please allow a clarification. this thread is about fixxed price stops placed before entry. for instance---setting a 3% stoploss. i have found this theory not to stand up under testing and practice. however, time based stops have shown some validity.
Everyone here is giving a different opinion without a thought for the fact that we all trade different systems, therefore we can all be wrong I trade a mechanical system with a two or three bar memory. It doesn't matter how you set stops, fixed, volatility based, noise level, they are useless. But timeout works perfectly. So its horses for courses, a system with a longer memory may not work with a set timeout.
I have been trading for years and have never used a stop loss order. Instead I prefer to buy options to limit downside. This prevents getting shook out of positions because of "evil market makers gunning for my stops" or other trader excuses.
uh, generally when one puts in a StpLmt for an effective stop loss order, then idea is capitulation that a position might reverse and become a loser, so, uhhhh, Yeah stop losses are for losers.... duhhh
zf trader I've always wanted to try that, glad to know it works. I wonder whether it can be incorporated into a mechanical system.
Being long and buying puts to hedge the position is the same as buying ITM calls alone. The second approach is better I think since it reduces commission costs, and saves capital for other investments. It works nicely as a stoploss at the strike price with absolutely no slippage. You do pay a premium though depending on how deep in the money you go with the calls.