Stop Loss Hunters?
- Thread starter matador04
- Start date
The tail wags the dog which wags the tail.
Can you shoot through the link? I'd love to have a read
It depends on what you do.
If you use an automated strategy with a well defined and stable distribution of returns you might need fixed stoplosses when you enter your trade in order to define your maximum risk (ex. 1% of capital).
This then allows you to provide statistical guarantees based on your distribution of returns (ex. 99% confidence no losing month).
Myth. They can see how many waiting buy/sell orders are sitting at each tick. Its not rocket science. So can you. Seriously, paranoia is not a good way to be trading.
I agree about giving a trade time. It's very difficult to get entry timing perfect, which is basically what you're asking for with a hard, tight, initial stop loss.
I've heard of other people also placing this "catastrophic" stop loss. While I don't believe there is any harm in this, I don't think it's useful either. Think about the circumstances under which your catastrophic stop loss would be triggered. Likely a major news event, that moves price in one direction very, very quickly. In this type of environment, your stop loss is more than likely to incur significant slippage due to the quick movements. Like I said, no harm done, but I don't see this as being any different from closing the position with a market order as price moves against you. Unless you are not actively watching the trade or something to that effect, in which case I suppose it would be useful.