Hard Stops vs Mental Stops

[lukas]

Exactly. On averaging down - I think big traders do it, but only until eventually they blow out or quit trading before then. It works until one day it causes something like a prop firm going out of business, or even Barrings Bank going bust. Some may be lucky, like Nav Sarao, who was doing just that, but it was just a matter of time before he would give everything back to the market.

Lesson for me - always place a hard stop, take my f**ing losses and do not think it is "unprofessional" regardless of what others say.

 

[comagnum]

Back when stops were posted at the exchanges the market makers could see exactly were they were and the sizes - this made stops very vulnerable to stop gunning & why a 'mental stop' was endorsed in many books back than.

These days the stops are either on your brokers server or on your computer, hence there no longer is a reason not to have a hard stop.

Stop gunning is still done by HFTs when a lot of clustered orders stack up - such as when a multi-day narrow range prints there are obviously many stops a tick or two above & below the channel boundaries and the HFTs will gun them - often after hours. Us traders have stop order transparency now but still have to be careful where we place them.

 

[lukas]

It is either the technology provider's server (like TT) or on the actual exchange server - in theory, there will always be someone who can find out where your stop is and make use of it but this is a conspiracy theory I do not believe is happening in real life.

 

[Jdesey]

My experience with mental stops is they didn't work for me. Too many times I would hit the mental stop and let it keep running against me and end up with too large of a loss. When I changed over to actual stops placed as limit orders things improved a lot. I also place a limot orders for a preset profit. Same problem when I had the mental exit and I wanted to let these keep running.

 

[ironchef]

It is either the technology provider's server (like TT) or on the actual exchange server - in theory, there will always be someone who can find out where your stop is and make use of it but this is a conspiracy theory I do not believe is happening in real life.

My experience with mental stops is they didn't work for me. Too many times I would hit the mental stop and let it keep running against me and end up with too large of a loss. When I changed over to actual stops placed as limit orders things improved a lot. I also place a limot orders for a preset profit. Same problem when I had the mental exit and I wanted to let these keep running.

I appreciate hard stop is necessary for day trading where things move quickly. Are they necessary for longer period swing trading, e.g., days or weeks when there is more time to plan and plot and things move slower?

Thanks

 

[murray t turtle]

huh? I have an out and when price gets there I use a market order to hit out or intelligent order execution decision to work my way out... i don't just put in an order that will go off based only on a print at X level going off

%%
Good points;
i dont believe in tempting anyone with my stop entered for anyone to see LOL.Even if that is over caution-so be it. However i have put in limit orders[hard stop] to take profits. Most of the stuff i buy they love -good uptrend + most of the stuff i sell , they hate[ downtrend-weakness]

Market orders work well in liquid markets; i also write down my stop loss in my notebook/swing position trade. If i was selling @ 200 day moving average i would expect a much worse fill/slippage/fast market for a common level like that, but that is not a prediction.LOL

 

[_eug_]

Made a good donation to CL today by using a mental stop instead of an actual hard stop, gave it way more room that I should have. I think that hard stops are the way to go if you have psychological issues with hitting out yourself. Otherwise mental stops make more sense. Usually stops will be taken and price will return to the entry where you could reverse the trade. Makes sense in theory but hard to implement in the heat of battle, for me at least.

 

[digitalnomad]

HARD

Your brain is slower than a supercomputer. This is one thing you don't get cute with.

 

[vanzandt]

HARD

Your brain is slower than a supercomputer. This is one thing you don't get cute with.

Here's the problem... imagine you're short this stock. Your stop just got triggered on a bs paint.
I don't use em. That being said, mental stops take extreme discipline.

 

[ironchef]

Here's the problem... imagine you're short this stock. Your stop just got triggered on a bs paint.
I don't use em. That being said, mental stops take extreme discipline.
View attachment 176114

Happened to me enough I gave up hard stops on swing trades. On the other hand I found mental stops even harder, hard to pull the trigger, even when it was necessary.