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Stop Losses are for Losers
- Thread starter chewbacca
- Start date
in my own experience, i've found that i've done my best trading by utilizing this simple psychological premise:
if i'm long.. i will only close out the trade when i think i should short.
if i'm short.. i should only really cover when i'm ready to go long.
now, i've not always reversed and maintained an "always in the market" tone, but what the original poster said is in essence what i sometimes do to really extend my winners and get the most possible reward out of my trades.
its the best form of trading imo. i think when he says "don't use stops", this is what he means. i always keep a "death spike" stoploss in the event of disaster hehe.
if i'm long.. i will only close out the trade when i think i should short.
if i'm short.. i should only really cover when i'm ready to go long.
now, i've not always reversed and maintained an "always in the market" tone, but what the original poster said is in essence what i sometimes do to really extend my winners and get the most possible reward out of my trades.
its the best form of trading imo. i think when he says "don't use stops", this is what he means. i always keep a "death spike" stoploss in the event of disaster hehe.
One of the, if not the most successful trader, trades exclusively with stops according to his wizards interview. If he identifies an uptrend he will place a buy stop above the market. Once filled he places a sell stop and trails it until finally stoped out.
He just does it for the pleasure of gambling (trading) skillfully.Quote from tradestrong:
Sure,
Here is a link on bankroll management. Which basically means using a conservative strategy of many "tiny" positions that scale up as you earn more. Poker players that last longer do because of the conservatism of their positions, no one position will destroy the player.
link
Here he is talking about his success and losses using this strategy:
link
So I've basically taken this to heart. Now I never take a position that is more than 1-2% of my entire portfolio. The worst I can ever lose on any one position is that 1-2% even if it goes to zero. If the markets move against me, I add more VERY SMALL positions. My entire position sizing is essentially my stop loss. This way I don't have to worry about stop losses. Going to zero is my stop loss and an acceptable loss.
Thanks for the link, there's a lot more there than meets the eye.
wareco!!
Goddamn the goddamn search function, huh?
Very nice catch, wareco.
So we can infer from this that you donât like the use of stops, right chewie?Quote from chewbacca:
seriously the people that tend to use stop losses are the people that:
- are undiversified; they put all their eggs in one basket hence they want to protect their basket
everytrader mistakenly believes had he used stops he wouldn't have blown up
Oh!!!!!!!Quote from chewbacca:
here is what i would like:
* Auto stops on all trades.....IB kinda has this feature but its really not auto, you do have to manually enter the 'auto' stop.
Goddamn the goddamn search function, huh?
Very nice catch, wareco.
Quote from marketsurfer:
one of the best posts ever on elite. 100% accurate. in addition, there are studies that indicate that stop losses are counterproductive ,due to inherent volatility and fluctuation, but they are ignored due to above reasons
the market machine ie brokers, et al push the concept since it causes more frequent trading or churn leading to more money in the market machine's pocket.
very nice,
surf
You know, surf... the more of your stuff I read, the more convinced I become that you have never placed a trade in your life. I mean, how do we go about responding to the idea that stops aren't necessary because all that is needed is to make your entry correct?
I defy anyone who is actually a trader to explain this one.
Seriously surf... I mean that whole thing a few weeks back about claiming that TA is useless and then disappearing when challenged to refute the proof, that was one thing. I can understand that since 'TA is useless' is an old canard. But 'You don't need stops, just make sure your entry is correct'... I mean seriously, surf.
Seriously, man. Get a grip. I'm sorry, but you need to get a grip on things before you press 'Submit'. You should try writing things out in Word and then leaving the computer for a while then coming back and reading them over before posting.
I have always hard disaster stop. If it gets hit (rarely), it is painfull, but not real disaster.
But I try avoid that stop touched and have a tight(er) mental stop about 3/4 closer to market.
If it is touched by price and runs quickly, I am selling it manually as quick as possible.
If it is only "wick", stop run, I stay in position. If it moves slowly, I recalculate trade again but mostly I am selling the position on next wave top.
Not leaving hard stops costs me once in time (but regularly, every month there is something) a lot (internet, power, hardware failures, health problems, etc).
This works +- OK for me. To have tight hard stop is veeeeery difficult because the standard market behavior can be described like stop run mode.
Btw, I try set my entries at those stop runs - not easy but if succesful...
But I try avoid that stop touched and have a tight(er) mental stop about 3/4 closer to market.
If it is touched by price and runs quickly, I am selling it manually as quick as possible.
If it is only "wick", stop run, I stay in position. If it moves slowly, I recalculate trade again but mostly I am selling the position on next wave top.
Not leaving hard stops costs me once in time (but regularly, every month there is something) a lot (internet, power, hardware failures, health problems, etc).
This works +- OK for me. To have tight hard stop is veeeeery difficult because the standard market behavior can be described like stop run mode.
Btw, I try set my entries at those stop runs - not easy but if succesful...
Quote from Pholeuon:
I have always hard disaster stop. If it gets hit (rarely), it is painfull, but not real disaster.
Btw, I try set my entries at those stop runs - not easy but if succesful...
Sure, I see stop running activities all the time. Obviously you don't put your stops where you think they're going to get run. That means that you have to trade small enough that you can have a wide enough stop.
I read one guy on here, I can't recall who it was but I knew that he was one of the real traders, not a wannabe (sorry surf, I really don't mean to pick on you, but seriously...), and this guy said that he traded 'by hand'. I assumed that to mean that he didn't put stops up in obvious places. He did not say, however, that he traded without stops. To me, that's ridiculous, whether you're a position trader or scalper. It implies that you can get your entries down to the point where you are never wrong. Again, it is hard to know how to describe how ridiculous that concept is.
If you have ever closed a position out at a loss, you had a stop.
Quote from chewbacca:
seriously the people that tend to use stop losses are the people that:
- are undiversified; they put all their eggs in one basket hence they want to protect their basket
- over leveraged; to the point where they can incur large losses from the noise of the market
- fight the trend; thus they need "protection"
what you should do:
trade the trend and only buy on long opportunities and only sell to enter short opportunities
diversify
and never bet too large right from the start - give the position some time
now granted every trader has blown up so everytrader mistakenly believes had he used stops he wouldn't have blown up.....but that is wrong because the only way to really blow up isn't by not using stops.........its by fighting the trend + being overleveraged
spoken by someone who has never traded the HSI.
trade the HSI for a while without stops and you'll be starting a new thread about the merits of stops.
your absolute statements are simplistic and naive to the point of stupid.