Never Use Stop Losses
December 9, 2007 by Trader Rich
I just wasted my time listening to the latest trader interview of Mike Parker on http://www.traderinterviews.com. If you've read this blog for long enough, you'll know that I'm very suspicious and pessimistic about what I read from other people on the internet. In my opinion, this interview just stinks and screams of suspicion. He never uses stop losses. I can understand using mental stop losses but Parker doesn't use any. He also makes it sound like he never loses. He's a trend trader and states, "if you are trading with trend, it is literally impossible to lose". Well, I really must be doing something wrong because I've found ways to lose trading with the trend. The interviewer presses him to find out what happens if the trend reverses. When do you get out of the trade? Parker states that he's "rarely seen a trend change." Again, I must be doing something wrong. Maybe I should stop using stop losses. Stop losses are, after all, the only reason I lose. Anyway, Parker has to have some pretty big drawdowns and I personally wouldn't recommend not using stop losses. I don't make consistent returns though so how would I know.
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I listened to that interview as well and I’m being kind by calling him a liar.
Predetermining the risk of a trade I think is the only rule all traders must maintain. - No exceptions -
Harvey, glad I’m not the only one. I hate to rip the guy even more but I’ve never head someone so boring.
Lot of people don’t use stop losses. Banks don’t use stoplosses, carry traders don’t use stoplosses, if you have a hedge trade you don’t need to use stoplosses, if you got enough capital you don’t need to use stop losses, if you’re trading long term you don’t need stoplosses etc…
By putting stoplosses, you expose your position to your broker and could become a victim of a stop hunt.
We have a moto when we trade, “Go hard or go home!”
That’s why 95% of all traders lose money. They are the ones who use very close stop losses.
If you want to try this non-stoploss strategy, please sign up to my Forex Broker company wetakeyourmoneyfx.com
I agree with the gentleman in the interview. The only way you can make money is a combination of two things. Eliminate the use of the stop loss order and use proper money management. The only time I use a stop loss order is when I am going to be away from my screen. It is used to protect me from some catastrophic world event and it is placed way out there. I don\’t use a stop loss order in the same way 95% of most traders use it.
I don’t know about not using stop orders but if your mm is not okay then you really have not been trading for a long time to see what can happen when the market goes crazy.
all it takes to wipe out your account is someone dumping pounds for no particular reason, then you will know to always use stop loses.
Rich, I think you may have been too hard on this fellow. I don’t know if he’s being intentionally vague about his exits or if he’s just trying to move the interview along and sound cool and successful, but I don’t really get the impression that he is a fake or a fraud.
The problem in my view is his passing reference to money management without elaborating. Let’s say we are using no leverage whatsoever when we trade the GBP/USD and we’ll tolerate a 10% loss as an absolute disaster stop…well okay, we may not put that stop loss into the market because we expect that it will never get hit…then we can happily go along and talk about dynamic support and resistance and reversals and so forth and say that we don’t use stop losses.
For a smaller time frame trader who leverages himself to the hilt like me, I’d better damn well have a stop loss or I could blow up my account in a week…that’s purely a function of my leverage though.
I know, it IS an unsatisfying interview though, and I certainly don’t take anything away from it that I can use other than to research dynamic support and resistance and Murray Math (sic?)…what the heck is that?
If there is one thing I know as a trader is that bad things can happen and they do happen. Having been wiped out at least 3 times trading, one lesson I have learned is to damn well better put my stops on ,whether I am watching the screen or not.
I have been in situations where the market does 100 pips and more in both directions in less than a minute and I can assure you, stops are like my family. I can never leave them behind.
There was a time I put ‘mental’ stops only to have my broker take “actual” money from my “real” account.