Thread: Best way to keep losers small?

Two popular adages of trading include:
-Cut your losers
-Let your winners run


there's obviously a balance between each which must be achieved, but focusing just on'cut your winners' with regard of how that impacts profit potential, how does one go about ensuring that losses will be as little as possible?


I'm torn between 2 approaches:
1- Place your stop in and leave it
two - Move your stop to breakeven

Clearly there's an 3rd option that's to track your stop, but I have not been a lover of this.

Do any info wizards have a response to which can be the very best at controlling losses?

Recall: Let's look at which will be the most profitable, but rather that one controls loss the ideal.

Here is exactly what you should do: Locate a pattern or anything you like to exchange. Subsequently ghetto-backtest it to determine where your average turning points are on a trade(i.e. at which the price would have begun reversing). For instance if you detect you become scared of a winning trade going bad and you also skip out after 20 pips, then mark (after some time has passed) how much more it could have gotten if you kept with it. You then repeat that for a few (hundred) of your patterns and write it down, then calculate an average.

And by ghetto backtest I suggest take a block of paper, quantify your pattern on the chart, write it down on a newspaper and replicate this for as far back as you desire. I am not using MT4 so I dont know how far it's possible to backtest by scrolling back (on fxtrade customer its 6 months on 1 hour charts). Then figure out the average. The important part is your ghetto, you have to become one with all the newspaper and chart at the same time you do it. It's dull as hell, but it should give you a good average about where to set your ceases and take-profits. By doing the boring hard measuring it yourself builds your confidence because you made that thought you have your own. Also helps with all the urge of closing a winning transaction too early because you know statistic is probably on your side.


Additionally about controlling losses. Stick with your stop-losses no matter what. Never-EVER adjust your stop loss deeper to the negative.

Originally Posted by ;

This is exactly what you ought to do: Locate a pattern or whatever you like to exchange. Then ghetto-backtest it to determine where your average turning points are on a trade(i.e. at which the price would have started reversing). By way of instance if you detect you get fearful of a winning trade going bad and you also skip out after 20 pips, then mark (after some time has passed) just how much more it would have gotten if you retained it. Then you repeat that for a few (hundred) of your patterns and write it down, then calculate an average. And by ghetto backtest I mean have a block of...

Ghetto backtesting is a pain in the ass, just how do you think I know this, which is the reason I'm asking in case anyone needs to have the information to hand.

My spine testing times doing it by hand are over, 100 is not even enough, you need 1000 of trades imo.

If you are entering a transaction, you must be having some notion of which way you are expecting the price to go. If it doesn't do what you anticipated soon after inputting (depending on the timeframe you are using), you've obviously made a mistake in estimating it properly. I suppose you need to exit right there, instead of waiting for it to hit your stoploss.

But at the ass-pain* is located the secret.
Once you write down a couple hundred measures you put them to a spreadsheet and you are able to compute your own averages and so forth. You should take pride in it, since you crunched the numbers yourself. And when/if your data leads you to greater take-profits or even better stop-losses it'll make sense.


*ass-pain is meant metaphorically, not literally. If you start feeling ass-pain go see a physician.

Personally I never like to move a stop loss. I set my take profits with a minimal ratio of 3:1 contrary to my cease, if the trade does not work out which happens I am prepared to take that hit. Previously I used to maneuver both stops and limits, it may work for the odd trade but over time I have burnt.

Originally Posted by ;

But at the ass-pain* lies the secret. As soon as you write down a few hundred measures you put them into a spreadsheet and then you can calculate your own averages and so forth. You should take pride in it, since you crunched the numbers yourself. And when/if your own data leads you to better take-profits or better stop-losses it'll make sense. *ass-pain is intended metaphorically, not literally. If you start feeling ass-pain go see a doctor.

Why do you call your explorer saturn? Are you into astrology? Hope u dont mind me asking.

Originally Posted by ;

Two popular adages of trading include: -Cut your losers -Let your winners run There is obviously a balance between each which must be attained, but focusing just on'cut your losers' with regard of how that affects profit possible, how does one go about making sure losses are as small as you can? I'm torn between 2 approaches: 1- Put your stop in and leave it 2- Move your stop to breakeven Obviously there's an 3rd option which is to track your stop, but I have never been a lover of that. Do any data wizards have a response to which is your best...

verv, I think when/if people discover some edges they develop with popular adages like cut yr loser-let your winners run the trend is your friend that only applies to their own systems. So I dont think its a good idea to follow them by the letter.maybe there are edges or profitable systems around who just contradict those adages. So maybe its good to not be too rigid in our approach. Now regarding your question, for me the ideal way to keep losers small is to keep sl little. I trade grids so that the only way I can lower my losers garanteed, is to tighten sl. However, as u said doing just this is not the answer. Can I ask you why you asked that question though.

Tough to take loss when u need win just.
Predefined quit is good but in very strong fashion move to breakeven is good.

Originally Posted by ;

quote why do you call your explorer saturn? Are you really into astrology? Hope u dont mind me asking.

I called it after the Saturn 5 rocket. ( https://en.wikipedia.org/wiki/Saturn_V )
I like astronomy, not astrology.

Astrology is savage medieval stupidity. Never use astrology for trading decisions or any other decision .