Trading without SL. How to protect against flash crash?

[qvintus]

Not necessarily true. Some of those who had a hard stop loss that wasn't triggered during the CHF crash were compensated by their broker. Those without a hard stop loss were on the hook for the losses.

Only criminal MM brokers could compensate you. True ECN brokers like Global Prime/IC-Markets and others won't compensate.
Jeremy maybe is reading this and could drop a message here.

[afeudale]

Only criminal MM brokers could compensate you. True ECN brokers like Global Prime/IC-Markets and others won't compensate.
Jeremy maybe is reading this and could drop a message here.

I guess I see your point - if the currency just falls off a cliff with no liquidity, then the broker can't fill your SL order even if they wanted to. Although some brokers have guaranteed stop-loss protection (with an additional premium) where they buy insurance against your trades to protect against just such a thing. Not sure if that qualifies as criminal

That said, 99.99% of people's losses on Forex don't come from black swan events such as the CHF crash, rather from those large regular currency swings which I still maintain that hard SL's can definitely help.

Forex obeys the laws of Levy Flight and if people think that the random-walk is all that will happen, they will be in for a big surprise when the rare - but guaranteed - "flights" happen and may even interpret those as "flash crashes", when in reality they are just part of the deal.

[Jemook]

Not necessarily true. Some of those who had a hard stop loss that wasn't triggered during the CHF crash were compensated by their broker. Those without a hard stop loss were on the hook for the losses.

Only criminal MM brokers could compensate you. True ECN brokers like Global Prime/IC-Markets and others won't compensate.
Jeremy maybe is reading this and could drop a message here.

Yep, we can and do rebate when there is a technical error on our side. Don't forget during CHF crash we had quite a few clients contacting us and on this forum saying their SL was filled at the 1.18 mark which is way better than where it crashed to afterwards.

I think a SL is important. We have spread filters in place which help protect from random spikes that can get thrown from time to time. In the event that the spike was a proper market move and the SL gets hit I'd rather be out than risk not having a SL and a CHF situation occuring again.

Of course a SL doesn't always help with a market gap but luckily it did for our clients on EURCHF.

Cheers
Jeremy

[mlawson71]

I view stop loss as a safety net. Even if there's nothing abnormal happening on the market, the possibility that you could lose your internet connection and therefore your control over your account - even for a little while - exists. It's better to be prepared for it.

[RainMaker]

One of the points of a SL is to protect you from sudden falls in price. My personal view is that trading without a stop loss is madness. I really hope that you see the light soon before your account is wiped out

[SteveHopwood]

One of the points of a SL is to protect you from sudden falls in price. My personal view is that trading without a stop loss is madness. I really hope that you see the light soon before your account is wiped out

I trade without a stop loss.

Bearing in mind whom I am, think carefully before answering this question: do you think I am mad?

Or this subsidiary question: do you think I need to see 'the light'?

Here is a much easier and decidedly non-threatening one: do you imagine that some of the more experienced people here might have learned a bit about trading, even those of us who do not use a stop loss? Those of us who have been trading for about a decade? And survived the experience?

Ok, so maybe that last question is not so un-threatening as I intended it to be when I started asking it. Hey ho. Words just tumble from my fingers sometimes.

This next one is as threatening as can be on my forum. Bearing in mind that I am a ruthless tyrant who suffers no fools and that you have been around for about 5 minutes and have an opinion of no value: do you really want to imply that the more experienced of us here are cretins?

Over to you.

[afeudale]

Ha Steve! Your eloquence with words always cracks me up! I felt threatened and I didn't even write that post! lol.

I totally agree - if you've been trading that long, of course you would have insights and knowledge that an inexperienced trader couldn't have. As I always say, there is no substitute for experience...

Technically though, can you share some ways in which you prevent catastrophe when trading without an SL? Small lot sizes? An EA to manage it all? Constant monitoring?

Thanks!

One of the points of a SL is to protect you from sudden falls in price. My personal view is that trading without a stop loss is madness. I really hope that you see the light soon before your account is wiped out

I trade without a stop loss.

Bearing in mind whom I am, think carefully before answering this question: do you think I am mad?

Or this subsidiary question: do you think I need to see 'the light'?

