The appropriateness of using Take Profit and Stop Loss in automated TS. - page 6
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The paradox of the situation, which is that EVERYONE knows that stops must be placed and no one explains the reason for this necessity, is imaginary. It lies in the fact that we unconsciously do not divide the ideal model - MARKET-MTS into two important components - the MODEL proper and the FORSMAGER. From the point of view of the ideal model, stop-losses and take-profits are really unnecessary - all the necessary operations of opening and closing market orders are performed by the MTS. And in this respect our intuition and model experiments do not fail us. But we also know for sure that there are slippages, connection interruptions, hangups, etc., etc., in Nature. These factors can lead to unpredictable (as in catastrophic) consequences that are not inherent in the ideal model. By the way, anything that is different from the ideal case is profitable for the brokerage company. This is understandable, for it is an ideal system that even a step to the side would make it worse!
1. stops are precisely what is needed to prevent possible disasters.
2. Stops will inevitably decrease efficiency (profitability) of any ideal model, but this is an unavoidable payment for possibility to work in real world with real money.
2. Stops inevitably reduce the performance (profitability) of any ideal model, but this is the inevitable cost of being able to work in the real world with real money.
It turns out that the duplication of communication channels and phone conversations with DC, in case of failure of ALL possible ways to get to the Internet will not justify itself? Maybe this has a place in scalper strategies, and I was researching trending, that's why I'm talking about everything, and imply only trending. Sort of like going online at night and closing a trade is easy. In addition, the brokerage company may arrange a stop loss campaign, or even not the brokerage company but a fund. And a person making a right entry will exit with a loss.Lack of takeovers is greed. Lack of stops is recklessness and hopefulness. Both these sins will be mercilessly punished by the market. Sooner or later.
Well, it's kind of known a priori. Why did I bring it up, to be able to compare calculations. And provided one in turn. Could you give some example to support these dogmas.Well, this is a priori known. Why did I bring up this question, to be able to compare calculations. And I gave one in my turn. Could you give some example to support these dogmas.
but what other way is there to guarantee an exit from a losing position than a stop loss? Even without a breakdown and a constant presence of the EA. What is another algorithm for a guaranteed exit from a losing position? Let it be a market order, for example? All the algorithms ensure the compulsory closing after the price has passed a certain level. Otherwise, there is no guaranteed closing, and the losses may be as big as desired (speaking of fat-tailed price increments :)). There is a good option of a forced exit by time (e.g. holding a position), but it still allows unlimited losses (except for the size of the deposit :)).
There should be a stop loss, but it should be triggered on rare occasions. I.e. other methods of exiting the market and loss-making positions including
I only use logical stop and profit( I don't usepending orders either) ... i.e. they are not specified in the order, but calculated on a specific situation in the EA and worked out by it ...
I don't have any problems with placement and you don't need to write me on this subject.
The advantages are obvious:
1) no one sees your stops (put off) and neither the market nor the docs specially go for them
2) does not depend on levels of stops, pending orders in DTs
3) contact with doc only at position opening and closing (no need to change anything on the server and clog the trading stream of the terminal)
4) stops are optimized according to current situation ... so if the trend is clearly in your direction you have to take it, not a fix profit ... and often it happens, you need to hold a negative until there is a clear signal for opposite situation, and fix stop would work ...
In general, of course, a lot depends on the particular strategy, but I'm sure any strategy can be implemented with logic stops, and it will give at least the same result and will have more potential for development.
but what other way is there to guarantee an exit from a losing position than with a stop loss? Even without a breakdown and a constant presence of the EA. What is another algorithm for a guaranteed exit from a losing position? Let it be a market order, for example? All the algorithms ensure the compulsory closing after the price has passed a certain level. Otherwise, there is no guaranteed closing, and the losses may be as big as desired (speaking of fat-tailed price increments :)). There is a good option of a forced exit by time (e.g. holding a position), but it still allows unlimited losses (except for the size of the deposit :)).
There should be a stop loss, but it should be triggered on rare occasions. In other words, other methods of exiting the market, including loss-making positions, should be foreseen.
So you are in favour of a technical stop. I agree with that. Somewhere to put it at 400-600 pips. :) So the dogma itself should be rewritten. We need to think about the wording...I only use logical stop and profit (I don't use pending orders either) ... i.e. they are not specified in the order, but calculated on a specific situation in the EA and worked out by it ...
I don't have any problems with placement and you don't need to write me on this subject.
The advantages are obvious:
1) no one sees your stops (put off) and neither the market nor the docs specially go for them
2) does not depend on levels of stops, pending orders in DTs
3) contact with doc only at position opening and closing (no need to change anything on the server and clog the trading stream of the terminal)
4) stops are optimized according to current situation ... so if the trend is clearly in your direction you have to take it, not a fix profit ... and often it happens, you need to hold a negative until there is a clear signal for opposite situation, and fix stop would work ...
In general, of course, a lot depends on the specific strategy, but I'm sure that any strategy can be implemented with logic stops, and it will give at least the same result and will have more potential for development.
I wanted to suggest something along these lines. People talk a lot about crisis situations, all sorts of cases, but it turns out that the system suffers and often badly.So you are in favour of technical stops. I agree with it. I would place it 400-600 pips somewhere. :) It turns out that the dogma itself should be rewritten. We need to think about the wording...
400-600 is too much. It depends on the average holding time of the position and the volatility during the holding period. The main thing is that there must be other ways to exit, which will usually be triggered before you reach a stop loss. Then using a stop can become economically advantageous, and not just technically just in case. Correct stops will cut off thick tails in price increments. Otherwise, stops will not be economically viable. But these tails are always possible and they can be, as they say, kicked in the face or catch a "black swan".
Well, it's kind of known a priori. Why did I bring it up, to be able to compare calculations. And provided one in turn. Could you give some example to support these dogmas.What calculations? Calculations of what? Catastrophic situations that can and do occur in the market? If someone could predict it, it would be a grail. Your formulation of the question is completely wrong, which is why the result is so strange. Key words: thick tails of distributions, black swans.