I guess I'm 3) Use small stops while not getting chopped around while going for outsized moves. Whichever school you choose, the size of the stop doesn't really matter if psychological damage is the actual issue.
i think the biggest point to remember is that your stop should not have anything to do with money management. your stop is there for a variety of reasons (trade no good, fast move against you, etc) but if it's placed at a point because you don't want to feel any more 'pain'.... and not because it is a reasonable point at which your observations have told you 'at this point the trade has failed utterly'...then one is missing the point of the stop. actually i think most of the posters that have posted get this already. what you risk per trade is how you should control your 'pain' level...not through stop placement. i guess my point is, get as much arbitrary rules and actions out of one's system as possible. (you could substitute random for arbitrary i suppose).
Not bad at all Fred - makes most sense. You could call a 'stop' kind of a 'blind exit'. You're much better off with 'seeing exits'. Requires less chatting and more thinking. nononsense prophete ordinaire du roy
Interesting point. However, if you choose to use "seeing" stops, as you refer to them, then you had better be one of those really centered people totally in touch with himself and the markets. Because if you are not, then you run the risk of "seeing" what you want to see when you are in a trade rather than what may actually be happening. Being in a trade can have that effect on mortals. That is why a predefined stop can serve as an anchor when the waters start to roil. And I would not refer to it as "blind." "Visually impaired," perhaps, because it did undergo a fair amount of testing. But I would rather be "visually impaired" than run the risk of hallucinating during a trade. This is not to say that I would not get out sooner than the stop if I felt it was warranted. However, getting out later is almost always regrettable. But, hey, if it works for you, more power to you.