Sir, Maybe Iâm totally ignorant here but⦠If youâre honestly keeping your losers small and manageable â then by default disaster days are eliminated â no? BTW â keeping losers small and manageable is not a trick, or luck â it is a skill â and a valuable one at that Regards RN
Skill?? I think loss control should NEVER be left to the nut behind the screen. Has this nut not been behind every huge wipe-out in history? Sooner or later you WILL FIND a reason to hang on to a loser, then overtrade. Even if stops are frying you, at least you can trade long enough to get better at stop setting.
True â but some nuts are forged to tighter tolerances As far as hanging onto a loser â I neither covet losers & winners, nor am I scared of them â quite the opposite I relish losers & winnersâ¦. I am friends with losers & winnersâ¦.. I like and accept losers & winners â equally and completelyâ¦.. You see I have accepted a loser or winner will be the result of each trade I take I know exactly how much I will lose on each trade I have absolute control over the mktâs ability to take my money â by exiting a loser at my choosing I have total certainty in a completely uncertain environment (btw I feel compelled to add uncertain DOES NOT MEAN random â the mkt is anything but randomâ¦) Now because of these â I have total freedom to trade the way I must Yes managing losers, (and winners for that matter), are skills â of that there is no doubt Btw â I still remember a time when I would sit and stare at a position â fretting whether it would win or lose â then seeing price pop against me â and there I sat like a deer in the headlights â watching the losses mount, and mount, and mount⦠All the while one inner voice screaming exit, another making a prefect argument why not to exit â while I just sat motionless watching the screen Not so much skill here â more of a hold, hope, wish, pray, justify, make excuses techniqueâ¦. No thank you Iâll stick to what I know Yes the good ole days are gone â but hardly forgotten Now please know I really donât expect you to understand what Iâm saying here â but no matter as I am not trying to convince you of anythingâ¦. You see it will never matter to you or anyone else how I manage losers â only to me and my P&L. But maybe it will provide some food for thought to someone â just maybe Happy Weekend RN
RN, Well said. I am just trying to stress the paramount importance of hard stops for those in their first 18 months (like me!)... The money management variables, "seemingly" random markets, and system development are enough to deal with so at least "fix" one part of the equation till you are much more experienced... Knowing the Maximum loss possible in a day "should" go a long way to remove that "threatened" feeling... Then again maybe a quick wipeout sends a stronger message than a grinding demise.
I believe hard stops are important at all times. I know a lot of seasoned traders say they use mental stops and honor them fully, but I believe every trader should put in a disaster stop, the max loss per trade you're willing to bear. This can be very far from the stop that would invalidate your trade, but it can protect you against rogue moves, both in stocks and futures. I've seen a stock that was in a nice stable uptrend for months drop from $19 to $5.50 in about 3 minutes on bad news and never come back. At least a disaster stop would've protected the position against that full loss.