Want to venture a guess how many thousands of CMGI traders refused to use stops on their positions because of the fear that they'd just catch a bad day, get their stop tagged, and then it would rebound and leave them in the dust?
The guys with the "mental" stop (or mostly "no stop") approach on CMGI rode that dog from $150/share to $2/share (they kept thinking "hey, it's going to reverse and head back to the moon any moment - better not exit now it can't go any lower").
There are a lot of reasons to use stops depending on what and how you're trading. If you're scalping or watching your positions constantly AND are confident in your ability to quickly pull the trigger when you need to - you probably don't need stops. But that's a fairly small subset of the overall trading/investing population and everyone else out there should probably be using stops.
Again, it's silly to say you should NEVER use stops because different traders have different trading needs and trading styles and situations.
But like anything else in trading - it's about how you implement (in this case, where you set the stops). If you set them poorly, you get poor results - just like if you constantly pick poor entries. And just like with entries, if you constantly pick back ones - it's not the "entry" that's the problem, it's your implementation. Same goes for stops - stops aren't the "cause" of any trader's problems (indeed often they might keep him from getting into serious problems), but his poor choices of stop placement can definitely cause a trader recurring problems.
Remember, it's not the hammer's fault if the carpenter misses the nail.
The guys with the "mental" stop (or mostly "no stop") approach on CMGI rode that dog from $150/share to $2/share (they kept thinking "hey, it's going to reverse and head back to the moon any moment - better not exit now it can't go any lower").
There are a lot of reasons to use stops depending on what and how you're trading. If you're scalping or watching your positions constantly AND are confident in your ability to quickly pull the trigger when you need to - you probably don't need stops. But that's a fairly small subset of the overall trading/investing population and everyone else out there should probably be using stops.
Again, it's silly to say you should NEVER use stops because different traders have different trading needs and trading styles and situations.
But like anything else in trading - it's about how you implement (in this case, where you set the stops). If you set them poorly, you get poor results - just like if you constantly pick poor entries. And just like with entries, if you constantly pick back ones - it's not the "entry" that's the problem, it's your implementation. Same goes for stops - stops aren't the "cause" of any trader's problems (indeed often they might keep him from getting into serious problems), but his poor choices of stop placement can definitely cause a trader recurring problems.
Remember, it's not the hammer's fault if the carpenter misses the nail.
