if Im remembered for anything in this world, it will probably be my hate of stop losses !
while a junior member here, I've been a forex trader for the past 6 years and its all i do to keep the wolf from the door, so it behooves me not to make many errors in trading !
Im gonna say that I PERSONALLY do not use stop losses ever !
before you jump on me allow me to put forth a few privisos to follow ALWAYS !
you MUST be trading in the direction of at least ONE of the 3 normal trends --- if you nail all 3 trends, then youre golden. trading in one is usually not a difficult thing though.
you should enter at the top (for shorts) or bottom ( for longs) of the LRC and/or zigzags for your selected timeframe. (all that means is dont enter a long position at the very top of its resistance, nor short a currency when its hit bottom --- duhhhhhh !)
you must use correct money management, just in case you get caught in the normal 10am EST reversal, the noonday reversal, or the late night reversal during the japanese session. You can avoid most of this by trading the european opening to the 10 am NY baby reversal, but definitely out by the NOON (which also happens at 11:30 am, est, depending on how the banks feel !)
If you get caught, you WILL suffer the drawdown BUT if youve chosen correct trend, usually overnite or latest tomorrow, your ship will come in !
if one follows the logic of forex, which always moves a currency from the bottom to the top of the LRC and then back down again over a number of different timeframes, one can understand missing a tp, have the currency then dive down as the shorts take profit after the runup, and while the longs wait for the new low to add to their positions or start new positions. Once we start up again, and the currency is in an uptrend, your profit WILL be reached and had you a stop loss, you would have lost your money on the drop !
Please understand that the history of stop losses comes out of equity trading and most equities DO NOT trade as smoothly, logically or predictavely as does Forex --- they were designed to prevent MASSIVE losses on long term holding stocks that had gone up tremendously, and would now fall, being shorted by the major institutions as individuals hung on, praying for them to go back up again.
with forex, if youre careful and dont overplay your margin and AS LONG AS YOURE MOVING WITH THE MAJOR TREND, you may wait a while and you may have some sleepless nights, but lo and behold YOU WILL MAKE YOUR PROFIT !
a trading partner and I have a simple mechanical system for grabbing 20 pips overnite on GU -- at 8pm, est, we hedge GU for a 10 pip profit each way. Normally, there is absolutely no problems, but as a test we hedged just before xmas which we knew was probably not the smartest of ideas --- the long was taken out as the currency moved up strongly on USD news but the short was left high and dry. Today, the short was taken out, along with last nights short, because that is the nature of forex repeatedly seeking its original trend. If a stop loss had been used, there simply would have been a LOSS, but in this case, there was profit !
Now Im not telling the newbs to run out and do this in ANY way, but if the intermediate and good traders demo this idea, they should easily see what I'm referring to,
Not looking for an argument, BUT IF YOU DEMO IT, YOU VERY WELL MAY SHED SOME OF THOSE OLD IDEAS ABOUT STOP LOSSES, a stupid concept, not ever designed for forex and one that has probably wiped out more newbs than anything else invented !
enjoy and trade well
mp
Quote:
Originally Posted by mtardif
Hey, I understand where you're coming from. I'm beginning to think that setting stop loss points on every orders is a "come get my money" signal for "The House".
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