Stop losses. Are they the tools of winners or losers?

Discussion in 'Trading' started by peilthetraveler, Nov 20, 2009.

  1. I dont use stop losses, but some people freak out on here when i tell them that. They say that the majority of traders lose money, but i notice the majority of traders in here use stop losses... Im wondering if there is any relation. I've only ever met 1 guy that makes 7 figures per year trading and he doesnt use stops either (and its worked well for him the 20 or so years he has been trading) So i just want to get some honest information out of you guys.

    If you make 10 trades with 10 stop losses, on average, how many of those trades get stopped out? I'm suspecting that its a higher percentage (like 50% or more) so i just want to be sure.
  2. It depends on your style of trading. It is impossible to use stop in some styles of trading, like mine.
  3. AyeYo


  4. r4Nd.m


    I trade forex. I don't use stop loss or take profits, although I do mitigate risk with correlation. So far, so good.
  5. What are the possible results when you enter a trade?
    1 Big profit
    2 Small profit
    3 Break even
    4 Small loss
    5 Big loss

    Which is the worst outcome?
    How do you prevent it?
  6. r4Nd.m


    All of those are possibilities. I protect my capital with small position sizing, averaging in & trading correlated pairs in opposing directions, or non correlated pairs in the same direction. ( is an excellent resource for viewing correlation over x number of bars)
  7. You know, there was a guy in here who average down. He is a nice and humble person as well. He made a lot of money and he traded so well that he even started a hedge fund. Unfortunately, we haven't heard from him since. What ever happened to him is anybody's guess.

    It's always easier to make money when you don't use stop or when you average down. Unfortunately, losing your whole account is as easy.

    There are some lucky traders who made a lot of money with no stop loss or with average down, started to use good risk management technique before the market take all the money back. Unfortunately, I don't think there are a lot of them out there.

  8. In the early days, I used a stop loss while day trading and got killed all three times.
    Brokers were waterhouse and datek.
  9. nO0b


    it's like asking a professional poker champion if he ever folds a hand when he has money in the pot.

    every trader uses stops. it's only a matter of whether you've built it into your position (eg. defined-risk spreads like verticals, butterflies, etc...), added it along with your order when you entered the position (traditional), or use dynamic mental stops that let a more sophisticated computer (your brain) continously re-evaluate market conditions for the proper downside exit point. but a stop's a stop.

    don't use/think of them as something that can get you out too early on a trade. they're about keeping you alive to trade again tomorrow.

    maybe it costs you a few hundred or thousand today.. but the ROI of stops is basically a portion of all your future winnings, if the alternative was you stop trading and go back to washing cars, or making somebody else rich.

  10. When i say stop losses, im talking about the traders who put their stop loss order in as soon as they enter the trade. Of course i will exit a trade if need be, but i dont decide at the beginning of the trade what my price point will be. I have to look at all the factors while im in the trade. Im looking at the charts of what currency im trading, the charts of other currencies relating to one of my currencies, the dollar index, watching the news, checking the alignment of the stars....(kidding on that last one!) Im examining and re-examining all the time. My "stop" comes when i see that its not going to turn around but keep going the other way, but i dont really call that a stop loss.

    to your poker analogy...99.9% of all poker players blow out in the world series of poker. Only 1 person wins. So maybe stop losses are bad. :)
    #10     Nov 20, 2009