Ever wondered why every forex dealing desk (which is taking the other side of your trade) gives ample recommendations (the web is just flooded with that) to place your stop ? http://www.etoro.com/education/placing-stop-order-your-trade.aspx Clearly, they wish you to rip them, because they are <b>non-profit</b> organizations, and they are there only to <b>fullfill your dreams</b>. They want that so hard, that they are even ready to give you the money to start up. http://www.etoro.com/lp/lp-social/v...e&utm_source=7995&utm_content=0&utm_serial=B1 What <b>charitable</b> and nice institutions. (First requirement to make money, even before strategy, is some common sense.) T
Even I -who I am an autotrader in zulutrade' s platform- use stops in my signal providers trades. Stop for me reduces the risk of the trades. Ok we all want green trades and many earned pips, the thing is how many negative pips can our account bear. profit + forex without equity don' t even exist. Stop can limit the loss. In other words can let us open new positions...
I would not listen to any recommendations anyway, without checking everything for myself. But as I did check everything, my personal experience confirms (including the infamous spot forex traded through dealing desks, such as Oanda), that tight stop-losses (5-6 ticks) are very effective as risk control tool and increase profit counted in units of risk dramatically. BTW, if you don't trust your broker/dealer, fine, just place the entry stop order with the other broker, this will make you feel safe from being robbed by evil dealer for the small price of extra trade (this is cheap nowadays). To be fair, I do not always use stops. The case I don't is when I am long options.
I never said not to use <b>hedging</b>. I always said that <b>stops at single trade level</b> are among the least effective way. Further, they allow the dealing desk to rip you off more easily. It's a scientific fact, easy <b>provable and replicable with rigorous experiments </b> that there are better ways to hedge. I do experiments and have been examining strategies for many years. Clearly, if one does not take a scientific approach and relies on the <b>bla bla</b> of the marketing bullshitters, everything becomes possible. Actually, i should be happy people use stops at trade level. So please continue doing so. But then do not wonder how come you are not in the 5% or 1%. ahah (some people look for the "holy grail" but they would not even recognize a glass if you put it on their hands ... ) Tom
I agree with you, that hedging orders instead of stops is definitely a safer defence from conflict of interest between trader and a broker. But surprisingly, after making thousands of trades with very tight stops with the same broker as entries, I cannot recall a single case, when particular broker would rip me off (this is pretty easy to check in forex, because you can compare different data feeds). So my empirical view is: danger of stops is more an excuse for those who can't fine tune their entries well enough and a kind of "trader's horror stories". With the exception of really illiquid instruments, where stop running may still be the case. Thinking that whole 6E or ES contract moved an extra two ticks specially to stop your 10 car position out I would consider severe psychological issue though.
selling options is a easy way to make small profits many traders feel good about it because they don't need to take losses but one big shock can wipe you out trading without stops can make you feel good too when the market returns to your expectation then you don't need to take losses or even make profits when the market doesn't return...