Stop Losses are for Losers

Only if your stops are too close.

 

too close is only in hindsight.

surf

 

Too close is only if you can't read the "REAL" support and resistance oscillations.

 

No serious trader can operate without stop losses! I personally like options the best. I usually buy OTM strangles to hedge. Just in case.

 

You could say that about all aspects of trading. The future is uncertain and it is easy to dismiss any method by saying it has only worked in the past. That applies to your view that stops are harmful, just as much as to my view that correct stop usage is useful. So, it's not an argument that supports your position in any way.

 

Regarding the question “Are Stop Losses good or bad?”; it is not an easy thing to easy to answer. Stop Losses is like friction, a “necessary-evil”, it helps you to walk but wears out your shoes.

Hence, Stop losses do protect you against big losses, but at the same time, its protection does costs performance. Thus, in general, they hurt profitability, which is due to the fact, that it can happen that some trades get stopped out which could have bounced back profitability.

 

OK, I am a quant who also trades, but my 2 cents said that stop loss is for losers, and I am glad to see some other more experienced traders think alike. If you have put a stop loss, you probably do not know what you are doing, or are trading too aggressively. The key is to stay liquid and if your initial decision is correct, rather add to your position than taking a loss. I have seen trailing stop losses work for me on very volatile stocks though...

 

There is a flaw in your reasoning, you are crediting your good run on your skills and blaming the bad run on not using the stop losses. What makes you think you would have made those 45K if you were using the stop losses...

 

On one hand you say a "stop loss is for losers" and then before the statement is even over, you state that, "stop losses work for me on very volatile stocks though...".

This is a perfect example of how "Stops" are used uniquely by different traders and even on different types of trades.

Also how experience teaches us to respect the difference.

 

100+ posts so I guess it's mostly been said. Some random thoughts.

Whether you use stops or not, being able to ascertain where S/R (support resistance) might lie, and being able to read P/A (Price Action), particularly in these S/R areas, is going to make you a more effective a trader.

If you can't read these things effectively or can't act on them without hesitation then maybe a hard stop can help.

Hard stops often will be hit as the market searches for liquidity. Giving up (risking) a little extra by not having the order in the market seems pretty effective to me. Guess everyone hates being taken out on a test. Of course if price rips through a level its gonna cost you more to find out. (see next scenario)

What was support is now resistance. Many many times price will come back and test from the other side. How you can capitalise on this without getting completely steam rollered by the one that got away is another matter.

If the market is telling you your position is wrong there is a pretty good chance you actually want to be on board in the other direction (surprised Jack hasn't called in to make that point).

Emergency stops (way outside the market) seem to be sensible to me. I'd hate to keel over dead and have half the kids inheritance gone before someone attended to open trades.

Some of the very best traders I have had the privilege to know do not use stops. They will evaluate a position on what is happening now in an ongoig fashion. Most of these guys trade much longer time frames of course.