It ALMOST happened in '00-'03, in the Nasdaq.... certainly did for some people (for whom stops would have saved their bacon). The big wipe-out hasn't hit yet, but it's coming. All the Buy and Hold investors will become bag holders. PS... "10 years" is temporary
But it didnt....and the DOW, the longest running market ever, has never had a 100% drawdown. peace axeman
How could it? Every time a stock in the Dow gets really weak, they replace it with something strong. Talk about manipulation...
The loss doesn't have to be -100% to be an effective wipe-out, you know. And yes, I concede. I think you should load up on DIAs and just cruise the world.... no worries.
My experience says never ever trade without stops. I've tried it all different ways from no stops to wide stops to tight stops. My suggestion is to get a feel for the market you're trading to determine what a "normal" swing looks like in a time frame about what you're trading and then use a stop a little wider than that. For forex trading, I'm primarily a day-trader to perhaps carrying it for a day or so. I tend to use 30-pip stops and look for a 2:1 reward to risk ratio. As soon as I get 30 pips profit in the trade, I pull my stop to break-even and then let 'er rip. I use a combination of price targets and chasing my stop 20-30 pips behind the price. You will find by using this method that you'll take a number of stops but that's OK as long as your wins are at least 40% of your trades (can be even fewer if you get some big wins). Absolutely critical that you don't pull your stop EVER! If stopped out and your evaluation is that you would enter a trade right then and there in the same direction, then reenter the trade. But the discipline of taking the stop is extremely important to your long-term survival. Once you start pulling stops, it's a slippery slope to going non-stop (pun intended). Trust me, I know.
Because, in trying to "crush buy and hold"... and if you try it without stops... You could get B U S T E D... that's why. (Unless your're lucky enough to quit before the circumstance that would bust you occurs. We should all be so lucky.)
No luck involved. I know for a fact, you can develop no stop systems with lower probability of wipeouts than systems WITH stops. You just havent figured out how yet. In fact...here is another example: Write a system to capture specialist trade thrus. Buy on a trade thru print, always sell 30 seconds later at market price. NO STOPS. Use 1/5 capital per trade. Think the market will wipe you out in 30 seconds? peace axeman