Quote:
Originally Posted by mp6140
Im gonna say that I PERSONALLY do not use stop losses ever !
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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.
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you must use correct money management, just in case...
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 !
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mp
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Hey mp6140, I have been doing financial modelling and I'll have to say that I am coming to the same conclusion that you have, which is that using stop losses is going to cause you to lose in the long run. By "in the long run", I mean 5+ years. Any EA that I have conceived that does not use stop losses manages to produce an uptrending equity curve over 5+ years. An EA that uses stop losses, at best, see-saws back and forth over the original starting balance. Sure, over a period of a few months you might have an uptrend, but in the long run, the best I can come up with is a sideways equity channel. You win some, you lose some, you lose some, you lose some....
As for "you MUST be trading in the direction of at least ONE of the 3 normal trends", can you elaborate? I'm assuming by "normal trends" you mean taking long positions when the 4-hour, daily and weekly chart are all signalling uptrends, and then you buy a dip on the 4-hour chart, and vice-versa for short positions? That is what I am modelling at the moment.
And that "money management" means assume you'll get caught in an unfavourable move and so don't risk all your equity on the one trade. Defining a trade as "one or more positions", meaning that you need capital reserves to "scale into the trade" as you add long positions on subsequent dips to lower your break-even price? (Which is what "they" tell you not to do?)
I must congratulate you because it take a lot of guts to come in and "just say no to stop losses". Most people just take that "always set a stop-loss" as some kind of 11th commandment handed down to Moses on the mountain. Don't mess with it. I am willing to explore different strategies. I am willing to not listen to "conventional wisdom". I am exploring lots of "what if" scenarios. I am doing my research and my modelling and so far my results point me towards the "no stop-loss coupled with excellent money management" as the only strategy that produces an uptrending equity curve "in the long run".