Hard Stops vs Mental Stops

[vanzandt]

On the other hand I found mental stops even harder, hard to pull the trigger, even when it was necessary.

Amen to that. Its the hardest thing to do.
You sit there and say "I'll just give it a little more. A little more, ...its gonna reverse"... next thing you know you've lost way more than you ever should have.
But what can you do. Those superlong wicks happen on high volatility stocks occasionally. Placing a hard stop is a disaster unless its some grandma stock that doesn't move much.

I wish you could somehow caveat a stop order with some kind of volume/time condition.

 

[digitalnomad]

Here's the problem... imagine you're short this stock. Your stop just got triggered on a bs paint.

Imagine no tail, and your stop did get triggered, and after that, it went up 5x the bar length and never came back. You getting the point?

 

[Overnight]

Imagine no tail, and your stop did get triggered, and after that, it went up 5x the bar length and never came back. You getting the point?

Aye, there's the rub.

 

[murray t turtle]

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.
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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.

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Good thing about swing/position trading; it [hard stop]could still be a profitable trade, seldom scalp- swing trade. I dont have any idea if daytraders should use them.
Another good thing about mental stops which i mostly use; any computer , super computer, ALGO was programmed by a human brain, LOL. That chart is a good reason to use mental stops; which i write down, so i dont forget.

By the way if that was a monthly chart i want out that bull spit top tail candle, since you said short....LOL. If it was a 3 minute candle, good reason to use mental stops

 

[beerntrading]

I've always wanted an order that is suspended for the first and last 20 minutes when I swing trade.

I try to use hard stops when I can, but they do a very poor job with options, especially if it's presented to the market (as opposed to hidden stop or continent order). Furthermore, I base my stop on the underlying price and the value of the option at that price at expiration. So my stop drifts a bit with volatility and time decay.

It was only this week I sent a profanity laden pm about a long option blowing past my stop while I was in someone's office. But turn that around to today and I would have been stopped out of PM for a nasty loss instead of a really nice gain.

I tend to do this with contingent orders on the bid or ask rather than last, on the opposite side of the market (I.e. a stop on a long position is if ask < X). This keeps market makers from widening the spread on me, and keeps anyone from seeing the order in the books until it's ready to fire. That also makes sure the stop occurs outside the price action. When I use mental stops with options, I do the same but it's much more tedious.

My first algo will be an option stop calculator that does that for me

 

[vanzandt]

Imagine no tail, and your stop did get triggered, and after that, it went up 5x the bar length and never came back. You getting the point?

I can manually stop myself out. Your premise is, if I'm reading you right, assumes one is not actually watching the stock on a screen. In that case you are correct.
But... see this candlestick on FB from a few minutes ago? That would have triggered a programmed stop... and for no reason. Thats why they are not good to use unless you are away from your screens.

 

[Jdesey]

here is the issue I ran into with Mental stops.... So, the asset would come down or up to my stop..and my brain than said "give it a chance" OR " "give it room to breath" or whatever...then you know what happened... the loss got worse and worse. Without real , live , stop loss sell/buy order in the trading system, it is just too easy to stay in when I should be out.

just my experience

 

[digitalnomad]

I can manually stop myself out. But... see this candlestick on FB from a few minutes ago? That would have triggered a programmed stop... and for no reason.

Ok, so where would you manually have exited if it didn't revert and kept going up? These aren't decisions you want to be making in a fast runaway market.

 

[beerntrading]

Ok, so where would you manually have exited if it didn't revert and kept going up? These aren't decisions you want to be making in a fast runaway market.

He's looking at a print that was off exchange or a misprint...two consecutive ticks mirrored in the BxA and it's a clear move. That's why I use the bid or ask for my stops (usually...today I messed up a really good trade using a normal stop). That's actually exactly the case for using a stop outside the exchange.

 

[vanzandt]

Ok, so where would you manually have exited if it didn't revert and kept going up? These aren't decisions you want to be making in a fast runaway market.

I certainly see your point. Especially if you have multiple positions open.