Do You Put Stop Loss Order?

[JackWell 10]

Do you put stop loss order? I read in some places that it is not a god idea to set the stop loss in the system because the experts know where you set it and can "shake you out" of the positions. So do you use stop-loss?

[Mysticforex 13]

While I am actively trading I use a mental S/L. If I must leave an open trade unattended I enter an S/L.

 

If I have a trade that is well in profit, but I expect more from it, I will set a stop @BE, or BE+10. No sense letting a good trade turn into a bad trade.

[MightyMouse 12]

Do you put stop loss order? I read in some places that it is not a god idea to set the stop loss in the system because the experts know where you set it and can "shake you out" of the positions. So do you use stop-loss?

 

You have to decide if you want to be "shaken" out at a loss or robbed blind, then manipulated without lubrication and then forced to close out the position because of low margin.

 

Be careful of what you read. If you act on the wrong information, it can permanently change the way you walk.

[zdo 20]

It’s system specific …

see http://www.traderslaboratory.com/forums/trading-markets/11903-hard-stop-placement-great-contradiction.html

 

Limiting your losses is one of the few things you have consistent control over in trading… So - very very generally / for the Beginners Forum / for many systems - If that is the point that will have proven your original position 'wrong' then you should set it, regardless of what 'they' know or do.

[Obsidian 10]

...Be careful of what you read. If you act on the wrong information, it can permanently change the way you walk.

 

So true...

 

sl is one of the sharp tools to protect you. but if you don't know how to use it or when to use it, you will probably end up hurting yourself...

[Lavazza 10]

experts know where you set it and can "shake you out" of the positions

 

Can you describe the exact procedure how it happens?

 

The more I hear this the more I'm convinced that it's impossible.

[MightyMouse 12]

It’s system specific …

see http://www.traderslaboratory.com/forums/trading-markets/11903-hard-stop-placement-great-contradiction.html

 

Limiting your losses is one of the few things you have consistent control over in trading… So - very very generally / for the Beginners Forum / for many systems - If that is the point that will have proven your original position 'wrong' then you should set it, regardless of what 'they' know or do.

 

Re: trading without a stop loss.

 

Please tell us of a trading system that is not a time bomb that does not use stop losses.

 

Please limit the response to trading and not investing.

[henryduncan12 10]

There is pros and cons of using Stop Loss as described by above members. So, it depends upon you that it is useful for you or not. Even I prefer it because it avoids big loss.

[Obsidian 10]

if you are not right, then you are wrong...you stop when you are wrong...if you are sure you were wrong then why not stop&reverse?:rofl:

[zdo 20]

Re: trading without a stop loss.

 

Please tell us of a trading system that is not a time bomb that does not use stop losses.

 

Please limit the response to trading and not investing.

 

Re: trading without a stop loss

There was no “trading without a stop loss” advice coming from me. I’ll repeat my advice for the beginners - Generally, if you’re not going to be at your tradestation watching a position, set the stop. The cost of it getting hit is on balance lower than the alternative ‘costs’

 

 

re: Please tell us of a trading system that is not a time bomb that does not use stop losses.

Quite a few break out type systems perform better across time with no stops set. Losses are taken by reversing if next signal is opposite direction.

 

re Please limit the response to trading and not investing.

Not sure where or how you’re drawing the line between them, so…

The only distinctions I make between the two is the level of my direct involvement in operations and the liquidity of the instrument (ie real estate is the only activity close to 'investing' I do and everything else is a 'trade'.) For the post, an up near the cusp example is the varieties of scale trading. It's definitely not a good example for beginners, but it is in reality an example of a viable system and is only a "time bomb" if capitalization and sizing are off.

[zdo 20]

if you are not right, then you are wrong...you stop when you are wrong...if you are sure you were wrong then why not stop&reverse?:rofl:

 

Of many answers, here is just one.

Because you may be trading only with the trend of a larger timeframe. This entry didn’t work… instead of reversing, you would stop out and wait for the next “Price Action" "setup” :rofl:

 

If I hear "it's system dependent" one more time...

