Stop Losses are for Losers

Discussion in 'Risk Management' started by chewbacca, Feb 4, 2008.

  1. seriously the people that tend to use stop losses are the people that:

    - are undiversified; they put all their eggs in one basket hence they want to protect their basket

    - over leveraged; to the point where they can incur large losses from the noise of the market

    - fight the trend; thus they need "protection"



    what you should do:

    trade the trend and only buy on long opportunities and only sell to enter short opportunities

    diversify

    and never bet too large right from the start - give the position some time



    now granted every trader has blown up so everytrader mistakenly believes had he used stops he wouldn't have blown up.....but that is wrong because the only way to really blow up isn't by not using stops.........its by fighting the trend + being overleveraged
     
    lawrence-lugar likes this.
  2. I think you meant to say "Stop Losses are for Loosers"

    M
     
  3. Stop losses are a tool, like any other, that allow some of us to manage our trades better.

    Those who say they are for xxx ... are probably halfwits. Or maybe they just don't understand.
     
  4. getting stopped out is basically forced liquidation


    now think about it why the f--k would you allow yourself to get liquidated - unless your were fighting the trend, overleveraged, and undiversified from the very start........or you had zero confidence in the position from the start and you just put it on for the action.
     
  5. pneuma

    pneuma

    winners understand that when you sell is more important than what you buy
     
  6. marketsurfer

    marketsurfer Vendor



    one of the best posts ever on elite. 100% accurate. in addition, there are studies that indicate that stop losses are counterproductive ,due to inherent volatility and fluctuation, but they are ignored due to above reasons

    the market machine ie brokers, et al push the concept since it causes more frequent trading or churn leading to more money in the market machine's pocket.

    very nice,


    surf
     
  7. gosh ... so anyone who was long from nasdaq 5000

    or dow 14000 and who did not

    a. use stop loss

    b. or some other way to limit their loss

    and is still "holding the bag" on their position

    or has a "paper bag" over their head and ignores
    the "RED in their P+L " if indeed they have not been
    liquidated by their broker already ...

    they are winners ?

    :confused:
     
  8. marketsurfer

    marketsurfer Vendor


    thats an extreme example, but position sizing and proper entries are the key, not stop losses.

    surf
     
  9. OMIGOSH SURF - this is so precious....and absolutely correct!
    I traded a sim e-mini account for 6 weeks, thinking it would be a breeze, given my incredible stop loss discipline.
    You know what ?
    I lost on 8 out of 10 trades...Yep: 20% win ratio.
    Reason: MY ENTRIES SUCKED....HUGELY.
    NO WAY you can be profitable with that kind of performance.
    Yet my PREDEFINED stop losses were carefully calculated....and a bit on the conservative side.
    Bottomline: stops are best set, AFTER the trade has been working for a while. Especially in the e-mini futures arena, the stop-taking engineers are always fast at work...to take your money !!
    SET STOPS WITH INTELLIGENCE ! Know when to say "WHEN" !
    Saying : I'm only going to risk $200 on this trade is absolutely dumb....it has nothing to do with support/resistance levels or other technical factors.
     
  10. marketsurfer

    marketsurfer Vendor

    right on, wiz.

    thanks for the example!


    surf
     
    #10     Feb 4, 2008