To use or not to use? (Stops)

R

ronin266

Are the stops helpful or they will just drag you down?.

I´ve been trading since 2006.Had bad times, had really good ones, now its something at the middle.

The stuff is that, lately (last 7 months), since I started to take more positions and using stops, I´ve seen that I´m just get shaked like 95% of times. I use a really small risk 3-5c max, for a reward of 20c min. (40-50c is the base expectation), since the starting of my "golden age". But since I started to put a stop in places that I knew with 100% that the price will not get until it´s a bad move, the moves started to get me out of positions.

I´m thinking in start to play fewer positions, with no stops (only mental ones, looking the pnl). But would like to hear some opinions at this topic.

As far as I can see now, the use of stops has:

PROS
-Saves you in case of a technical problem (internet, computer, electricity, heart atack, girlfriend, etc)
-Cuts your losses in case of a wrong position
-Gives you more freedom and reduce stress (you can hold more possitions)

CONS
-You show your "hand" to the market (Please take my cheap shares, shake me out) and other market participants use that against you (HOT, GS, MA)
-You show your hand to your broker/prop firm and give them the capacity to "move" against you. (In case that they´re running their own side prop business. Its unethical, so I suspect thats is a rule rather than an exception :D)
-You lose focus on the instrument you are trading, cause you derivate the responsability of the trade to the stop.
-You take a passive position regarding your trading, letting "the market" control your positions
-You get shaked if other people with greater volume putted their stop above/below you and their stop got executed (you get squeezed).



My idea now is to open positions without stops, but when a decent profit amounts (20c or more) only then put a stop. So as the market already moved a lot, it would not be profitable to specialists, your b/d (in case that the order flow is not fully internalized), and other participants with the ability to see the stop, move the price against you to get the shares.
Or, start scalping, so my couple thousand shares desn´t attract anybody.
 
I guess it depends on your trading style - but I've always had the opinion that you either want to be IN a trade or OUT of a trade.

If you are IN - no need for a stop because you are in-it-to-win-it.

If you want OUT - stops can be blown through quickly and easily. The best way to get OUT fast is with a marketable limit order (pay through).

Just my opinion.
 
Quote from ronin266:

Are the stops helpful or they will just drag you down?.

I´ve been trading since 2006.Had bad times, had really good ones, now its something at the middle.

The stuff is that, lately (last 7 months), since I started to take more positions and using stops, I´ve seen that I´m just get shaked like 95% of times. I use a really small risk 3-5c max, for a reward of 20c min. (40-50c is the base expectation), since the starting of my "golden age". But since I started to put a stop in places that I knew with 100% that the price will not get until it´s a bad move, the moves started to get me out of positions.

I´m thinking in start to play fewer positions, with no stops (only mental ones, looking the pnl). But would like to hear some opinions at this topic.

As far as I can see now, the use of stops has:

PROS
-Saves you in case of a technical problem (internet, computer, electricity, heart atack, girlfriend, etc)
-Cuts your losses in case of a wrong position
-Gives you more freedom and reduce stress (you can hold more possitions)

CONS
-You show your "hand" to the market (Please take my cheap shares, shake me out) and other market participants use that against you (HOT, GS, MA)
-You show your hand to your broker/prop firm and give them the capacity to "move" against you. (In case that they´re running their own side prop business. Its unethical, so I suspect thats is a rule rather than an exception :D)
-You lose focus on the instrument you are trading, cause you derivate the responsability of the trade to the stop.
-You take a passive position regarding your trading, letting "the market" control your positions
-You get shaked if other people with greater volume putted their stop above/below you and their stop got executed (you get squeezed).



My idea now is to open positions without stops, but when a decent profit amounts (20c or more) only then put a stop. So as the market already moved a lot, it would not be profitable to specialists, your b/d (in case that the order flow is not fully internalized), and other participants with the ability to see the stop, move the price against you to get the shares.
Or, start scalping, so my couple thousand shares desn´t attract anybody.
More...

A stop doesn't have to be an order you have already placed, but you must trade with the concept of "stopping out of a loser" by some mechanism. At some point you have to accept, "this isn't working out like I imagined" and take your losses to preserve what remains of your capital. If you don't, the market will eventually pound you into the dirt.
 
Quote from Scataphagos:

A stop doesn't have to be an order you have already placed, but you must trade with the concept of "stopping out of a loser" by some mechanism. At some point you have to accept, "this isn't working out like I imagined" and take your losses to preserve what remains of your capital. If you don't, the market will eventually pound you into the dirt.
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yeah I know, I traded that way before. But I got tech problems 2 times that cost me 4k each, for a couple of minutes with broadband problems :/. Those swans never ocurred again, but they just scared the shit out of me...
 
Quote from ronin266:

yeah I know, I traded that way before. But I got tech problems 2 times that cost me 4k each, for a couple of minutes with broadband problems :/. Those swans never ocurred again, but they just scared the shit out of me...
More...

Good point. I always thought Stops were held on my PC but a little checking reveals that for CME at least, stops are held at the exchange.

I use Ninja Trader and the cancellation instruction for OCO has to come from my PC, whilst the 2 orders reside on the exchange servers. Theoretically if I lose the connection, both orders could be filled.
 
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