I see your point - if the Gov is tilting the tables then it is not honorable. Point taken. Do you see mine? Level playing field, successful trading w/o govt bailout or inside info, hft bid bluffing, etc - definitely honorable.
In an ideal world there shouldn't be bail outs, welfare, trade subsidies, tax etc. Ideally, we should all put in maxumum effort and be paid fairly for that effort. Sadly, we don't live in an ideal world. I do see your point, however, all things being equal, trading wouldn't function at all in the environment you are describing. Its that "edge" that allows a few to profit while the rest lose. You are only able to profit because you have a piece of information that the next trader lacks. If he had that same information, you would lose your edge.
I disagree. I profit because I deploy a piece of public info (elliot wave analysis) in a way (obsessed with risk management) that most human beings are not willing to. Retail winners are outliers, for sure, but so are any business startups that survive.
Until several others figure out the same thing, and then you will lose your edge. Basic first year economics: in a truly competitive environment, profit tends to zero. In this truly competitive environment, price is forced down to the point where profit is zero. I'm not saying this is a bad thing. I am simply pointing out the fact that profit depends on you posessing information that your competition lacks. In other words, profit in trading depends on some degree of inequity in whatever it is your trading.
I totally agree with RCG Trader. It just amazes me that so few recognizes the metaphor and oldtime's delicious tongue-in-cheek style of writing, even though the topic of stoploss is a point of serious discussion. BTW, Fool, I am too, a secret admirer of oldtime.
I don't think people need to actually use stop market orders if they don't want to, but the principle of stops is a good one = having a plan for how and under what circumstances you will exit trades that are not working well for you. It's about risk management and ensuring that the worst case scenarios aren't as bad as they otherwise could be. Also, unless you have very high probability strategies, you usually need to have your average winning trade be more than your average losing trade. Stops can help reduce the magnitude of your losing trades, so can work pretty well once you find decent areas where you can do this without hurting your win rate too much. You could also come up with a plan for re-entry for when you wind up getting stopped out in a bad place.
You need to have two exit strategies before you go into the trade, plain and simple. One for when the trade goes negative and one for when the trade goes positive. Most lousy traders don't enter a trade with an exit strategy, which is the most important, and if by LUCK the trade goes positive, they sure as hell don't have an exit strategy for that scenario, so they either get out too soon or watch their profits sky rocket and then plummet back down. On the other hand if the trade goes negative early on, then they are left on an emotional train wreck praying to the gods for the trade to go their way with no exit strategy in place, they then most likely randomly exit the trade after a huge loss and the cycle repeats and repeats. A plan and discipline are needed get out of trade if it goes against you, because the trick here is to cut losses and let the winners run. Obviously you DON'T want to have a string of small loses with no winners, if that's the case then look at yourself in the mirror and ask yourself WTF I'm I doing wrong here. Regardless, let's face it, you can't be right all the time. There's too much risk in not having a stop loss or getting out of a trade after it goes negative and sorta riding it down because you think it might go back up, chances are that it won't, so why risk it and if it does go back up then it's probably just LUCK, which is often the case in most sideways markets, I mean who can predict that stuff. LOL Trading is complicated, but it get's more complicated when you go into the battlefield with no plan and no discipline. So yes you can use stop losses or not. Just make sure you have your two exit strategies in place and you monitor the trade closely especially if your not using a stop loss. I know this is a whole other subject, but it does get trickier when the market is more volatile because your stop loss can get hit randomly for no apparent reason only to swing up in the direction you had originally predicted, but that's the nature of side ways markets, be cautious with them.
Good post. Take a look at IBM. LOD yesterday $ 194.85. Look at how price left that level. Fast forward to this morning. Look at how price capitulated down to that level... but stopped $ .06 short. $ .06! Price reversed and is currently up over $ 1.00 from that level. Why didnt MMs sweep the obvious - where stops are located? It is perceived that "amateurs" use LOD/HOD and get stopped out all the time. Not true as a general statement. It all depends on timing and the setup... understanding the nuances in the market and of course how to read a chart. Did IBM just randomly do what it did today... a coincidence if you will? Of course not.... its not as random as you think if you know what to look for..
Well, if you do not want to use a stop loss that is your business. But I promise you that your clearing firm has a stop loss for your account. And they will use it regardless of what your desire is. I have found from personal experience that traders who rail against the use of a "stop-loss" or some sort of loss-taking mechanism have an equally robust profit-taking strategy.