[MightyMouse 12]

Re: trading without a stop loss

There was no “trading without a stop loss” advice coming from me. I’ll repeat my advice for the beginners - Generally, if you’re not going to be at your tradestation watching a position, set the stop. The cost of it getting hit is on balance lower than the alternative ‘costs’

 

 

re: Please tell us of a trading system that is not a time bomb that does not use stop losses.

Quite a few break out type systems perform better across time with no stops set. Losses are taken by reversing if next signal is opposite direction.

 

re Please limit the response to trading and not investing.

Not sure where or how you’re drawing the line between them, so…

The only distinctions I make between the two is the level of my direct involvement in operations and the liquidity of the instrument (ie real estate is the only activity close to 'investing' I do and everything else is a 'trade'.) For the post, an up near the cusp example is the varieties of scale trading. It's definitely not a good example for beginners, but it is in reality an example of a viable system and is only a "time bomb" if capitalization and sizing are off.

 

Ok. It sounds like you can design a trade system with no stop, but have to de-leverage the trades to prevent the potential of massive losses from an over-leveraged position that does not have a stop. That makes sense. But, then you lose the benefit of the leveraging your capital in a trade.

 

The distinction I make between investing and trading is similar to your distinction. Lots of investors invest, frequently it is done systematically, in a favorite stock such as Coca Cola and do it with no stop. The difference between this and trading is the holding period. A trader will trade in and out of Coca Cola in a day, week, month, or year, but an investor buys and holds for similar time periods that some do with real estate.

[mohsinqureshii 10]

Of many answers, here is just one.

Because you may be trading only with the trend of a larger timeframe. This entry didn’t work… instead of reversing, you would stop out and wait for the next “Price Action" "setup” :rofl:

 

If I hear "it's system dependent" one more time...

 

Agree With that. I am also not believe on trading without stop loss. Specially for new comers. Stop loss is a way to manage your funds properly and wisely. In my point of view one should wait a level where his stop loss is very low, obviously technical studies will help with that. When you got your level just hit the price and place a stop at technically resistance or support's breakage. And if your stop hit then wait for new formation or level.It will help you a lot.

[mohsinqureshii 10]

Do you put stop loss order? I read in some places that it is not a god idea to set the stop loss in the system because the experts know where you set it and can "shake you out" of the positions. So do you use stop-loss?

 

I don't think so. It is just a lame excuse in my view. I use stop loss order in any trade and it is not hurting me any more because i put it after picking my desired price. It is difficult to wait your desired price but when you got your price than of course you have a plan in your mind about Stop loss and profit limit as well. So just plan your trade and trade your Plan.

Many time i face the condition that my stop loss survive only 1 or 2 pips difference and many time markets just hit my stop and go in my desired direction. But it is part of the game. So always be positive and Trust yourself.

[mohsinqureshii 10]

While I am actively trading I use a mental S/L. If I must leave an open trade unattended I enter an S/L.

 

If I have a trade that is well in profit, but I expect more from it, I will set a stop @BE, or BE+10. No sense letting a good trade turn into a bad trade.

 

I am not in favor of mental S/L. Forex Markets play with your emotions and it is not a wise choice to use a stop loss in your mind.Remember that it is a beginners forum and many beginners learn with that. So in my point of view every beginner should place a stop loss. If they really want to learn. Beginners should embraced their mistakes because it is the only way to learn Forex trading. We all did many mistakes when we were beginners. didn't We? So it is part of our education. With stop loss beginners can learn Risk management and many other things.

 

Your second option is really good and acceptable.

(this is only My point of view. I hope you don't mind)

[hgalek 10]

I tried mental S/L orders for a long time, and found they didn't work for me. Instead of a mental stop loss, I just readjust mine as I see fit. If I'm long, I won't move it down, but I will move it up continuously during a trade to ensure that it matches the support levels I perceive. The opposite is true if I'm short.

