Nobody who uses stop orders to exit from their trades would say you should ever relax that discipline by cancelling an order or lowering the stop price in order to hang on. But some might change that stop order into a market order when something tells them they should. What could that something be? Any rules, or rules of thumb? The question is especially relevant this time of year, because crashes are common in Jan. and Feb., and at this point in the market cycle, at such dizzy heights.
When you use stop orders to exit from trades should you ever use discretion to exit early?
- Thread starter Steve Ladd
- Start date
Stops, while required for survival, are an art. Just because you set one doesn't mean you set it in the right place. Therefore... if you realize/feel you want/need to exit before your previously place stop is hit... well, that's a judgement... and it may or may not be right. You can always stop out and reset for the next play.
Some players will set a time limit on their play. That is, if things aren't working out after a certain amount of time and even if stop not yet hit, they will close the trade and go onto the next. Nothing wrong with that try, either. After all, it's an art/guess. Doesn't matter if you guess wrong. Does matter if you rationalize/hope behavior that leads to a large loss.
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Stop losses teach you discipline and keep you in the trade long enough to make a substantial profit. That said, it is pretty hard to pick tops and bottoms. You will "never" keep all points of profit, no matter how hard you try, so why bother? There are times when the candlesticks are telling you to exit the trade. Pay heed and take your monies. Being greedy is one good way to lose more monies, being fearful is just as bad and will also, cause you monies.
yes because your question says exit early which means saving you money if the stop was going to get hit anyway
and you could be at a profit.
are you in a loss or a profit running a stop.. thsi question is very vague but you see lots of people answeering it who rarely have the profitable opportunity to use a stop properly which is to stop YOUR PROFIT at a profit not stop your losses!!
and you could be at a profit.
are you in a loss or a profit running a stop.. thsi question is very vague but you see lots of people answeering it who rarely have the profitable opportunity to use a stop properly which is to stop YOUR PROFIT at a profit not stop your losses!!
From my experience, the more I deviate from my backtested plan, the worse my results are.
Even if there appears to be a good "fundamental" reason to not stick to my plan.
Yes, I may get the ego boost from being "smarter" than the market for a few trades, but over the course of 500 trades I will probably wind up far behind where I would have been had I just shut my brain off and stuck to the original plan, warts and all.
I believe I read you saying once that you will sometimes cut short a stop order, so I was wondering if you would chime in. I am happy with how I calculate stop prices but as a position trader I have not yet developed hard rules about when to exit the market generally (I don't short). Maybe in such times shortening my stops will be a half-way option.