Wm., Bingo... < Fart > unless you are involved in something like hedging, scalping, or arbitrage finding a direction, may mean not knowing where your going....ElectricSavant
That's right. A stop-loss scheme is a must, no matter what format you take (eg mental, physical, hedging). I have yet to meet a trader who is 100% right all the time. Unless such a trader exists, it's silly not to admit to one's mistake and cut losses fast.
Mental stops are good in the sense that it can avoid being stop-hunted. I'm thought of a special stop-loss order called timed physical stops. The stop-loss is executed if the price is below/above the target for a specific period. As a future trader, a few points/pips breakout is normal. I would always like to avoid such false stopout while spending no extra efforts to watch the market.
I learned an important lesson from an FX trader at MSDW... "When in trouble double!" This guy had his first Ferrari by 28. Probably not doing as well as most of the guys here, but it's better than nothing.
Steve Tvardek I do, I trade full time so its easy for me to not have to use physical stops. //////////////////////////////////////////////////////////////////// I too trade full time and generally one equity at a time. Over time I've learned that if you put a stop market order you have no chance to minimize a loss if it starts to go against you. Other than buying back in that becomes more dangerous the more noise around. Yes it's hurt me a few times, more often then not mental stops work for me. I have been doing this long enough to know how I react to both gains and loses, which is one reason I don't like giving up control. Sit there a few days with no intentions of trading no matter what happens and watch how many times during the day a stock for no apparent reason, no news etc. drops .50 to 2.00 and more, and before you can react it's back to or close to where it was when it started the panic fall. I can't move that fast in most situations you either get stopped and I'll almost guarantee you won't get a good fill. It will be all over the place as others are being hit too. Do what works for you is my best advice. As evidenced by your poll the answers vary widely, and I am sure most folks are voting on what works best for them. don
Several of the systems I trade are purely indicator-based, they don't use stops at all. They don't exit until the indicators say "get out tomorrow"; when this happens they place market-on-the-open orders. These are relatively long term, slow systems, with an average trade length of more than a year. By design, they absorb quite large price swings (both favorable and unfavorable), nullifying the raison d'etre of stops.