Stop Losses are for Losers

This is good progress, we have at least established the function of a Stop Loss! Now, it remains to verify it's validity which shouldn't be too difficult.

On one hand you can supply us with some charts of ES(since being a very active and liquid instrument with plenty of volitility best representing the price action) that supports your theory of a single xing would have been a profitable following, and for each one of those I'll show 100 charts that would have caused huge losses! If true then the odds are 100 to 1 against the single xng theory.

One issue you bring up is totally correct though that, at some point(the earlier and the faster the better) when the market goes against the trade, one must take some sort of action to adjust or protect, and, my take is exactly the same but emphasising that there are better alternative to a plain straight out B&W Hard Stop Loss that as established is a predetermined loss which places trading closer to gambling when it should have been calculated risk management!
I know most will argue, Stops Losses are risk management tools...but, are they really that? Or more like Risk eliminators?






Quote from CFerret:

Agree, this is better place to discuss risk management issues than journal.

Will try to be as clear as possible - in many cases YES, simple cross of S/R level by a certain amount is the failure of a pattern AT THAT TIME.

I try to not predict, but simply REACT to what happens NOW, not what I think would happen in future. When it happens, then I'll react accordingly on the next stage of PA development.

And I am always out if my plan assumes violation of S/R is the failure and I should be out. Or even reverse position in some cases.

If then it happens so that price goes back and it is a fakeout, nothing stops me from re-entering again if it looks like a valid setup.

I simply don't see more effective way to manage risk of outright positions.

Net long option positions is the other way than stop-loss orders, but they're not suitable for me as I am a short term player.

For other traders though, simple S/R violation may be not enough and they wait for stronger confirmation, like forming a new confirmed trend for example.
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Quote from TradStSOX:

This is good progress, we have at least established the function of a Stop Loss! Now, it remains to verify it's validity which shouldn't be too difficult.

On one hand you can supply us with some charts of ES(since being a very active and liquid instrument with plenty of volitility best representing the price action) that supports your theory of a single xing would have been a profitable following, and for each one of those I'll show 100 charts that would have caused huge losses! If true then the odds are 100 to 1 against the single xng theory.
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"Huge losses" are simply impossible with the use of stop-loss and that's exactly what stop-losses are for.

And if you follow the profitable edge trading, having losses is no biggie, furthermore assuming that in outright speculative trading it is impossible to avoid losing trades.

And it's absolutely not a problem as long as you strategy is overall profitable.

BTW, I can give not 100, but 100K charts if needed, showing that trading using a simple stop-loss as a risk limitation tool is valid approach.

I even post my trades literally in realtime in my journal and always use tight stops there.



One issue you bring up is totally correct though that, at some point(the earlier and the faster the better) when the market goes against the trade, one must take some sort of action to adjust or protect, and, my take is exactly the same but emphasising that there are better alternative to a plain straight out B&W Hard Stop Loss that as established is a predetermined loss which places trading closer to gambling when it should have been calculated risk management!
I know most will argue, Stops Losses are risk management tools...but, are they really that? Or more like Risk eliminators?
More...

If you make such a statement (that you have a better alternative), you no longer have the moral right to say it's "proprietary" or like that and should give examples of how you limit your risk in speculative trades with this "alternative" and without using a stop-loss.

Because saying "stops are not the best way, but I won't tell you all what is" is, let's say, not very productive discussion. :)
 
BTW, I'd say that stops are not risk ELIMINATING tools, because where no risk - there no profit as well (not counting the case of market correlation inefficiency, possible to be arbed).

Stop-losses are risk LIMITING tools.
 
The chart posting was referring to the exact case you brought up that a single Xng. can mean the failure of a S/R which is a very wrong presumption of the price action and for each case of which you show that a sing Xover proved the collapse of a S/R I will show you 100 that did not. So there show us the first chart.

