Stop losses. Are they the tools of winners or losers?

I'm an automated day trader and I use stop loses in the exact sense you are talking about. In fact, 99.9% of my trades get stopped out, because I trail my stops in various ways (both time and price go into my equation as to how I trail).

I'm not a huge trader. 200K and have only been profitable for 2 years, but I'm 100% automated and if I didn't use stops for my particular strategy, I'd be broke.

3112 positions so far this year and 3290 positions last year. 52% last year and so far this year, I'm up 51%.

Jason
 
95% of new traders will let a trade run way past their stop if it is not entered in the system. Your mind can always find a reason to hold....the psychology is brutal when you hold a loser......

place the stop...its only one trade not the end of the world.
 
I don't think the question is correct.

Some people trade profitably with stops and others without them.

Zillions of way to skin the cat in this business.

Generalize and you will only look like a fool.

ESD
 
Quote from peilthetraveler:

I dont use stop losses, but some people freak out on here when i tell them that. They say that the majority of traders lose money, but i notice the majority of traders in here use stop losses... Im wondering if there is any relation. I've only ever met 1 guy that makes 7 figures per year trading and he doesnt use stops either (and its worked well for him the 20 or so years he has been trading) So i just want to get some honest information out of you guys.

If you make 10 trades with 10 stop losses, on average, how many of those trades get stopped out? I'm suspecting that its a higher percentage (like 50% or more) so i just want to be sure.
More...

PTT

I believe you’re seeing people freak out because – there is no way to control the market – other than with a stop loss…

And by suggesting you don’t use a stop loss – is very disconcerting to these people (in other words they are showing they care about your success)


You do use a stop loss – you’re just not labeling it as such (meaning since you don’t automatically enter a stop immediately after entering a position – you’re not associating exiting a loser with the term “stop loss”


You, me, all traders exited a loser why – to stop losing more than we already are – in that trade – period…..


Hence every exited “losing” trade is a stop loss – to think otherwise is… – well let’s just say misguided…


And OP I think you would agree with me here – especially based on your other post


To everyone else,

No I do not want to get into an argument over semantics – please… (hell call it a negative winner if you must – but a rose by any other name is still just…. )


So to answer your question…

Yes – Stop Losses are an “essential” tool of every successful trader's arsenal – have no doubt


However...
As with all things trading related - It is every trader’s responsibility to find the optimum stop loss methodology for their trading – as one size does not fit all – but the ultimate result will always be the same – a loser is exited to stop losing more...

Happy Weekend

RN
 
I don't get it. There's always going to be a point where the trade is DEFINITELY wrong and it turns into a gamble. No doubts. Puts a stop there. It's easy.

With that said, if you put 100 into a stock and that's .00005% of your portfolio, of course you're not going to use a stop. So you're right. Don't use a stop. Ever. In fact, it's a great way to learn in this game. Never use stops. lol. Unreal. What a joke.

Stop also = limiting opportunity cost as well. (like wasting your time in a losing position)

To break even:

10% down = 11% up
20% down = 25% up
30% down = 43% up
40% down = 67% up
50% down = 100% up

%W > %L
$W > $L

Do the math.
 
a newbie trades and blindly picks stops or avoids them and gets hammered

a sophisticated trader TESTS their stops, in the same way they backtest, forward test, etc. their logic/edges.

Something called Excel. You put ALL your trades into a spreadsheet, similarly size them, and test various stop sizes and find what protects as much as possible, and still minimizes your loss. Yes the future may vary, but at least you have some clues how YOUR trading/system behaved in the past.

Or/And you can also test leverage sizes, based on volatility/ATR..., etc.

a good edge will lose to poor or blind money management, given enough time.
 
Quote from athlonmank8:


To break even:

10% down = 11% up
20% down = 25% up
30% down = 43% up
40% down = 67% up
50% down = 100% up

%W > %L
$W > $L

Do the math.
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That's where averaging down enters the picture, to cheat the math.

What's averaging down's greatest fear ? Risk of blow of up.

How do you prevent such risk ? With an emergency stop.

And the problem is solved.

Adding to a loser must not equate adding to a loser forever.

Recognizing this made a tremendous difference in my trading, tremendous.

ESD
 
I think this thread is misleading in that many methods that nominally don't use stops in fact do. Anything that acts to get you out of a losing position because it's a loser is in fact a stop. Similarly, the entry and exit behavior of any trend following system is in effect a stop.

I suppose if you got out of your losers by other means (say, after a predetermined time) without any concern for how much had been lost, then you could have a stop-free method.

My primary trading tool is a trend following system, and it enters and exits trades solely by means of stops. Probably between 65-75% of trades are exited at a loss. The winners are on average much bigger than the losers.

My discretionary trading outside that system typically enters positions with a market order, and nearly always exits them with some sort of a trailing stop. Historically I've had about 65% winners, and the winners bigger than the losers.
 
Quote from Redneck trader:

Hence every exited “losing” trade is a stop loss – to think otherwise is… – well let’s just say misguided…
More...

+1

Of course, the corollary is that a profit "target" is actually a stop profit.

As an earlier poster opined, the type of stop; loss, profit or none at all, is dependent on the type of trading system being used.
 
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