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Thoughts on stop losses...

Discussion in 'General Forex Talk' started by Justine, Nov 18, 2007.

  1. Justine

    Justine Recruit

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    Stop losses are hunted by brokers all the time.

    A lot of times tight stop losses get hit during whippy price action when volume is thin.

    You only need a stop loss if you are over-trading your account. For example if you are trading 1 mini-lot with 200:1 margin in $5000 account, 100 pip move against you, means nothing.

    If you entered a position and it turned against you, you could hedge by entering a position in another pair that tends to move the other way. (EUR/USD and USD/CHF for example).

    No currency pair moves up or down forever. There is always a retracement. If you trade really small, hedge (see the point above), when you see the signs of the retracement you could add (again small) to your position so that you could get back to even or profit sooner.

    In my opinion, stops are only useful in order to protect profits.

    Stop losses should be mental and used with discretion when it is obvious that the major trend has really turned the other way and there is no point to wait for a retracement.

    Anyway, the key to this strategy is to trade really really small. 1% or less for every position. It is very important to have enough money to enter small positions in different pairs that might move the other way till a reversal comes.


    Now, this opinion is mine and mine only. I know a lot of people would say that this is crazy, but so far this attitude towards stop-losses has worked well for me.

    I had 30 profitable trades and 0 losses since I have adopted this strategy 2 weeks ago.

    Any discussion welcome.
     
  2. Pharaoh

    Pharaoh Colonel

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    Justine,

    I'd love to hear an update on how well/badly this has worked since your original post.

    Personally, I don't think I could take a risk of that magnitude. Most pairs won't move more than a hundred or so pips in a day, but things can get lively at times. Also, if you are trying to ride a trend and it reverses, it may go many hundreds of pips against you before reversing (if it reverses). Just check out that long downturn in USDCAD, followed by the long upturn. Entering at the wrong time with no stoploss could have proven to be a very expensive mistake.

    My personal recommendation for your trading style would be to have an "emergency stop loss" at the absolute limit of how much you are willing to endure. Many brokers will run close stops, but there aren't too many that will try to spike a 200+ pip stoploss.

    Pharaoh
     
  3. OzWizard

    OzWizard Corporal Punishment

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    When are YOU people going to wise up.....

    Stop playing in the FOREX...

    Open a real account with a USA, NFA broker and trade FX futures...

    - 1 pip spreads (even at news time)

    - small comm!

    - $500 margin per lot (and at $12.50 per pip 2 lots can make ya $$$)

    - backed by the Chicago Merc

    TOALLY TRANSPARENT......

    Just look at a FX chart and see how it 'mirrors' FOREX...

    I am befudled WHY anyone would trade FOREX......... :confused:

    OZ
     
  4. Pharaoh

    Pharaoh Colonel

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    I am befuddled why Oz spends time here instead of on a futures forum somewhere. :p

    Maybe it's the obvious joy he takes in arguing with me. :D

    Pharaoh

    P.S. Just to try to extract some useful content from this:
    Oz, what sort of stops do you use in your futures trading?
     
  5. OzWizard

    OzWizard Corporal Punishment

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    My 'mission' is to LEAD you FOREX'rs...

    ..... into the promised LAND!!

    p GUY, GO LOOK AT MY LAST TRADE all IS THERE (stops too) - well of course NOT my actual strategy...

    ??? did ya ever play 4-square when you were a kid???

    OZ in Kyiv!
     
  6. Pharaoh

    Pharaoh Colonel

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    Who do I call to rescue me from people who are out to save me? :p

    Ummmm.... no. Somehow, I missed out on that. I guess I led a deprived childhood. :unhappy:
     
  7. OzWizard

    OzWizard Corporal Punishment

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    P - buddy... Seriously.... why.......

    ....???

    For the life of me I can only see 1 reason to PLAY in FOREX and not
    the FX futures....

    ! SMALL MONEY $ ! ;)

    Here in Ukraine there are 1 man operations (BUCKETs) that allow accounts
    as low as $20 USD!!! ha ha :eek:oh:

    With my USA broker $2,000 gets ya into FX futures and you can trade
    4 lots (thats $50 per point / pip)!!!! :D

    I have always made critical decisions using the PRO - CON list....

    FOREX just doesn't add up!!!!

    Your turn to tell me WHY you continue in FOREX? Is it $$$??

    OZ Wizard (in Kyiv) ...leader to the promised land!! ;)

    ps - Look at the chart of the Canadian FX, it mirors the spot perfectly!!
     

    Attached Files:

    #7 OzWizard, Dec 14, 2007
    Last edited: Dec 14, 2007
  8. Pharaoh

    Pharaoh Colonel

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    Hey Oz!

    I got your PM, but there seems to be a minor technical glitch that won't let me reply right now.

    I'm trading at MUCH smaller levels than you (10-20 cents per pip). Considering how well things have been going, this is probably for the best (although there are definite signs of improvement). Once I feel safe putting more money on the table, I night just check out your "Promised Land" of futures.
     

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