You are missing the point, no one denies taking of some action if position enters a loss and my specific method as many times mentioned earlier is that, you should NOT enter a trade unless you have a valid reason for it and you should vacate it because of the scare factor or personal risk tolerance level utilizing a predetermined loss amount if there does not exist a valid reason showing the initial set up has gone bust and an imaginary stop loss line is NOT a valid reason, it just represents the risk tolerance and does not help with the trading success and, NO neither does it help with capital preservation if the original reason behind the trade continues to exist and the trader unnecessarily de-capitalizes himself..
 
Quote from TradStSOX:

The chart posting was referring to the exact case you brought up that a single Xng. can mean the failure of a S/R which is a very wrong presumption of the price action and for each case of which you show that a sing Xover proved the collapse of a S/R I will show you 100 that did not. So there show us the first chart.

You are missing the point, no one denies taking of some action if position enters a loss and my specific method as many times mentioned earlier is that, you should NOT enter a trade unless you have a valid reason for it and you should vacate it because of the scare factor or personal risk tolerance level utilizing a predetermined loss amount if there does not exist a valid reason showing the initial set up has gone bust and an imaginary stop loss line is NOT a valid reason, it just represents the risk tolerance and does not help with the trading success and, NO neither does it help with capital preservation if the original reason behind the trade continues to exist and the trader unnecessarily de-capitalizes himself..
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I'm talking not about "imaginery stop-loss" here, but about the point where previously taken setup fails and that point is a logical reason to get out.

And your point that "in many cases violation of S/R is not true reversal" is completely wrong, because at THAT MOMENT we do not know if it is or not, but what we know is that our reason to be long (assuming a long) is no longer here, so we just bail out.

You very well may have another signal to get out and thats OK, but anyway it will ALSO BE STOP-LOSS.

And of course anyone should have a reason to enter the trade and to exit the trade. We're not talking about random entries here.

It DOES WORK because trading IS GAMBLING. It's all about probabilities and you never know future in advance. Don't forget, gambling can be controlled or not.

You simply have no other choice. If you have control and have an edge, your in a good shape, if not, I'm sorry. :D

Actually what you say basically IS stop-loss. Cause you say you get out when there is no more reason to stay in a trade.

So how it is any different from a stop-loss?

How do you execute this getting out of a losing trade when an opposite setups says you to get out?
 
Again, to clarify, I'm not talking here about ARBITRARY stop-loss vs. LOGICAL stop-loss.

I'm talking about stop-loss vs. other ways to limit risk vs. not limiting risk at all.
 
Here is an example (instead of chart, don't have time now to make screenshots):

I am long @ 100, S is 90. My pattern is no longer here if price trades below 90. Price violates 90, I'm out.

As you state in many cases price will soon go up again and I agree this is correct. But I don't care and simply wait for my next signal.

NOW, WHAT WILL YOU DO IN THOSE CASES WHEN PRICE DOES NOT GO BACK UP?
 
OK, basically it seems we don't have a difference neither would anyone else for that matter over that fact that a bleeding hemorrhage needs to be treated(which is what I'm saying), your version is that, no, with the first sign of one it MUST be surgically removed regardless.
Stop Loss is NOT a money management issue.

My way is, signals take you into a trade and signals should take you out of the trade.

Now, yes, it can be argued that a predetermined loss is also a signal and, yes, again it could be if, it has been backtested and researched.
 
Quote from TradStSOX:

My way is, signals take you into a trade and signals should take you out of the trade.

Now, yes, it can be argued that a predetermined loss is also a signal and, yes, again it could be if, it has been backtested and researched.
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What you describe IS a stop-loss!

Seems like you don't make distinction between arbitrary stop-loss and LOGICAL stop-loss (place where reason to hold a position ceases to exist).

Furthermore, there is often the case when failure of a signal automatically means opposite signal, so not only first position is exited, but it is reversed to opposite.

And all these cases ARE stop-losses too.

Because stop-loss is what? An order executed at a price where your method tells you "there is no more reason to hold, get out (or reverse if there is such a case)".

How can so simple concept be so difficult for you to understand?

There is one nuance though:

when you exit a losing position, do you always wait for a signal to REVERSE or you you have signals to just EXIT as well?
 
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