Hello everyone, I hope everyone reading this post is doing great in their trading and life in general. This is my very first post on Elite Trader. I had recently come across the forum and lurked around for the past few days, and today decided to join in as a member. There are many traders out here who are doing great, and I'm pretty sure everyone must've gone through their fair share of ups and downs whilst trying to get through and become a consistently profitable trader. My question is regarding stop loss. I have an edge in the market, and have been successfully trading for the past 4 years, not any spectacular returns, but helping me to pay the bills and keep at it. I'm a contrarian trader, so when the market rips or dips I take in opposite position and scale in, I have a decent win rate. My thing is that at times when I take a trade and scale in with few cars trading micro, I see there is a shift/change in the setup, it's nullified. I'll be down $70-$100, and it wouldn't even put any dent on my account or the PnL to take a stop there. But I just can't happen to take the loss, I would let it go against me and then average large at the next level of interest, and make few ticks and come out positive. This has worked 9/10 times, but the 1 time it doesn't work I give back profits for a month or even two, the thing that hurts me the most is that when I'm down small I know the momentum has changed, and I should take the small loss, and then re-evaluate and re-enter later, but I just can't happen to win over my mind. My mind is like hey we've taken 300 trades in the past 15 days, all green, why close this one in loss, and then I wait, whereas the whole thesis why I took the trade has been nullified. I just can't win over my mind to take that small loss, and that one time when I do lose I curse myself, that I could've been up on the day had I taken the small loss. So to sum it up I'm trying to ask how did you guys and gals if had this issue got over it, how did you make your mind believe that it's okay to take that small loss, and it's not about the win ratio, but managing the risk, and being able to come back at it later when you have an edge 5-10-15 mins later or whenever that is. Sorry for the blabbing, and thank you in advance to all of you for reading the post and taking the time to answer. Good Luck!
The concept of the stop-out is simple. It's to protect capital. When you place a trade you determine how much you're willing to risk that your play is correct... that's where you place your stop. No other consideration is relevant. KISS, baby.
The hard way to get over it is by learning from the experience of being margin called or blowing up your account because a small loss grew into big loss.
Every trader goes through this. Nobody likes to stop out and take a loss. Create a plan, leverage your edge, set your stops, and execute. Anything else is just gambling, fear, and hope. You might as well flip a coin or go to a casino. Maybe this belongs in "Trader Psych" sub-forum.
Great topic, I always hedge my bets by scaling out incrementally. That's a huge difference from how I used to trade when I first started which was all or nothing. For example, my inverses all gapped up this morning in my favor, but I scaled in pre-market. As they dropped I scaled back out again incrementally in multiple positions. The advantage of this approach is that you keep some of the shares alive in case there's a pivot back up in your favor, without having gotten shaken out of the entire position. It's been a game-changer for me, always scaling in small and scaling back out small instead of rolling the dice on large initial positions taking large stops.
It's not about the stop... It's a discipline issue. I'll wager the same issue appears for you when taking profit. You take the signals your system/methodologies offer to you, and execute as designed, end of story. No second guessing, no on-the-fly inventions. Exiting a trade with a stop (or not) in place, is no different than entering a trade. You take the signals and execute as designed or your system is worth nothing! Trade well... stats and profits take care of themselves.
Way I got over of taking losses on protective stops, I changed my thinking. I changed from "me" taking trades to me pushing buttons, I removed myself. If profits came, the system made money if it lost money, system lost money, I am there to push buttons when actions need to happen. If that don't work try this. Wife Uses stun gun on Husbands Butt Goes Wrong! - YouTube
To ease the psychological pain, I take comfort in reminding myself I can always get back in later, be it 5 minutes or 5 weeks from now. I can always get back in. Strategically speaking, if the thesis is invalidated, get out. When things turn around in your favor with a new thesis, get back in. If that doesn't work then one's edge isn't what one thinks.
Yes. Strategically it's OK to "get sucked out". You can always get back in. First thought ALWAYS... "protect capital... even if stopping out appears to have been wrong at this time".