Originally published in French on objectifeco.com, February 11, 2014. The site was purged in 2016; this text survives only in the Internet Archive (Snapshot). Translated, not rewritten: what follows is the original argument as it was made, including what time has since proven wrong. Where that happens, you'll find a note from the desk, dated 2026.
How do you win at trading?
I promise I'll answer that question by the end of this piece, but to understand the answer, you'll need to read all the way through, or you risk missing the whole point.
And to get there, I first have to take on a rumour that just won't die.
I hate opening a piece, let alone opening the week, with bad news. And I'd promised Charles at the start of the year I'd make an effort to stop shattering traders' dreams.
But what can I say: in trading there are things you can't afford to ignore, or your account's ruin is guaranteed. And winning still starts with not losing.
For several weeks now, the CAC has been locked in a corridor, purring away inside it.
As a result, the best-performing strategies have been the ones doing what's called counter-trend trading: buying or selling into a small acceleration, betting on the next consolidation.
Human beings are wired to think in straight lines. The markets are anything but. It's the main reason most people fail at active trading: we rely far too heavily on the idea that whatever worked in the past will keep repeating the same way.
When the market breaks out of the consolidation these counter-trend strategies thrive on, it accelerates, and often quite violently. That usually leaves this kind of strategy holding a heavily losing position.
The answer's obvious, isn't it: just put on a stop!
A stop is a reassuring thing. It tells you exactly what loss to expect, doesn't it?
It's comforting: when the market accelerates against you, you know you're covered.
Are you quite so sure about that?
A demonstration beats a long theoretical lecture. I'm going to lay it on thick, deliberately.
Take this strategy: it goes short whenever the market accelerates.
Desk note, 2026: the original illustrated this strategy with charts of its trades and results. None of them survived in the Internet Archive copy, so they are missing here; every figure the argument rests on is quoted in the text.
Here are the numbers it produces over the last fifteen years:
You get a 95% win rate over close to 400 positions. Not bad, is it.
On top of that, the average gain per position is 9 points (at €10 a point, that's €90).
One detail, though, should already make you frown: the average losing position is far bigger than the average winning one.
Most strategy vendors would show you this equity curve (often because the software they use doesn't give them any other option):
A 95% win rate, a curve shooting straight for the sky. And that's nothing next to the one where the size gets ramped up as the curve climbs.
What more could you ask for?
Now let's put up the detailed performance curve.
The bride's looking a little less beautiful now, wouldn't you say?
More to the point, the make-up is starting to crack: there are stretches of heavy losses that hurt both morale and the portfolio. Drawdowns of 500 points (12%) on a single position, and that's before any leverage!
And this is where you're supposed to tell me: "no problem, just add a stop."
In theory, you're absolutely right. But what actually happens in practice?
Rather than take those heavy falls on this strategy, I add a stop at 2% of my entry price. When you're trading with leverage, 2% is already not bad at all, I promise you. But you'll see it's more than enough to make our point.
Let's go back over our positions and see what it does:
You can see quite clearly that the second position got cut by the stop. That's good news: it spent a long time underwater, and the losses could have been severe.
Likewise, the last two positions on the right of the chart get cut by the stop. That's less good, because in the end those positions would have come out winners if we'd left them alone.
So what does our performance curve look like now?
And no, you're not dreaming. Our beautiful bride has turned into a strategy that's barely profitable. And yet we're still winning 83% of the time!
Far more importantly, the maximum loss, which used to run around 500 points, is now over 1,000. Ouch!
So what actually happens when you add a stop?
This holds true for EVERY trading strategy there is.
On the plus side, we cut every badly-timed position with a contained loss.
And it has to be said, there isn't much else on the plus side.
On the minus side, we've got plenty of positions that would ultimately have won, cut for a loss because of the stop.
In concrete terms, adding a stop means swapping a few big losses for a great many small ones. And some of those small losses come straight out of gains that would eventually have materialised if you'd left the position alone.
Of course, if you never do anything and never put on a stop, the outcome is exactly the same: fatal.
On one side, you're told: you must use stops.
On the other, I'm telling you: whatever you do, don't (meaning: because it degrades a strategy).
Desk note, 2026: this is an argument about what a tight stop does to a strategy's statistics, not advice to trade without one. Samuel's own rule, a few paragraphs down, is that a stop which triggers only in a genuine crisis is compulsory.
The difference is, we're comparing apples and oranges.
IF you trade the market discretionarily, there's nothing harder than cutting a position at a heavy loss. I've watched with my own eyes clients unable to click the mouse button to close their position.
I've seen people cut a position, then re-open it five minutes later, having convinced themselves they couldn't possibly be wrong.
YES: for a discretionary trader who doesn't yet have enough experience to handle the moments of crisis that will eventually come, the stop is COMPULSORY. But not a stop sitting right on your entry price: that one will damage your strategy whether you like it or not.
The only stop worth having is the one that stops you blowing up, one that only triggers in moments of genuine crisis. And I'd go further: it should not just cut your position, it should also keep you out of the market for a while.
IF, on the other hand, you trade with a method (automated or manual, it makes no difference), the same thing will always happen: the stop will cut A LOT of badly-timed positions that would have turned into winners if you'd done nothing. And the tighter the stop, the truer that gets.
Either your strategy can afford it, because you hold a very substantial edge on the market that lets you cut plenty of positions, or it's the surest way to ruin yourself.
It won't be ruin by way of one big crash. It'll be a slow, steady, nagging kind of ruin: stops getting hit again and again, one after another.
And there, clients have their answer ready-made: it can't be the method's fault, it must be the broker hunting stops, right?
Well, I have bad news for them: the culprit is statistics. It's every one of those positions you cut with the stop that would have turned into a gain.
In all my years doing this job, I keep reading, again and again, that the secret to winning is not losing. The rumour assures you stops are the start of a solution. I can tell you, numbers in hand, that stops are the second reason retail accounts blow up (the first being those who will never manage to cut the one losing position that takes their account down with it). Not the stop itself, to be precise: the string of stops.
Well, I'm going to tell you the truth. I've been watching hundreds of accounts for years. And today I'm going to reveal to you the secret of the best traders.
Those people win because they manage to produce some huge winning positions.
If I were being sarcastic, I'd say: no, really, get this, they win because they make big gains!
I'm labouring the point on purpose, because that really is the answer.
THE ONE AND ONLY difference between traders who win and ALL the others: winners manage to land big gains on their account. A few times a year, they get a handful of positions that make ALL the difference. Everything else about the account looks the same. Number of positions, share of winners, small or non-existent losers. EVEN the number of big losses. Plenty of very successful accounts take a good hard slap on a regular basis; they're not spared that either.
Those hugely profitable positions are few and far between, and they're the entire difference separating the big winners from everyone else. So imagine what would happen if the positions that were about to deliver a huge gain got aborted early, because of a badly-placed stop…
Part of a series. This article belongs to The Exit Decides the Trade, Not the Entry. Related: Winning Trades Make All the Difference and Counter-Trend Trading: The Key to Success. Background: stop-loss order in the Ouinex glossary.
About the author. Samuel Rondot has traded since 1995, self-taught. Between 2009 and 2017 he published around 300 articles on objectifeco.com, abcbourse.com and his own blog, many of them drawn from what he saw in hundreds of client accounts. Objectifeco wiped its archive in 2016; the Internet Archive kept a copy, and every article republished here links to its original. He now runs the Strategy at Ouinex.
Trading leveraged products carries a high risk of loss.
