Stop Losses are for Losers

[JBTrade]

This statement is too broad, especially when you consider the variety of strategies and approaches used by different traders. Your own mistakes are the most valuable educational resource that you have at your disposal. If using stops has a negative effect on your trading, and eliminating stops solves that problem, then so be it, that’s fine - but it really depends on personal style, approach, and strategy. No blanket statement such as “stops are for losers” truly applies.

Personally, I feel that traders should print and review charts from their all trades at the end of the day. Try it if you’re not doing it, and after awhile, take a look at all the times you’ve been stopped out. If you’re getting knocked out of good trades by noise, then perhaps adjust your strategy, if not, just keep doing what you’re doing, and always keep reviewing.

I personally place all my stops at sound technical levels, with an additional buffer that incorporates share price, spread, and other factors such as avoiding round numbers and other obvious amateur locations. When my stops get hit, I have a significant reason to exit a trade, which overwhelmingly ends up saving me money. Getting knocked out of good trades by minor fluctuations is not a noticeable problem. Although, I do agree that arbitrary and irrelevant stops should not be used. The same goes for using poor position sizing or none at all, and then just exiting based on raw dollar amount stops.

I’m curious as to how you no-stop guys determine position size, because in my trading, my stop is an essential part of the equation for determining position size in the first place. Would you mind sharing?

 

[ganesh6]

Does this mean one has to hold/average ETFC, CFC etc from last year and JDSU, SUNW(JAVA), enron, worldcom etc from 2000 ?

Dont you think stocks like these will kill the portfolio.

 

[Bitstream]

Quote from gangof4:

spoken by someone who has never traded the HSI.

trade the HSI for a while without stops and you'll be starting a new thread about the merits of stops.

your absolute statements are simplistic and naive to the point of stupid.

lol, i wonder if you have yet even peered at the hsi dom...not to mention placed a trade on it.

ror

 

[maninjapan]

Im not sure exactly what chewbacca is reffering to but where in any trading book does a stop refer to a set dollar amount? Stops are often a point on a chart where you know the trend has reversed on you. And jsut because the trend reversed doesnt mean your initial analysis was wrong does it??
If can only afford to lose a few hundred bucks on a trade then you just gotta set your entry further away or scale in. If you miss it you miss it. Patience is a virtue

 

[Ares1]

How about adding a protective put to that?

Quote from tradestrong:

Sure,

Here is a link on bankroll management. Which basically means using a conservative strategy of many "tiny" positions that scale up as you earn more. Poker players that last longer do because of the conservatism of their positions, no one position will destroy the player.

link

Here he is talking about his success and losses using this strategy:
link

So I've basically taken this to heart. Now I never take a position that is more than 1-2% of my entire portfolio. The worst I can ever lose on any one position is that 1-2% even if it goes to zero. If the markets move against me, I add more VERY SMALL positions. My entire position sizing is essentially my stop loss. This way I don't have to worry about stop losses. Going to zero is my stop loss and an acceptable loss.

 

[ElCubano]

Quote from syswizard:

SET STOPS WITH INTELLIGENCE ! Know when to say "WHEN" !
Saying : I'm only going to risk $200 on this trade is absolutely dumb....it has nothing to do with support/resistance levels or other technical factors.

i dont have a set amount for any one trade....like ur $200.00 example.....i exit when the trade just aint working...it could lose me $50.00 or $500...peace...i do have a stop please no more pain stop stop....

 

[Compulsive]

Quote from Mathemagician:

I think you meant to say "Stop Losses are for Loosers"

M

I think is LOSER and not LOOSER

loose /lus/ Pronunciation Key - Show Spelled Pronunciation[loos] Pronunciation Key - Show IPA Pronunciation adjective, loos·er, loos·est, adverb, verb loosed, loos·ing.
–adjective 1. free or released from fastening or attachment: a loose end.
2. free from anything that binds or restrains; unfettered: loose cats prowling around in alleyways at night.
3. uncombined, as a chemical element.
4. not bound together: to wear one's hair loose.
5. not put up in a package or other container: loose mushrooms.
6. available for disposal; unused; unappropriated: loose funds.
7. lacking in reticence or power of restraint: a loose tongue.
8. lax, as the bowels.
9. lacking moral restraint or integrity; notorious for his loose character.


los·er /ˈluzər/ Pronunciation Key - Show Spelled Pronunciation[loo-zer] Pronunciation Key - Show IPA Pronunciation
–noun 1. a person, team, nation, etc., that loses: The visiting team was the loser in the series.
2. Informal. a. a person who has been convicted of a misdemeanor or, esp., a felony: a two-time loser.
b. a person who has failed at a particular activity: a loser at marriage.
c. someone or something that is marked by consistently or thoroughly bad quality, performance, etc.: Don't bother to see that film, it's a real loser.

3. Slang. a misfit, esp. someone who has never or seldom been successful at a job, personal relationship, etc

 

[JSSPMK]

Quote from marketsurfer:

no, i used stops in the past. but have learned the truth recently.- position sizing and correct entries are key.

regards, surf

LOL

 

[Topsurfi]

I also agree that stop losses are for people who don't have the disciplin to exit a trade if it is obviously not working well.
The problem is that as soon as you are IN a trade you often get a biased opinion about this position thats why a stop loss set in the beginning is a valid tool for beginners.
I have to admit that it happens often (in FDax) that a trade turns against me and I don't exit although in hindsight its clear that it was not going to work.
On the other side I know perfectly that using a "tight" stop in Fdax would kill me long term and its the same shit to have 10 losers with 10 Dax points each compared to one big hit with 100 Dax points.
If you use stops they should be far outside the market noise which means a lot in Fdax.

The same applies for trailing stops - also bad.

 

[Shagi]

Those are the most misleading statements. Its not about being overlveraged or not having confidence for professionals. You are talking about the undercapitalised and those who maybe dont know what they are doing.

For some us stops are the get out point when you are wrong. Do you understand that when you are wrong. You cant be 100% right all the time with every entry even if its long term trading. If you are then your statements hold, and if you claim to be 100% right all the the time then Im wasting my time posting this.

Quote from marketsurfer:

one of the best posts ever on elite. 100% accurate. in addition, there are studies that indicate that stop losses are counterproductive ,due to inherent volatility and fluctuation, but they are ignored due to above reasons

the market machine ie brokers, et al push the concept since it causes more frequent trading or churn leading to more money in the market machine's pocket.

very nice,


surf