Trading with a Stop Loss in the Futures Market is for Losers
- Thread starter emg
- Start date
Luckers, archive and study this, it will help you.
One last point on this "reaction low/high" stuff. My experience has been that that kind of stop gaming is far more likely to happen during an uptrend than a downtrend. As a result, I've developed a trailing stop method that differs for long trades from what I do for short trades. Using this method, I can tell you with pretty good confidence levels if that penetration of a reaction low will lead to a continuation or not, but I'm out of the trade before it hits that low anyway. And if it reverses back up, if certain criteria are met, I hop back on. Many times I've been tallying my gains on a long trade while those who stayed in realize they've overstayed their welcome and scramble to get out, thus, triggering my next short trade. Point being, not all penetrations of reaction lows during uptrends are just to shake out "weak traders". Not saying you are making that kind of categorical statement, just making my perspective more clear. I'm also saying that there is a completely logical way to determine all of this without any subjectivity involved.
When I'm short and looking to lock in profits or minimize losses, reaction highs are fine. Why? There is a psychological asymmetry even for strong hands when it comes to the short side (fear moves faster than greed, as everyone knows) and fear is more, shall we say "focused" and less interested in playing stop-related games, so it is much more rare to see reaction highs penetrated to shake out "weak traders" (which makes even more sense when you consider that short sellers are typically more sophisticated traders anyway, so the number of "weak traders" is far smaller than on the long side). Is this perfect? No, but the probabilities favor that kind of stop on the short side, as part of the ongoing management of a trade.
Initial stops are a completely different animal and, just speaking from personal experience, the entire logic of my initial stop-setting actually evolved out of seeing the failure of reaction lows/highs as initial stops. Which also relates to why I never try to pick bottoms or tops, which is implicitly what traders do when they use reaction lows/highs as initial stops, since it is my firm belief that "strong hands" also do not try to pick bottoms and tops, but react to "bottoming" and "topping" PROCESSES.
I would not expect any retard paying $1,800 per month for a trading platform, to even be capable of understanding my posts after studying them for a lifetime.
In other words: I understand your response. LOL.
I live in a world beyond your world Bone-head. And you can't do anything about it. I can eat your lunch while telling you that I'm eating it, and you can't stop me!.
Got it PROF?. LOL.
You can look at this another way. Jesse Livermore used stops. He bankrupted 4 times.
What does this tell you? Basically if you need to use stops, you are overleveraged and stops dont matter, you will be bankrupted at least once.
Second: stops dont protect in reality against bankruptcy. Thats why disaster stops are idiotic.
What does this tell you? Basically if you need to use stops, you are overleveraged and stops dont matter, you will be bankrupted at least once.
Second: stops dont protect in reality against bankruptcy. Thats why disaster stops are idiotic.
Stops don't have anything to do with leverage in any number of cases. They are simply points at which your hypothesis about the market is more likely to be wrong than right or the point at which locking in a profit is sound logically.
There are some people on this board who do sound like they know how to trade without stops, so there's no point in denying that it can be done. However, the people who sound like they know what they are doing when it comes to trading without stops are rarely the people who make the most noise about stops being unnecessary. That tells me that those people understand why stops fit some trading strategies very well and are unnecessary in others. Most of the people who talk about trading without stops come across as the type who just need to be proven right on every trade and will hold on to a loser until it eventually becomes a winner or it goes to 0. Fine, but that completely ignores the opportunity cost of holding a losing trade when you could be deploying that capital more efficiently by just getting stopped out and taking the next trade that comes along. I've had numerous occasions where I'll get stopped out for a loss and then when the next trade in that direction comes along I make back the original loss plus some. People who trade without stops seem to lack this ability to see the "big picture" that trading is a game with multiple "rounds" and fixating on one trade is not necessary.
Trying to link stops and Jesse Livermore's bankruptcies is completely specious logic, not to mention the fact that nowhere within the book does he mention stop usage as one of his mistakes. To accept your assertion, I'd have to believe that you know more about why Jesse Livermore went bankrupt than he did, which is pretty unlikely.
so your system worked but you had a stop in place so you got out even though the system didnt stop working. and in the end the system worked but you got your ass handed cuz of volatility.
suunds to me stops arent that great after all. u just use them to curb volatility, but they do nothing for the end result. it just seems like they help profits but in reality not.
and i didnt link stops and bankruptcy i linked stops and leverage then bankruptcy. so what is that ppl who use stops usually have more leverage then they need they are overleveraged, in the end since they dont realize this, they will bankrupt. using stops doesnt deter them from leverage. stops thus are counterintuitive. using stops is a big danger to financial health.
i refer u to a study about value investors who use stops and those who didnt. those who didnt had better returns.