Do you use a stop or no?

E

EliteTraderNYC

Just wondering, what is your philosophy on stops? There seem to be advantages and disadvantages (I am referring mostly to ES intraday systems)

Advantages:
Lower drawdown
exact loss size therefore easier to manage risk
avoids catastrophic loss in even of market blowup/account blowout
automatic exit


Disadvantages:
locking in a loss for a trade
seems to create a chance for curve fitting if you place arbitrary stop on the chart
seems easier to create a winning system without stops
 
Think about it logically:

There's no real loss until it's a realized loss.

An unrealized loss can become an unrealized profit at any time, thereby making you whole again!

Ergo, if you use a stop you're placing your account at risk of loss and we all know that risk management is critical!

Yeah, yeah, I know there are those of you thinking "the OP specifically referred to intraday trading; how to you deal with that???"

Keep in mind that although good traders often talk about the importance of using stops, really great traders have learned to be flexible instead. If you've put on a trade with the intention of closing the the day flat, and price is not in your favor just prior to the close, there are ways to handle this without the risk of placing a stop in the market or closing for a loss.

1. Set an alarm for 10 minutes prior to the close.

2. When the alarm goes off, quickly check the Yahoo message boards for confirmation that your position is right, but the timing's just a little off.

3. Look for at least two other opinions similar to yours. If you find at least two, simply turn the position into a swing trade. (Be aware that swing trades can last from a couple days to several months.)

Occasionally, many months may pass without your position becoming profitable. The truly adept trader knows that when this happens, one can simply shift the trade into a long term investment.

Remember, there's no need to place your account at risk by using stop loss orders once you learn to be flexible with your time horizons.

Plus, there is a key mechanism in place that automatically protects you should things go drastically awry: Broker liquidation

:p :p :p
 
Quote from NoDoji:

Think about it logically:

There's no real loss until it's a realized loss.

An unrealized loss can become an unrealized profit at any time, thereby making you whole again!

Ergo, if you use a stop you're placing your account at risk of loss and we all know that risk management is critical!

Yeah, yeah, I know there are those of you thinking "the OP specifically referred to intraday trading; how to you deal with that???"

Keep in mind that although good traders often talk about the importance of using stops, really great traders have learned to be flexible instead. If you've put on a trade with the intention of closing the the day flat, and price is not in your favor just prior to the close, there are ways to handle this without the risk of placing a stop in the market or closing for a loss.

1. Set an alarm for 10 minutes prior to the close.

2. When the alarm goes off, quickly check the Yahoo message boards for confirmation that your position is right, but the timing's just a little off.

3. Look for at least two other opinions similar to yours. If you find at least two, simply turn the position into a swing trade. (Be aware that swing trades can last from a couple days to several months.)

Occasionally, many months may pass without your position becoming profitable. The truly adept trader knows that when this happens, one can simply shift the trade into a long term investment.

Remember, there's no need to place your account at risk by using stop loss orders once you learn to be flexible with your time horizons.

Plus, there is a key mechanism in place that automatically protects you should things go drastically awry: Broker liquidation

:p :p :p
More...

OK. You had me until "2". Shame on you.
 
Quote from EliteTraderNYC:

Just wondering, what is your philosophy on stops? There seem to be advantages and disadvantages (I am referring mostly to ES intraday systems)

Advantages:
Lower drawdown
exact loss size therefore easier to manage risk
avoids catastrophic loss in even of market blowup/account blowout
automatic exit


Disadvantages:
locking in a loss for a trade
seems to create a chance for curve fitting if you place arbitrary stop on the chart
seems easier to create a winning system without stops
More...

Consult the market guru emg

http://www.elitetrader.com/vb/showthread.php?threadid=222458
 
I do use stops, and contrary to what EMG says ( I have him on ignore) there are effective ways to use stops and I find that its better to get stopped out rather then have a trade go against you and u find yourself hopping to regain some ticks as it that blood red candle keeps getting bigger, and your positions goes from -380 to -420, -460,-500, then u get some hope as it jumps to -260, and u say hey it could jump to -75 next, but it falls to -450 and -600 in the next 5 minutes.

Better to put that stop at -150 and if it gets hit...then you are still in play for the day.

But the placement of stops has to be below the place where the computers will go stop hunting.

here is an example of a trade yesterday

eLlcBomo
 

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Quote from cmb:

I do use stops, and contrary to what EMG says ( I have him on ignore) there are effective ways to use stops and I find that its better to get stopped out rather then have a trade go against you and u find yourself hopping to regain some ticks as it that blood red candle keeps getting bigger, and your positions goes from -380 to -420, -460,-500, then u get some hope as it jumps to -260, and u say hey it could jump to -75 next, but it falls to -450 and -600 in the next 5 minutes.

Better to put that stop at -150 and if it gets hit...then you are still in play for the day.
More...

Even better to have a very clear idea of exactly what it is you expect price to do, then get out if price doesn't do it.

Much better than leaving it up to the market to decide for you.
 
STOPS are used to reduce or help eliminate "something" bad to maintain the process to produce something of beauty. So, pretend you are an Oyster when trading........... READ ON:

The birth of a pearl is truly a miraculous event. Unlike gemstones or precious metals that must be mined from the earth, pearls are grown by live oysters far below the surface of the sea. Gemstones must be cut and polished to bring out their beauty. But pearls need no such treatment to reveal their loveliness. They are born from oysters complete -- with a shimmering iridescence, luster and soft inner glow unlike any other gem on earth.

A natural pearl begins its life as a foreign object, such as a parasite or piece of shell that accidentally lodges itself in an oyster's soft inner body where it cannot be expelled. To ease this irritant, the oyster's body takes defensive action. The oyster begins to secrete a smooth, hard crystalline substance around the irritant in order to protect itself. This substance is called "nacre." As long as the irritant remains within its body, the oyster will continue to secrete nacre around it, layer upon layer. Over time, the irritant will be completely encased by the silky crystalline coatings. And the result, ultimately, is the lovely and lustrous gem called a pearl.

How something so wondrous emerges from an oyster's way of protecting itself is one of nature's loveliest surprises. For the nacre is not just a soothing substance. It is composed of microscopic crystals of calcium carbonate, aligned perfectly with one another, so that light passing along the axis of one crystal is reflected and refracted by another to produce a rainbow of light and color.

Cultured pearls share the same properties as natural pearls. Oysters form cultured pearls in an almost identical fashion. The only difference is a person carefully implants the irritant in the oyster, rather than leaving it to chance. We then step aside and let nature create its miracle. How pearls are cultivated and harvested Early on, pearl cultivation depended entirely on wild oysters. Later you'll learn that, in some cases, the same applies today. But modern pearl cultivation has become more selective.

A string of pearls with the right amount of cleavage has destroyed many a powerful man.. :eek:
 
Quote from dbphoenix:

Even better to have a very clear idea of exactly what it is you expect price to do, then get out if price doesn't do it.

Much better than leaving it up to the market to decide for you.
More...

I'm not sure if you trade CL (oil) much, but a stop loss order ensures that the market takes me out if price doesn't do what I expect it to. The instrument is notorious for running 20+ ticks in a second; I'll gladly take a few ticks slippage on a stop loss trigger than have to close in reaction to a 20-40 tick adverse move :eek:
 
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