 

There are two reasons for the hard stops. One, having the hard line there keeps my gut in check because I know exactly what my loss will be, and two, it keeps me from getting run over when the market turns really quickly, which murdered me a couple of times.

 

This is the only downside, and it kind of sucks, but it's not very common.

 

[Mysticforex 13]

I am not in favor of mental S/L. Forex Markets play with your emotions and it is not a wise choice to use a stop loss in your mind.Remember that it is a beginners forum and many beginners learn with that. So in my point of view every beginner should place a stop loss. If they really want to learn. Beginners should embraced their mistakes because it is the only way to learn Forex trading. We all did many mistakes when we were beginners. didn't We? So it is part of our education. With stop loss beginners can learn Risk management and many other things.

 

Your second option is really good and acceptable.

(this is only My point of view. I hope you don't mind)

 

Of course I don't mind

 

One thing that is never far from mind... My Account is the heart and soul of my trading.

 

No Account = No Trading.

[Trader1 10]

using stoploss is mandatory, you just can't trade without one, the stoploss are there to protect you and to set and limit your risk, if you trade without one your risk is limitless, never trade without stoploss.

[Landser 10]

Yes, I do use S/L orders. For me it's the best way to limit my risks in the environment of heightened volatility.

[Irene Ivory 10]

I'm sure that it is quite impossible to work on Forex without using SL orders. It is better to lose 100 dollars if something goes wrong than 10000 dollars. Always try to predict your possible loss and profit.

[eagle75 10]

stop loss is a must ! :doh:...

[fast 10]

Do you put stop loss order? I read in some places that it is not a god idea to set the stop loss in the system because the experts know where you set it and can "shake you out" of the positions. So do you use stop-loss?

 

There are advantages and disadvantages of placing a stop loss order, but in my strong opinion, the advantages of placing a stop loss order far (and let me say it again: far) exceed the occasional minor disadvantages.

 

You should be more concerned (in my opinion) where you place it and where it resides after you do. Two posters have already said something that shouldn't go unnoticed. The key to placing your stop is to place it where your pattern is broken. For instance, if you're swing trading and plan on entering long shortly after a cycle low because you think price will climb, then you should place your stop one tick below the cycle low. In that instance, there is no better place to put it, if you adhere to the wisdom of placing it in a place that proves you were wrong.

 

For example, if the cycle low is at $7.50, and if you enter at (oh say) $7.60, then the first point you are guaranteed to be wrong is $7.49 (assuming what you're trading has a tick value of one cent). Yes, there should be some wiggle room between your entry and your stop loss, but that should not extend below the cycle low (when trading long) if the cycle low happens to be a major component of the pattern you’re trading in your overall trading methodology. If it's not, then the same underlying principle still stands, and that is you should appropriately place it in the territory that reflects price action that didn't go as anticipated.

 

On another note, you should be aware of where your stop loss orders reside. It's not a great deal that you should be overly concerned with, but if you ever become an active trader and start profitably trading on a consistent basis, then you should strive to make sure your stops reside at the most ideal location. For instance, one place a stop can reside is your very own computer. That is the least favorable place to have it. Another place they can reside is on your broker's mainframe. That's better, but it's still not the best location. If you ever find yourself daytrading on a consistent basis, and if it looks like you'll have a long-term outlook, then you should do what it takes to ensure that your stop loss orders reside at the exchange's server. The reason why is because of the time it takes for your orders to trigger. It won't make a meaningful difference for a single trade, and it won't make a meaningful difference over your next ten trades after that, but over the course of a long time frame, all those miniscule differences add up, and they can add up significantly if left unchecked.

[kuokam 10]

Yes, but...It hurts.

It is not a simple matter to handle. Obviously one hard stop prevents you from going broke at once. But 2, 3 or ten stops hit have the same result on your account as no sop at all.

So, can wide stops be the solution?

[steve46 12]

Yes, but...It hurts.

