The way that you place your stop can have a significant outcome on the results of your trade. I just coached a client through this, and it had such a positive impact on him I decided to share it. How do you place the stop? Do you place the stop at the start of the trade? Or, do you watch the trade, wait for price to hit your stop location, and then manually and quickly place the stop? I know there are reasons traders wait to place to stop. But, is this really supporting you? Waiting to place your stop can raise your anxiety and make the trade less successful. The way I see it, there’s a number of reasons why. . One–you need to be physically sitting at the computer when price reaches the proposed stop level so you can place the stop. Two–traders tend to get anxious having to decide quickly when and where to place the stop in the moment, especially in high volatility. Who needs more anxiety! Three–you are making a decision on the fly. It becomes harder to stick with your initial trade plan (and stop target). Some of you will start bargaining with yourself, then move the stop, double down, etc. and potentially watch the trade go downhill. Now your plan is out the window and you are in precarious territory. I am suggesting, therefore, that you place your stop initially when you place the trade. Then, you have the ability to leave the office . . . get some coffee . . or even go to the gym! Let the trade run on its own. Your anxiety level will likely go down. And, this will push you to clarify the trade’s exit before you take it. It’s critical to plan out your trade, establish your targets, and then trust it to play out. For my client, the impact was significant. His anxiety went way down. His ability to take the intended stop became easier and more solid. He was trusting the plan and himself and he felt a new level of success not having to struggle with his stop.
It's less important as to "where" or "how" you place your stop. It IS important that you use them someplace. Wherever you do, it's still a "loss limiter" for trades that go against you. That is... "You can't survive long-term without stops. Exactly where you place them is an art and hopefully and educated and technically based guess." IOW... you look at the chart and say, "I'm playing the long from here. I can see where it reasonably might go 20 points up, and I'm willing to risk 4 points that I'm right". That's it! Now, is 4-points the right amount to risk on this play? 6-points? Whatever, it's a guess.
Placed stops at entry are subject to spike risk. The price touches the stop, then goes right back to your entry. Spiked. If the price moves through your stop and continues with momentum, you would be glad you had it sitting there. Stop on close does not get spiked, but you have the momentum risk. Close your position only if the price Closes beyond your stop loss point, not on touch. But if the price moves though your stop level and continues, there could be unknown losses to follow. So, would you rather get spiked or potentially get hurt if there is continuation to your adverse price movement? Short stops or Wide stops, they all get hit.
1) GTC, OCA, Bracket Orders??? 2) NEVER add to a losing position. Never, ever average down losing positions...
I agree that stop loss is very important measurement to be taken when you are trading. It helps you to avoid facing losses
There is such a thing as scaling in and out in a trading range. Pros do that! That is not the same as "adding to losing" position, or bottom fishing. It all depends on your account size and position size! If the positions do not amount to be more than 3-percent of your account, scaling is OK. Assuming you still use stops and do not risk more than 3-percent, TOTAL.