Here is a much easier and decidedly non-threatening one: do you imagine that some of the more experienced people here might have learned a bit about trading, even those of us who do not use a stop loss? Those of us who have been trading for about a decade? And survived the experience?

Ok, so maybe that last question is not so un-threatening as I intended it to be when I started asking it. Hey ho. Words just tumble from my fingers sometimes.

This next one is as threatening as can be on my forum. Bearing in mind that I am a ruthless tyrant who suffers no fools and that you have been around for about 5 minutes and have an opinion of no value: do you really want to imply that the more experienced of us here are cretins?

Over to you.

[SteveHopwood]

Ha Steve! Your eloquence with words always cracks me up!

I always try to entertain.

I totally agree - if you've been trading that long, of course you would have insights and knowledge that an inexperienced trader couldn't have. As I always say, there is no substitute for experience...

Technically though, can you share some ways in which you prevent catastrophe when trading without an SL? Small lot sizes? An EA to manage it all? Constant monitoring?

Thanks!

Tiny lot sizes.

Many experienced traders accept a certain percentage of risk per trade and the most common one appears to be 2%. I am not arguing with them - they have their tried and trusted methods.

For me, it is tiny lot sizes. Live to trade tomorrow.

The only times recently that I needed to close positions at a decent sized loss was when I was overtrading.

Again.

As usual.

I like to trade 0.01 lots per pair (biggies + GJ) per $1,000 of balance. Grid trading is great when it is immediately successful, but 10 open 0.01 trades = 0.1 lots traded and is a bit of a bugger when the markets turn around and go against me.

I found myself with huge numbers of trades open when Trump won the presidency. We are talking hundreds of 0.01 trades here and a margin level of <500%. The markets were decidedly jumpy and I could see the possibility of a strong move against my trades wiping out the account, so I shut down. I lost 20% of the account. The trades might have recovered and saved me a few hundred dollars. They might have continued against me and wiped the account. I don't care. I have learned to listen to the voice inside my head that asks, "Should you close down now" and do so as soon as I hear the question.

Thing is though, that was 20% of an account I had built up nicely over preceding months. Overtrading yes, but not like I did in my early years when overtrading would have killed the account before I even had time to consider saving it. So, I still had 80% of a moderately decent trading account left and plenty of potential for growth - and it has grown courtesy of HGBnD.

I am not telling anyone how to trade here. Up to you guys whether you try HGBnD or not. Up to you whether you set a stop loss that represents x% of your trading capital.

I am just telling you how I trade without stop losses. Of course, it helps that HGBnG sets up hedged grid trades, so a monumental move in either direction will eventually trigger the stops. It might take a while in a flash crash though, but nothing is ever perfect. Anybody here who seriously believes that a stop loss will help there is living in a dream world.

A dream world that could turn into a nightmare world at any second.

Which brings me onto another hobby horse of mine. Sorry that this is turning somewhat elongated, but you have brought up thingies that I think noobs should know.

Here is this other hobby horse: never trade with funds you cannot afford to lose.

Not wanting to lose money is different. Nobody wants to do that. Being desperate not to do so is different. It will lead you to make hasty decisions that will ultimately turn out to be wrong. Guess how I know? Guess why I am so relaxed about trading these days?

You need to max out the credit card to make a trading deposit? Forget it. Carry on playing on demo whilst you save up a stake that will not result in you losing your home should you blow it.

Hmmmmmmm. This has turned into a bit of a homily, so I shall stop now. Just bear in mind guys, that trading the credo I outline above is the one I live by. 1% of the profits I make go to our UK NSPCC every month. I do not trade merely for a living. Give that some thought also.

[afeudale]

Well said Steve! Thank you!

I donate about $10k/yr to various charities, and also plan to donate proceeds from trading to charity, since I feel that gains on Forex are probably ill-gotten (i.e. taking from newbies...doubtful any of my wins have institutions on the losing end...), but I guess I need to be profitable first before I can start to donate! hahaha.

p.s. what's up with pianists also liking forex and programming? I play as well - although not professionally, nor nearly as accomplished as you. Best I can do is Moonlight Sonata (and not the 3rd movement for sure!).

Ha! That's my random tangent of a ramble...lol