It is not a simple matter to handle. Obviously one hard stop prevents you from going broke at once. But 2, 3 or ten stops hit have the same result on your account as no sop at all.

So, can wide stops be the solution?

 

Depends on the result of your 3rd, 4th and 11th trades.....in other words, each system has an "expected" result that can be monitored over time. That data tells you whether your system is viable or not....based on (among other things) whether your profits overcome your expenses (including trades that are stopped out).....this is one of the data points that can be adjusted to determine A.) whether to use a stop at all B.) if you are going to use one, where to place your stop

 

In other words the question has to be considered as part of a larger system design...if using a stop, not using a stop, placement of a stop at some point, produces a viable profitable system, then thats what you do...if it doesn't then thats what you do....

 

Most of the problem people face is "themselves"...specifically lack of basic design skills, followed by lack of capital to execute the system, followed by lack of disciplined execution of the system, followed by lack of data (poor data capture) followed by an inability to accurately evaluate the data (you don't know what it means).....kind of a circular thing most amateurs have going on there.....in the end its no wonder so many wind up losing the account....

 

From my point of view the real issue is do you know what you are talking about? If you don't, and you want to be involved in this business, it might make sense to get sufficient education to enable you to evaluate the question productively....

 

Seems to me that some smart person (professor, teacher, whatever) if this were presented to them, would see a profit opportunity and put together a nice online course aimed at helping amateur traders to get on the right side of this issue....for now..I would contact the guys over at the Khan Academy and see if they would be willing to do this....otherwise most of you will never get past the questions you are asking because you haven't improved your skill set...

 

Best of luck

[steve46 12]

A final comment

 

I am just finishing a system that is aimed at retail traders who have been struggling along unsuccessfully....

 

it uses distribution lines as a frame work...so when price tests those lines, the trade is supposed to wait to see whether or not price is likely to fail or continue through in a sustained manner....

 

The system lends itself to several kinds of rules, but the one I like for amateurs is simple. You watch price test a distribution line. Price either "takes out" that line, in which case we wait for a retest (a retracement to that line followed by a failure), or price tests, takes out the line then reverses.....sometimes (of course) price goes into a horizontal range moving back and forth above and below that line....and the question (similar to Kuokam's point) is what do you do about that.....? and for me the answer is as simple as changing your time frame...for example if your data shows you that price tends to do this causing you to enter and get shaken out repeatedly....what about moving to the next longer time frame and applying the same entry rules.....many times this change alone will "fix" that problem...in other words its a system "design" problem...for my system...the issue you bring up shows itself on the 1 minute time frame, but not on the 3 or 10 minute time frame....so you adjust....you see what I mean...and of course this is just one of many issues that a trader faces...it could be (again just to provide one example) that even when you adjust your system as stated, it doesn't help...you then have to consider...do you really have an edge....do you have sufficient capital to trade at all?

 

If we go back to that same example....when price moves above and below a boundary, it is in effect displaying temporary supply and demand boundaries....what some call support and resistance...what about simply re-defining your system so that whenever you see this behavior you "define" the lower boundary of that congestion as support (an area where you might get long) and the upper boundary as resistance (an area where you might get short), then you look at your system and decide whether you can determine trend on the longer time frame...if you can you now have a viable system....one where you simpy wait for these congestions or sideways ranges to occur.....then you enter based on your new logic (trend determined by the next time frame)....

 

Finally, if one is having the problem Kuokam brings up....one way to minimize that problem is to use highly correllated market to help confirm entry decisions...in my system I use two markets (DAX and ES for example) because for me the DAX serves to confirm that my decsion is correct, or if the entry is not working, to provide sufficient data to motivate me to close the trade BEFORE I take a significant loss.....again it is a matter of intelligent design and ability to evaluate the data...

 

These are things that a skilled system developer considers...then they obtain the data and evaluate the possibilities...as with all things, some are good at it, some are not...and perhaps should consider opportunities in other areas of business..

Edited September 29, 2012 by steve46