Trading without Stop-Loss / Buy & Sell Limits

Beginner Questions
1

Hi all! Very new here and very new to forex trading so I have some very pressing questions that may seem like no-brainers to the rest of you, but I would appreciate all the help I can get.

My situation is that for the past 2 weeks or so I have been using a demo account for trading (I don’t dare try with real money yet!) and I’m not sure if this is a big difference from using a live account or not, but basically:

I have been trading without a stop loss limit. This is on the advice of a trader who is friends with my family, and he says he never uses stop loss because once the market crosses that threshold you set, your money is lost for good. Whereas if you don’t put in a limit, you can always wait for the market to turn around and rebound. Seems fair enough to me

My question is, using the demo account, I have raised over $3000 so far, but I do this by watching the market all the time, and sometimes (right now for instance) the buys and sells I have are red (negative) meaning my net P&L is at a loss right now. My Balance shows $13,187, my Equity is $13,012 and my Unr. Net P&L is -$175 (negative amount).

I usually just wait for the red to turn to green (indicating a profit) before I close the buy/sell. It adds to my balance, though it may take a while, and I’ve never eaten through it. But is this how it’s going to be with a live account as well? If I don’t set a stop loss limit and my buys/sells go into negative, will I be losing real money, or will the loss only be realized IF I close the position? If I leave the position open until the market rebounds and close it only when it goes green again, that’s okay right? I won’t burn through my funds that way?

I know this is a pretty dumb question to the experienced traders out there, but I’ve only been doing it for 2 weeks now and I feel too embarrassed to ask this in real life. :frowning: This is the only place where I can get a definite answer.

2

Your loss isn’t realise until you close the trade.

However this isn’t a proper way of trading & you should take what your friend says wig a pinch of salt.

My first piece of advice to you would be to go through the BabyPips School. Information is key, never stop learning.

Just as an example, why would you let a trade run to -£800 just to close it with a take profit of £150? It’s insane. You need to analyse the charts, try & pick a good entry & always have a line in the sand that says, “if price gets to this point then I’m out as my analysis was wrong”.

If you got in to a trade at the wrong time, you could be holding it for weeks, if not months, before it got in to the green again. All that time, your funds are tied up in a bad trade & aren’t available to use towards a good set-up.

All in all: it is a TERRIBLE way to trade.

3

I second that

:slight_smile:

4

There are metrics used to measure what you are talking about.
Maximum Favorable and Maximum Adverse Excursion.

Read up about those, and see how it applies to your question.

1 Like
5

And- you’ll have capital tied up in a trade that could be put to better use.

6

That too…

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7

Trading without stop los we can use hedging strategy, to manage the risk, I am not like without stop loss and still felt comfortale using stop loss in my trades, this is easy way to manage the risk with using fixed stop loss

8

I suspect that he’s perhaps an aspiring trader, or someone who’d like to be a trader, rather than a “trader”, really?

It’s true there are some traders who trade without a stop-loss on their trades, but they offset their liability by hedging, instead, with other market positions. For someone learning to trade, this is terribly complicated and entirely unnecessary (and many people who do it routinely aren’t actually benefitting from it anyway, in reality).

To me, and I’m sure to the great majority if traders who are actually making a living, it sounds extremely short-sighted and misguided.

It’s true that your loss isn’t realised until the position’s closed, but who can afford to keep their positions open for ever?

You can wait for the market to turn around, if you have enough capital in your account and are willing to risk it all, but if the market doesn’t do that, you’re finished and out of the game.

Trading is fundamentally about [B][U]risk-management[/U][/B]. Your friend has perhaps not explained this to you. (Or possibly even doesn’t quite appreciate it yet, himself?).

When I sit down at 8.00 every morning to trade, my primary responsibility for that day isn’t to make money: [I]it’s to be able to sit down again at 8.00 the next morning and trade[/I]. As long as I have an edge, and apply it sensibly with the correct position-sizing and stop-loss, the income will follow, as long as I can do that. Without a stop-loss, there’s no such thing as a position-size at all: any/every position is potentially unlimited in size, i.e. in risk. :15:

It might be a good idea to stop thinking about “[I][U]when[/U][/I] the market turns around” and use the word “[B][U]if[/U][/B]” instead.

If you routinely trade without a stop-loss, you’re potentially risking your entire account on every trade you make, with no way of knowing in advance which one will eventually be the one that wipes you out.

As Keynes so rightly pointed out, markets can behave irrationally for longer than your working capital can last.

9

You should always use a stoploss. Trading without a stoploss is certainly not advisable if you are a beginner. Although, finding a suitable level to set as stoploss is a learning experience all on its own.

