Can You Trade More Profitably Without Stop Losses?

Who knows…there in lies the problem. I been in trades like this and wish I had implemented these stop loss strategy….. Read about how we use cookies and how you can control them by clicking "Privacy Policy". An out of the money put option works like a wide stop loss on a long position. All have their pros and cons, I think it comes down to which method resonates with each of our own trading personalities. The Hands Off approach reduces the chance of being stopped out too early by keeping your stop loss at a safe distance.

If you are willing to try trading without a stop-loss, there is a specific no stop-loss Forex strategy. But please note that despite similarities between Forex and the stock market – Forex traders rarely use the same strategies as equity traders.

SWING TRADING LESSONS

Who knows…there in lies the problem. This is where it pays literally to trail your stop manually using price action levels as the basis for your decision. The basic principle with manually trailing your stop loss is the same as the automated way. It goes without saying that not every trade will work out this perfectly.

My initial profit target was pips away. So right off the bat this represented a 4. Although I focus on money risked vs. That was the potential gain on this one trade. On the second day 2 above my order to go long was filled with my stop loss 35 pips below. This immediately cut my risk by more than half. Instead of risking 35 pips I was now risking 15 pips.

This brought my 2. Why did I do this? I figured if there was any chance of a push higher it would come without breaking the low of the inside bar on day 2. Once day 3 closed, I was obviously in the green and had the bullish conviction I was looking for.

Notice how day 3 closed — just a few pips from the high of the day. Price action signals such as this can also tell a lot about a market. The rest is pretty self-explanatory. So what was the total percentage gain? I was initially risking 2. This is the icing on the cake so to speak. There is nothing complicated about this stuff.

No proprietary indicators or confusing algorithms. Need clarification on something above? Well you missed my favorite, volatility based stops based on the average true range or a multiple thereof. Great article none the less.

Volatility-based stop losses can be effective. All have their pros and cons, I think it comes down to which method resonates with each of our own trading personalities. We are all looking for that stop loss method that is the best — I think those ones you touch on ALL have merit based on market conditions and ones tolerance.

Also ones general knowledge of trading — for me the stop loss method I use comes down to my trading instinct or intuition a lot of what is derived from my general trading knowledge, current swings, market pace, whats happening on higher time frames etc etc.

I really love your instruction. But I think I will not sleep tonight due to I drunk 2 cups of coffee and tea as your instruction. But will try my next week trading by that way. The article is clear, simple, and testable, and can be analyzed if the trader backtest the different ideas. Thanks for this insightful article and lesson. It is indeed a great eye opener on different stop loss stratagies.

I never understood trailing stop loss in this way before. I am so glad and i will put it into pratice and see how it will work out. I been in trades like this and wish I had implemented these stop loss strategy….. When trailing your stop, does this assume you have not set a final sell or buy target?

Or do you trail your stop irrespective of your final target? Thank you very good article. Brilliant article Justin, just wondered though how you determine where to place the stop on the days low?

By how much off the low for example which surely is where a high proportion of the stops are placed? Fantastica ora so finalmente come posizionare correttamente gli stop loss senza farsi prendere dal panico, fermare commerci favorevoli e aumentare i guadagni. Please log in again. The login page will open in a new window.

After logging in you can close it and return to this page. Sumantra Kumar halder says: Session expired Please log in again. Far from being smooth and orderly, forex pairs have a tendency for bursts of high volatility.

These events are common at breakouts. These fake-outs are where the market makes a false break in the other direction before eventually reversing. Spreads are also on the rise which further increases the chance of a stop out see above point.

Most trading strategies will hold more than one trading position. So given that most markets are correlated to some point, does it make sense to manage stop losses independently? This is ordinary hedging. With some strategies , hedging can be a safer and more reliable way of protecting downside losses than stop losses.

Some say that trading with stop losses leads to lax analysis and sloppy trading. Perhaps this is because the trader subconsciously sees the stop loss as a safety net. In the same way that riding a bike with safety stabilizers could make you over-confident as well as more prone to take uncalculated risks.

The trader without stop losses might be more prudent in the choice of trade, money management , and the control and monitoring for the account. This final point is the killer. When the market collapses and liquidity dries up — something that happens from time to time — a trade will exit at the first price it happens to hit.

That could be many percentage points away from a stop out level, potentially leaving you with massive losses. Here are some alternative ways you can protect downside losses without using broker stop losses.

It comes with caution though. Omitting stop losses should only be done with full consideration of the risks and after careful testing. With dynamic stop loses you need a piece of software to keep watch on your account such as an expert advisor. The software continually checks the floating losses on open trade positions. When a loss-limit is reached, one or more of the positions is automatically closed.

This limits downside losses on the account. A complete course for anyone using a Martingale system or planning on building their own trading strategy from scratch. It's written from a trader's perspective with explanation by example. Our strategies are used by some of the top signal providers and traders. Dynamic stop losses allow for much more flexibility than broker-side stops because the software can apply any logic that you want. Hedging means that one trade position is covered by another.

The difference between the two determines the profit — but once both trades are in place the profit or loss is locked at that amount. With a more practical hedging strategy a trader would use different currency pairs as well as other instruments to create a basket that has lower volatility with improved risk-adjusted returns. Ideally they will also use a VAR calculator to estimate the account exposure. This checks the overall effect of hedging between each position in the account. Options can be a great way to protect downside losses in place of stop losses.

They do require a bit more planning but once mastered can offer at least as much protection. With this approach the trader buys out of the money call or put options that will cap the downside losses on one position or even on the entire account. An out of the money put option works like a wide stop loss on a long position. While an out of the money call option works like a wide stop loss on a short position.

But options do have a cost even though by using out of the money options this cost is relatively small. In a worst case scenario if your positions go south the options will pay out and protect against the downside.

A scalper for example would look to make only a few pips on each trade. Each position may only be open for a few minutes or hours. During this time the trader is monitoring it closely and is ready to react if it goes into the red.

That is simply to hold a small reserve balance in your trading account. Not surprisingly this is not recommended.

The 'Hands Off' Forex Stop Loss Strategy

This is a No Stop Loss Forex Trading Strategy.. Its just an idea that if you know how to code an MT4 expert advisor, you can follow the trading rules below and see if its profitable in the long term or not. Floor Traders Method With No Stop Loss Forex Trading Strategy This is a variation of the floor traders Forex Trading method and the only variation is not to use a stop loss initially when you enter a trade. As a Forex stop loss strategy, the break even stop loss is the easiest to implement. This is because, as stated in the last point, there’s no need for market analysis. This is because, as stated in the last point, there’s no need for market analysis.