aud/usd and my stoploss is my system. I use several indicators and they say when to get out and when not. So it’s personal if you want to use a stoploss or not.
But when you have $1500 on your account and you trade 1 lot (100k) then it’s best to use a stoploss.
Please don’t say its personal. A stop loss is the one thing protecting you from a wipeout. If your power goes out for an extended period of time and you do not have your broker’s #, you could very well hit margin call in the time it takes for you to figure it out. This is only one of many possible scenarios that could destroy your trading future.
Really depends on your tradingsystem and the lots you use compared to your accountbalance. Lets say you have an accountbalance of 25k and you just trade 0.1 lots?
I was watching a rather ridiculous video of Rob Booker’s recently where he was advocating exactly such a strategy (and the fact that Rob Booker reccommends it should be sufficient warning to immediately discount the idea !).
I cant see the problem that people have with just accepting losses. Not using a stop is kind of like refusing to stop at red lights whilst driving. I guess it possible that you might get home faster, but its more likely you’ll end up in dead or seriously injured.
Stops protect capital, and a stopped trade is no different at all to a profitable trade, neither is right or wrong, theyre just the outcome of a process thats completely outside of your control.
Trading 0.1 lot for each 25K isnt a particularly effective use of capital.
If you are trading with no server side stop or market order in place to close your position than your stop is a margin call. A margin call may or may not get executed at the exact level your broker says it will.
I don’t care what broker you use or how small your trade size is you will at some point experience a technical problem that will prevent you from manually executing a trade. If you want to wait on hold with your broker tiring to close a bad trade while watching a demo account from a different broker that shows your money getting drained out of your account be my guest. To suggest to other new traders that trading with no stop is a valid strategy is irresponsible. A stop can be big and be for nothing else than to prevent the scenario I described above but you need to protect that capital!
The problem here is that just the odd stab in the dark will kill your profits, what you always need to remember, and without going into details of risk/reward, but on a 1:1 basis, one losing trade will require 2 winners to get back into profit.
I’m not suggesting anything. I’m just saying that using a stoploss isn’t a rule like he is saying in his opening post.
Saying a stoploss is 50 pips or so isn’t a writen rule. Stoplosses can also be made using indicators and that’s what I do. Stoplosses/stopprofits can also be an exit time. Let’s say all trades must be closed @ 6 pm. You just don’t need a pip based stoploss. But I’m glad to see everyone has a different approach to trading. When I’m making a manual trade I do use a stoploss but with my strategy I don’t cause of the parameters and indicators I use.
So I’m not suggesting to never use a stoploss but it just depends on the strategy and variables…
Even if you don’t want to trade with a “normal” stop loss, you should at least put in a “last resort save my account” stop loss, just in case your computer ends up as shown below… or YOU get hit by a car and are unconscious for weeks… no indicator / mental stop loss will work then…
It is also personal if you want to lose all your money.
Being the 4th longest serving member on this forum, I have seen these claims of not using a stoploss many times on this forum before.
Whole threads have come and gone on this subject - and people [U]still refuse [/U]to accept the need for a stoploss.
None of those people are here any longer on this forum - they disappeared long ago.
[B]Why?[/B]
Because their money is all gone. :eek:
[B]Rommen’s example of trading is foolishness at its best. [/B]
[B]Simbafx [/B]and [B]Shr1k[/B], both experienced traders, have given very appropriate answers and I have nothing to add…except…
I prophecy that Rommen will last no more than six months at best on this forum!!
I’m in agreement, I’ve only been trading for a bit of time now, but I’ve noticed how much smarter and better my trading has gone since I implemented them. I’m losing less and winning more often (albeit not as big, but so far I think it’s worth it)
I think traders that refuse to use a stoplosses have that behavior rooted in some very bad traders mistakes/habits/mental issues.
Not being able to accept losses.
Thinking that if they put on SL their broker is going to hunt it. (Your broker is NOT hunting your stops!!)
Thinking they know better and can read when the market is going to reverse and go their way.
Or just holding on hoping for a reversal.
Putting on rediculously tight stop with rediculously large TP
Revenge trade gone bad.
Plain stubborness and adopting an, “all or nothing,” “until death,” mentality. Which, is usually a mental issue brought about by going through 1-6 at one time or another.
P.S. if you dont use stops just send me your money, because it’s already gone either way. At least I’ll spend it on something nice.
It seems we found the holy grail… It’s the stoploss…
I have a stoploss in my tradingsystem and it’s put 100 to 150 pips away depending on the volatility of the market at that moment.
I’m purely saying that you don’t always need a stoploss. I you trade 1 min / 5 min / 15 min timeframes you could also depend on your strategy to exit when some setups occure.
But like I said everyone can trade in his or her own way. I’m not giving in to the statement that a stoploss is always needed. I’m sorry for that but it’s a personal point. And it’s also proven by my strategy so that’s kinda convincing to me.
I know what you are saying. I dont exit on a hard stop, I have set amount of pips where I will cut the trade off myself. BUT, not much beyond that I have a catostrophic SL.
There is a HUGE difference between not using a stop loss and having a catastrophic, “absolute line in the sand,” stop loss where you will finally let the trade be taken out with a loss.
Well yes, assumming that you dont lose connectivity with your broker, and dont underestimate the possibility that the problem might just be the brokers fault, or the problems you might face trying to resolve these kinds of issues.
I agree entirely with your earlier comment about using a set pip value for stops, and for what its worth I often use a time based exit, but I know the historical maximum adverse excursion for the setup, and it does no harm at all to have a stop placed even if if I have no intention of ever letting the market move so far against me.
You could argue that you could hedge the risk with a second broker, or get on the phone, but somehow placing a stop just seams that bit easier.
