Hard stops are for turkeys

Yeah, I was saying that, right here on good old et long before the hft scum became a pox on the land.

Now, any kind of stop , unless its for a few cents away at limit, is an invitation to be buggered, sodomized, and otherwise made some hft clowns (manipulators) woman. ( A few of the nicks here may actually relish that, you know who you are).


Anyhow, you've been warned by the master.


http://blog.themistrading.com/?p=2459

 

A hard stop is simply an admission that you can be wrong. If you can't admit that then you are doomed to failure as a trader.

 

keep a local software based stop.
hard stops on the NYSE network is showing your hand.

 

I consider a hard stop an emergency stop.

I exit most losers long before that stop is hit

 

Ummmmmmmmmm........

In the example you gave, the stock(s) went down 30% in a very quick manner. Stops would have been great. Sure, depending on how far the stop was from the initial price prior to the whacky move, the worse the slippage would be. However, even if the slippage was 3 or 5%, and got triggered after the stock moved down 7%, then you still kept yourself out of another 18% decline. The fact that the stock came all the way back is irrelevant - you couldn't have known that that would happen and to risk 30%, which could your whole account/career if you're leveraged, is unacceptable. Stops are therefore a great.

What happens when the health-care stocks DO all go down 30% as a sector and you didn't get out because of a fear of flash crash?

That said, I don't like "hard stops" either. You need custom software if you want to get a good stop-out without slippage.... waiting for a print to go off below/at your stop-out price, then going market, is very inefficient. It's begging for a poor print.

I usually stare at the Level II and then punch out in anticipation of the print at the new high/low so I don't panic along with everyone who has a traditional "please rape me"

 

yeah usually PA signals the exit.

 

I trade futures , but stops are used to control risk. Maybe this applies . My hard stops are fail safes. I would not put a stop in at a price risking 8 tics from my entry or" my arbitary risk tolerance" if the DOM has big volume at a price slightly above, showing possible resistance there. Not the price I pick because of a early entry to reversal.

 

I think your stop limit orders are riskier:

http://www.interactivebrokers.com/en/trading/orders/stopLimit.php

IMO turkeys are those who do not understand the various order types and not those that use them, hard or soft. Stops control risk and if reward is much bigger then it does not matter if they are hard or soft.