There is no guarantee that the spike won't continue in the same direction after a few minutes. Most stops are placed in areas near sup/res levels, that's what makes sup/res work and if you notice then these are almost always broken through with spikes. I'm not against stops on any silly principle but I go by backtests and every stop level method I come up with is inferior in the long term compared to time based exits. Yes, I could find great examples of when it works well but in the end I only care about the best risk/reward, not pretty charts. There is also the issue of slippage which definitely affects stops since as I mentioned, they tend to be triggered during volatile periods.
Setting stops is an art... and to a large degree arbitrary. Exactly where you place them can be called into question on this trade and that... but what's crucial is that you use them. Even when you look back and lament you didn't have it at a slightly different price, it still served the function of "preserving capital against a loss which might have progressed into being catastrophic"... which IS crucial to overall success. IOW... when your stop is hit, you don't know at that moment whether you booked a small loss that you might have avoided, or whether it saved your bacon from getting wiped out. You'll know later, of course, but that won't do you any good at the time.
Skill - set where the reason for entering invalidated (specifically just the other side of it) Art is for hanging..., trading requires skill RN
That's the one I like best, but not the only valid play. And even when you set you stop at the "invalidation" price... how much of a false break buffer do you allow for. None? 1-tic? 2? 2 points? 3? (It's still "measure with a micrometer, mark with paint brush, cut with axe", you know.)
I agree. -- that's why trading is part art, part science...a skilled trader has the ability to see the big picture. ops: consider all the variables and forces in play. having automatic stops in play but not really understanding the greater picture of things can make your strategy neutral at best, if not a losing one.
Using stop loss is a part of MM acts, prevent your account from blown out and anticipate something we're never want. We may expect something good happens to us but we also have to predict unwanted events, so that's why some daily traders use stop loss.