I'm thinking, as of Monday morning, that I will no longer use them.
Permit me to amend that. As of Monday morning, I will only place "catastrophic" stops 10 points from my entry, in the event I lose all contact with my broker, etc.
Reason: After an analysis of the trades I have made on the ES over the past six months I have found, in nearly every stopped-out case, that my losing position would have been profitable, on a same-day basis, but for the fact that it had been taken out by a stop. On those rare occassions when I was simply flat-silly-on- the-wrong-side-of-everything, I would have exited that trade anyway, usually within a tick or two of the stop. Only in one case did the market move so quickly against me that the stop got me out at a better price than I would have reasonably gotten myself out of in the first place (in that case, a possible two points savings). But this "savings" was more than compensated for by the death-by-one-thousand cuts effect of small losses incurred by the use of stops.
I mean, all kinds of stops. Tight stops (4 ticks). Loose stops (12 ticks). Trailing stops (that turn big winners into small winners). ATR-based stops. Stops strategically place around support/resistance. In short, any kind of stop that's bait for a stop run. In other words, any kind of stop.
I realize that this flies in the face of everything I've been told and have read. So, clearly, I'm an idiot. But the facts don't lie and, after an examination of the facts, this is the only conclusion I can reach.
Thoughts, anyone?
Permit me to amend that. As of Monday morning, I will only place "catastrophic" stops 10 points from my entry, in the event I lose all contact with my broker, etc.
Reason: After an analysis of the trades I have made on the ES over the past six months I have found, in nearly every stopped-out case, that my losing position would have been profitable, on a same-day basis, but for the fact that it had been taken out by a stop. On those rare occassions when I was simply flat-silly-on- the-wrong-side-of-everything, I would have exited that trade anyway, usually within a tick or two of the stop. Only in one case did the market move so quickly against me that the stop got me out at a better price than I would have reasonably gotten myself out of in the first place (in that case, a possible two points savings). But this "savings" was more than compensated for by the death-by-one-thousand cuts effect of small losses incurred by the use of stops.
I mean, all kinds of stops. Tight stops (4 ticks). Loose stops (12 ticks). Trailing stops (that turn big winners into small winners). ATR-based stops. Stops strategically place around support/resistance. In short, any kind of stop that's bait for a stop run. In other words, any kind of stop.
I realize that this flies in the face of everything I've been told and have read. So, clearly, I'm an idiot. But the facts don't lie and, after an examination of the facts, this is the only conclusion I can reach.
Thoughts, anyone?
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