Daytrading Without Stops

[Camaguey]

A friend of mine and I talked about something along these lines (after a LOT of beer, yeah we have nothing better to talk about after 6 beers): Randomly go long/short, set a trailing loss to 4 ticks. Move it up every 4 ticks. Expected outcome: minus commission and slippage, you break exactly even on trades and your broker gets rich as hell.

Problems w/ this is you'd need to make a long/short decision EVERY 4 ticks w/ >%50 probability. AND the market conditions would have to stay constant between the ticks (not gonna happen).

I think your variant w/ no loss won't work on any system as you'll need (theoretically) infinite funding or a way to avoid margin calls. A no loss day trade system would've wiped you out in Oct 1987 if you'd been long.

 

[Camaguey]

Making random decisions on a system w/ noise, like lunch hour whipsaw, should have expected mean of zero.

 

[TMTrader]

I know about someone who backtested a random entry system that had a 1 pt stop-loss and 3 pt target and some other basic parameters. It had 38% success which meant it made money.

I don't know of anyone who uses such a system. I certainly would not.

TM Trader

 

[spreadem]

Cut your losses, let your profits run ... not the other way around.

 

[5R08Astang]

Since MM's play games and try to 'take out the stops' by quickly dropping the bid, causing fear and selling, and then bringing it back to market levels, why would you want to place a stop order, especially if you're staring at the computer, know this game, and have disciplined mental stops? I've seen it happen all the time.

I'm open to feedback if my thinking is flawed, right-on, or wherever in between.

 

[indahook]

Quote from TMTrader:

I know about someone who backtested a random entry system that had a 1 pt stop-loss and 3 pt target and some other basic parameters. It had 38% success which meant it made money.

I don't know of anyone who uses such a system. I certainly would not.

TM Trader

Anyway you could post the results? Only curious because I have thought about this before. I would NEVER trade this way either but my thoughts were that you could raise the % even higher if you made it less random by only going long on up days and short on down days(regardless of the mkt`s actual strength or weakness). Could be fun to play with...

 

[harrytrader]

Mr Market is not speaking about trading but about investment ! In investment framework having no stop can be intelligent. But in trading futures no stop is a really dangerous idea.

Quote from sprstpd:

Does anyone (successfully) daytrade without stops?

For example, suppose I trade ES and I get long at X. Say I have a profit target of X + 4. Now suppose ES moves 1 point against me. Then I move my profit target to X + 4 - 1 = X + 3. The profit target would always be 4 points above the lowest price on the ES since I entered the trade. I would continue this target adjustment til I was out of the trade. I would never have a stop so I would always be selling on some strength. And there are numerous 4 point moves on ES so I'd probably get out before the end of the day.

I realize that this method would occasionally take big hits. However, the number of singles (i.e., 2 and 1 point gains) you would get might make up for this. I'm sure variations of this have been tried before - any comments?

Any other stopless methods (besides Mr. Market) that people actually trade?

 

[sprstpd]

Quote from TMTrader:



So you will only blow your account slower.

Basing a system on lunch time whipsaws is not a good idea.

Ok, it is apparent that no one thinks that the two example methods I presented have any merit. However, I didn't mean for this thread to be specifically about these two examples. Just stopless systems in general. Apparently no one uses stopless systems and so the only things you can think about are the systems I threw out there. I agree that neither of these systems would really work unless your entries were consistently fantastic.

Anyway, the reason I started this thread was this post by profitseer:

http://www.elitetrader.com/vb/showthread.php?s=&postid=288841#post288841

 

[sprstpd]

Quote from harrytrader:

Mr Market is not speaking about trading but about investment ! In investment framework having no stop can be intelligent. But in trading futures no stop is a really dangerous idea.

Doesn't it come down to the skill of the trader/investor? Certainly an investor who doesn't use stops can get burned just as badly as a trader who doesn't use stops. You are assuming here that the investor is able to pick stocks based on some criteria that will eventually go up. Couldn't an experienced trader have a pretty good idea that ES will end up in a certain place eventually (during that day), stops be damned?

 

[funky]

Quote from 5R08Astang:

Since MM's play games and try to 'take out the stops' by quickly dropping the bid, causing fear and selling, and then bringing it back to market levels, why would you want to place a stop order, especially if you're staring at the computer, know this game, and have disciplined mental stops? I've seen it happen all the time.

I'm open to feedback if my thinking is flawed, right-on, or wherever in between.

your reasoning leads me to believe that you look at the market as something to fear. try re-examining your thoughts towards this, as this could be a dangerous problem with your trading.

stops are meant to be placed so that your trade accounts for this lower timeframe 'noise'. if you are trading 30min charts, then the 'noise' is a 15min chart. if you are trading 1min charts, then the 'noise' is what you are talking about. either way, stops are meant to be a tool to take you out of the market if the trade goes against you. if you find that you can't place a stop because the volitility is too great, and thus the risk/reward is not sufficient, then you should pass on that trade.

again, re-examine your view of the markets, and the instrument that you trade. i have a feeling that most of your problem is psychological.