10

The [B]BIG PARADOX [/B] in forex trading is that you on myfxbook find only one trader (FXVIPER) a trader with a sizable amount of cash . Manage about 7 million dollars spread over six accounts with a leverage between 1-3.
Absolutely no SL. The good lesson show that with a little leverage can you do incredibly stupid things and get away with it , if you if know what you are doing …

Is that anyone one this forum who can show me hard evidence from a forex trader who make money from living. related to a trading style they recomend people …
[B]I dont think so [/B]

11

This sure is a subject dear to my heart as I just posted a thread on this topic last week, There are alternatives to a actual Stop order, I like to use a red line on my chart, price closes below that line I exit the trade, I take on some risk but I also don’t get stopped out on a news event only to see price recover by days end. Stop orders are a tool of the trade, if used correctly it can save you but used incorrectly it can hurt as well

12

When I was a newbie tried to trade without SL several times, but unfortunately with after you rack up 10-15 profitable trades in some next trade you just enter against big trend and it wipes out all your profits. Trading without SL will always blow out your account, as basically you left it unprotected against volatility.

1 Like
13

Then you’re mistaken: I know at least three or four here who [I]could[/I], but they’re not going to, and quite rightly: why the hell should they?! :rolleyes:

14

god, youre such a downer, be positive sometimes makes the world look much prettier :smiley:

15

You just went long on EG, knock on door, you go get it, just a salesman, you go back to your PC, +2 pips. Coffee refill, +4 pips up, you mozzy to the kitchen to the coffee maker, pours coffee, 8.9 mg Earthquake hits, knocks out the power to the entire western of the globe. You dont feel it, pets the cat, sits down, Margin call. Happened on a Thursday, Markets dont get back up thru the weekend, Now, you ow THEM money,

Some wise man once said, What can happen, will happen.

Want to get good at trading? Use a 6 pip stop for your entire Forex Learning cycle.

The stop is the slap to your face, telling you your wrong. And you will need that slap several times between now and then, lol…

Easier to make up 6 pips then less equity and 60, or 300 like some/ALOT do, less pips to boot.

16

Ooh, that’s even narrower than I had to use, for my first year (I was allowed 10 pips). I agree unreservedly with the spirit of what you’re saying, though.

17

when someone says “trading without stop loss” i think thatg person is not talking about scalping few pips here and there. i trade without stop loss 90% of the time, but im trading bigger time frames and after a certain time has passed the price has moved few hundret pips so it for sure wont come back in one day so the stop loss become obsolete.

dont get me wrong, i have stop losses in place when the trade is beeing initiated but the stop loss stays at that very same place thoughout the entire trade, so if a week passes and the price moved 700 points you have more then enough time to react onto changes and stop losses become obsolete and only annoying with the possibility of stopping you out when you dont really want it and kick you out of a profitable trade.

on the extreme hand you have the big players (funds banks hedgers, whatever) who trade in time frames of years, they dont look to gain of 200 points they look to gain 4-5000 points on a trade, a stop loss there is completely obsolete as nothing will happen in one day that will endengaer the trade, what can endengaer the trade in such cases happens over weeks and months.

so definately, if you are a scalper you need stop losses you cant live without them. a swing trader uses them in its beginning but later they become obsolete and a long term trader doesnt use them at all.

you have to put things in the right context from the point of the trader and the trading style.

in stocks most people dont use stop losses, but in stocks you rarely have people scalping the stocks. in forex you have a lot of people trying to scalp, so you need stop losses in the case of most of the traders.

18

Where are you getting [B][U]this[/U][/B] information?

19

Lexys , Read carefully through my text , Al Brooks do not show any hard evidence that he living of trading…

Books and videos and excellent understanding of the market is not a proof to be profitable.

[B]Fxviper jeff and Nick show their accounts because they want to manage peoples money…
And as far I know the ONLY one in this circus how manage a bunch of money, 7 million …
we can be agree and disagree about jeff trading style …
[/B]
Why the hell should they !!!, when you claim you are living of trading and beside have a “hobby” selling books and courses , is that not natural to provide any prove that you main salary really coming from trading.

Is common knowledge that mostly of all trading gurus do not make any money from trading.

Is ok to be an believer , but show me hard evidence of any trader you admire or recommend that he/she living of trading…

SAD FACT IS THAT YOU CAN´T …

20

i cant quote you any scientifically accepted text which says exactly what i said in exactly the same words. if i find one i will definately do.

i get it from observation. You for sure know the turle trading system and their rules.

turtles were long term traders who initiated only a hand full of positions in the entire year and holding to them for months, and the person introducing them to his system banned them from using any stop losses (out of the reason to not reveal their strategy into when to close positions) but the explantion itself of why stop losses arent used is selfexplanatory itself (besides to not reveal their strategy to brokers and outsiders) the inventor of the turtle system said that stop losses are obsolete as a one day move will not endanger the position itself as the StandardDeviation of the markets they are trading in mathematically proves that a one single day session will not move enough to put the trades into danger of loosing too much capital.

So a standard risk/reward calulation in those stops of the turtle system streched over a several days of standard deviation losses in a row. several days give you more then enough time to react onto a loosing position and a stop loss is not needed.

other then that you can read the very same information up in John Murphys - Technical Analysis of the Stock markets where he warns from using automated stop losses and does not include them at all in any trading style.

if i understood it correctly we are talking here about automated stop losses which tell your broker to sell exactly at a predefined price. right?

That is what i am reffering to.

I am not reffering to a predefined area according to propper risk management where the trade is declared as wrong and the positions are beeing closed by the initiation of the trader itself. a predefined area according to the money management standards of a certain trader where he pull the trigger is always needed in order to have a propper money management.