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Tight Stops can give false comfort
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Tight Stops can give false comfort

  #81 (permalink)
Trading for Fun
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Never use a tight stop because it gives you comfort that you are some how protecting your capital.
A tight stop can cause larger draw downs and reduce the expectancy of your system in a significant way.


With all my previous posts in this thread I was trying to disprove that second sentence from you first post. I am NOT contributing to this thread in a way you would want to, because I don't know a single person who thinks tight stops are comfortable. There were enough surveys showing that people prefer large stops and short take profit (equal to: letting loosers run, cutting winners short). I won't be able find the source. But William Eckhardt in New Market Wizards talks about this kind of survey.

Neither of the two claims you make are true. They are, excuse me, nonsense.

If you find my posts offensive I will stop, but I feel like I have to protect whoever reads this thread.

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  #82 (permalink)
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worldwary View Post
This is likely true with random entries. As I see it the primary function of exits (as I mentioned earlier) is to establish a favorable relationship between the size of the average winner and the size of the average loser. The primary function of entries is to choose a spot where the market is more likely to move to your target than your stop. In other words, to influence winning percentage.

Hopefully people who are trading with real money have an entry system that performs better than random entries. You may be right that most traders on the internet cannot do better than random entries, but I personally think it's not that hard to find a tradeable edge. The problem instead is that most people cannot tolerate the drawdowns that come even with a tradeable edge, and quit while they're behind.

Very good words.

If you look at profitability statistics, then to find an edge is almost impossible. I have to refer to my favorite Market Wizards book again . In Tom Baldwin's interview he says, that about one percent of proffessional traders, not amateur, not some else, but professionals will earn a lot of money during their first five years. The rest, 99%, sail off.

So, if you hear, that 10% of people make money and 90% don't, it is wrong. The 10% are simply experiencing luck, because whatever they trade fits the current market nicely. But except 1%, those 10% will lose money some time later, because they have no edge either.

Sorry, this is so offtopic, but I think these were the most important thing I discovered in my whole life. Some system perform better, because they simply have lots of heads in a row and experience abnormal winning streak. But those systems still have no edge.

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  #83 (permalink)
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RM99 View Post
In a word....no.

If you were to place your stop loss at 1 tick, your strategy would get absolutely slaughtered, I don't care what your profit target value was.

A strategy that has no edge will not get slaughtered by one tick SL, it must remain the same.

I will try to use one pip stop live in September (that's where I will have time) with a system that does have an edge and see if it works. So, I will trade currencies with one pip SL. We'll see how it goes.

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  #84 (permalink)
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ReaM View Post
A strategy that has no edge will not get slaughtered by one tick SL, it must remain the same.

I will try to use one pip stop live in September (that's where I will have time) with a system that does have an edge and see if it works. So, I will trade currencies with one pip SL. We'll see how it goes.

I won't be holding my breath.

Like I said, I don't care what kind of edge you think you've developed. Between slippage and commissions, there's no edge in the world that's going to hold up (maybe not even for a short duration) with a tick stoploss on anything other than something incredibly solid and low volume.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #85 (permalink)
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Well, obviously I will not tell my edge to anyone, because it will stop being an edge. In my whole life I only found two things that work and before I found them I was trading systems that had no edge but performed well in current years.

I will post the actual statement showing average win average loss, profit etc...

Others should also feel encouraged to test things =)

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  #86 (permalink)
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Tight stops are the least comfortable thing in the world <--- this is what I said in my previous post.
Large stops feel a lot more comfortable.

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  #87 (permalink)
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liquidcci View Post
Actually I saw you recently posted this below on another thread at it explains quite a bit. I am amazed you would come to a thread to protect and tell everyone how it is when you are a new trader and don't know what futures are. Nothing wrong with being a young new trader as long as you don't act arrogant. Like I said earlier sounds like you have a read a few books and feel like you are now the expert. Come back in a few years and I might listen to what you have to say.

I don't trade futures. I trade spot currencies. I know what futures are, a contract at a settlement date in the future at a price that is decided now. I know US futures have quarterly experation dates, London has monthly experation dates, but that's all I know. I know nothing about them.

I am not a new trader, I trade since 2008, I trade profitably since 2008. I manage money for my relatives and already one friend. I will accept public money in 2012.

That I don't know futures has nothing to do with me not being able or being able to trade.

Anyone knowing markets well will accept the fact that moving SL to 2:1 increases winning rate to 66.6 and decreases to 33.3, given it is a strategy with no edge (flip coin system)

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  #88 (permalink)
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And you still should give up on two things:

1. Tight stops give comfort
This is WRONG. Large stops give more comfort. Letting loosers run seems more comfortable psychologically. Tight stops have absolutely no comfort. You are sitting there and watching it being approached and almost touched instantly.

Yet I must say: That which works is always something least comfortable. Watching your profit run and wanting to close. That's not comfortable. Using tight stops is not comfortable, but for my strategy it is a must.

2. Tight stops increase draw down.
This is wrong, because tight stops work just like any other.

By the way, none of my posts here show me I distinguish myself from someone who knows how to trade. And yes, I read most books.


liquidcci View Post
24 and trading since 2008 I would say you are a new trader. Accepting public money and you are new to forex and just learned what futures are in March of this year. Really? Good grief.

I know since 2008 what futures are (you can see in that post that I said I know they are closed overnight), but I never showed interest to them ever since, because of success in foreighn exchange.

I don't have to listen to a word about decisions to trade someone's money by someone who's been trading for 20 years and still shows no signs of knowledge.

I know I will never blow my account, because I know my edge. I know it, because whatever I trade has worked for the last 100 years. I know why I have that edge. I know I can teach it. An edge can be taught and it's a good sign it really is an edge.

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  #89 (permalink)
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And yes, we should stop that.

Good Luck

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  #90 (permalink)
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Sorry to those who follow this thread for the drama in the last few set of posts this weekend. I did not like poster ReaM taking my statements out of context then trying to argue against them with absolutes. I do not mind opposing opinions but twisting games I do not like. I let it get to me and began to make it personal. I actually came to big Mikes from other boards because while enjoying debate do not enjoy childish endless loop arguments. I appreciate that most posters on this board are respectful and do not play such games. The quality of posters and posts is why I am at Big Mikes as opposed to other boards.

In order to end the drama I did what I should have done early on and ignored ReaM. I also deleted a few of my own posts where I was borderline making it personal. While the things I said were true I do not like stooping down into childishness.

So lets get back to our stop discussion.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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