Hey hey: what's up my friend, so here's the thing right: is it possible right to trade without a stop loss and without blowing up your trading account? Because here's the thing i'm sure many of you or you watching this right now. You know that, yes, you can trade without a stop loss, but the downside to it is that there will come a point in time where you encounter a loss and because you were trading without a stop loss. That loss is so huge right that it wipes out. All your small little profits that you have accumulated along the way and what usually happens is that you wipe out your trading account so now the question is: is it really possible to trade without stop loss and without blowing up your trading account? Well, the answer is yes right and in today's episode i want to share with you four techniques right that you can consider right and you can even explore more about if it's something that you know, you think it's it's for you right.

So let me share with you the first technique. The first technique is a form of trading called spread trading, so many of you might not be familiar with this term called spread trading, but the idea behind it is that you are trading a spread. So what is a spread? So let me give an example: let's say you know you notice that the price of coca-cola shares and pepsi they are usually having a let's say, a four dollar difference in price. So, let's say, for example, coke is trading at 10.

Pepsi is trading at six dollars, so there's a difference in price of four dollars. So let's say in future, coke goes up in price to let's say twenty dollars and pepsi goes up to sixteen dollars again. Their price differential is four dollars, so certain certain market, certain stocks right certain instruments. They have this kind of like a fixed price differential over time right.

So so this price differential is kind of like constant over time. Of course, there are times where it can fluctuate up and down, and this is where a spread trader i can take advantage of it. So let's say assuming right: you know that coke and pepsi their price differential is four dollars and, let's say one fine day, you're. Looking at the charts right now - and you realize, the price of coke is let's say 25 and the price of pepsi is 20.

So now the price differential is five dollars instead of the historical four dollar price point that they have. You know remain over the years. So what you can do is to trade this spread. So what you want to do is that you realize that now, pepsi is kind of like you know, uh undervalued, because it's uh lower than it should be the price point.

So what you can do is you buy pepsi shares and you sell coca-cola shares. Okay, you lock in this uh kind of like this so-called spread right, so you buy pepsi at 20 and you sell coke at 25. So you expect this difference in price right to converge into four dollars right sometime in the near future, and let's say in the near future: uh the price does converge. Let's say you know: coke goes up to thirty dollars and pepsi goes up to twenty six dollars.

Now their price differential from five dollars has now converts to four dollars and you will make a profit from it and and what you're going to do is that you know, since earlier, you bought your pepsi shares now you're going to sell your pepsi and we're going To sell your pepsi shares and now you're going to buy back your coca-cola shares, which you have you know shorter earlier. So this is what we mean by spread trading. So this is, i would say, an advanced form of trading, but in this type of trading you are pretty much trading without a stop loss because you're kind of like the i don't use the word h. But it's kind of similar, your h because you buy pepsi and you sell coke and you're kind of hitched in that sense.

So this is what we call spread trading, and this is how you can also use this trading strategy or technique or methodology right to trade without stop loss and without blowing up your trading account. Second technique to share with you is uh buying call option. You can either buy a call option or put option right. You don't have to worry about stop loss, because the reason for it is that a call option is a contract right that allows you to buy an asset right at a certain price in the future.

Okay, so if anything happens right that contract that you've bought will expire worthless, so let me give you an example, a kind of example that you can relate to. So let's say you are you know. Currently, you know wanting to buy a house, and the house that you want to buy is only built - let's say one year from now, so what you can do, for example, is that you can enter a call option right to buy the house. Let's say the house right now: you think it's uh.

The price is at five hundred thousand dollars. You can buy a call option to buy that house in one year's time that you will be built at five hundred thousand dollars. Of course, that call option won't be free. Let's say the call option.

Cost you a thousand dollars. Okay, so you buy that call option, which is the contract to buy that house which will be built one year from now at five hundred thousand dollars. And then what happens is that let's say one year later, that house right that you had uh, that you taught it will be priced at five hundred thousand dollars. Let's say the house has increased in price to six hundred thousand dollars so right now your call option right.

It still allows you to buy that house at five hundred thousand dollars, but the market value of the house is now worth six hundred thousand dollars. So that's how you kind of make a profit right by trading by by trading uh uh that that option that corruption that you have bought. So this is one example and let's say uh one year down the road right instead of having the house price at five hundred thousand dollars, you have a change in mind. You have a change in the financial decision.

You don't want to buy the house anymore. So what happens is that the call option that you have that you bought for a thousand dollars? You just expire worthless, okay, so this is how call option works in the grand scheme of things, so you can see that, if you were to, you know, buy call options by put options the most or the worst that can happen to you. Is that the option that you have bought? Okay will expire worthless? Okay, so this is not going to be true for all types of option trading, especially when you know you start, you know shorting. You know uh trading naked options, so so this is just very simple example where i talk about, you know, buying call or buying put option okay.

So next one, let's talk about uh uh, another technique that you can use right to trade without stop loss right. The other technique you can you can use is what we call a time stop. So traditionally most of you are familiar with. You know using stop loss right, it's a at a predetermined level where, if the price hits that level you exit the trade so a time stop works differently in the sense that you only exit the trade.

If certain amount of time has passed so very simple one is: let's say: you buy a stock when it breaks above the 200 day high. Okay, you can use the time, stop right where it says that if this stock right doesn't go up, let's say more than two percent over the next two weeks you will manually exit the trade or you will exit the trade. So this is what we call a time: stop loss you put a time factor right to determine right when you exit your trade to determine when you cut your loss, okay, so this is what we call a time, stop loss and the final technique. I want to share with you is uh, it's not really a technique, but the reason why a time stop loss would work right is when you are trading without leverage, because if you were to trade with leverage right, then the time stop loss is uh.

It would be quite irrelevant because, because if the market moves, let's say certain, let's say user, you know one to two leverage: okay and and the market dropped 50 against you, you are essentially wiped out. So even though you are using a time, stop loss right. But if you are trading with leverage that time, stop loss won't work as well. So if you adopt a time, stop loss approach to your trading, you cannot use leverage, that's that's the key thing.

So, for example, if you want to trade stocks, you want to adopt a time, stop loss approach. You cannot be using leverage if not right, uh uh. If the market moves against you by too much right, you could end up wiping your trading account. So that's the kind of the key thing right to share with you.

If you want to go with a time, stop loss approach. Leverage is something that you you. I won't say you can't use right, but you want to use it as sparingly as possible because that will affect the uh the drawdown right, that you encounter okay. So with that, let's do a quick recap right to how you can actually trade without stop loss and without blowing up your trading account number one spread trading number two: you can uh trade options and number three.

You can utilize a time. Stop loss technique right, which is uh different from the type of traditional stop-loss that you're familiar with. But the key thing to bear in mind is that you have to uh not use leverage right when you are using time, stop loss. Okay, so with that said right, i wish you good luck and good trading.

I will talk to you soon. You.