Stop Losses - when to use?

[Betavegeta]

Stop losses are good in theory but in reality they make you prone to getting stop hunted by large institutions which are in a position to influence market direction.

 

[Gringotts Bank]

Stop losses are good in theory but in reality they make you prone to getting stop hunted by large institutions which are in a position to influence market direction.

Everyone uses stops, whether they realize it or not, otherwise they end up with a draw down chart like canoz posted. Hard or soft, visible or not - it's still a stop.

 

[Wysiwyg]

Stop losses are good in theory but in reality they make you prone to getting stop hunted by large institutions which are in a position to influence market direction.

Better veg. eater, the cost for an organisation to trip a stop in order to cause financial loss would be phenomenol. They would have to sell down or buy up and thus incur losses of their own when price reverses.

 

[tech/a]

Only a few here in my view get it!

If discretionary

Context
The ability to read chart and volume
Is paramount if you want extra ordinary results.

Set and forget systems trade
Better than average results for those good at it.

Trading without a stop can be very profitable if your scalping range.
But work on a long timeframe and it's like driving a bus without brakes.

 

[galumay]

Everyone uses stops, whether they realize it or not, otherwise they end up with a draw down chart like canoz posted. Hard or soft, visible or not - it's still a stop.

Thats taking semantics to a level that reduces discussion to nonsense. That is if I am correct in that you appear to be implying that any sell order is some form of "stop loss"?

 

[tech/a]

Thats taking semantics to a level that reduces discussion to nonsense. That is if I am correct in that you appear to be implying that any sell order is some form of "stop loss"?

Why wouldn't it be?

 

[Betavegeta]

Well if people insist on using stops at least don't base it on any obvious moving averages or any commonly accepted technical trading signals that almost every trader knows.

To be safe just use a mental stop and move it a few price steps below what you thought was a good stop initially.

 

[tech/a]

Well if people insist on using stops at least don't base it on any obvious moving averages or any commonly accepted technical trading signals that almost every trader knows.

To be safe just use a mental stop and move it a few price steps below what you thought was a good stop initially.

If that is the case wouldn't you be able to use that for your own trading advantage?

 

[galumay]

Why wouldn't it be?

Really?! This is like the mad hatter's tea party, if words can mean just whatever we want them to mean!

Seriously, lets keep the discussion slightly rational. "Stop Losses" as per the OP's query are not the same thing as a normal order to sell.

 

[tech/a]

If I I'm trading a range of say 10 points long or short and I have a buy
3 points off a support level and a sell at 7 points above that
The exit would be 3 points below the buy and the sell would be a target stop

Label it what you like it does the same thing
Gets you out where you want to.

Semantics

 

[galumay]

If I I'm trading a range of say 10 points long or short and I have a buy
3 points off a support level and a sell at 7 points above that
The exit would be 3 points below the buy and the sell would be a target stop

Label it what you like it does the same thing
Gets you out where you want to.

Semantics

I dont even know what you are talking about!! (pardon my ignorance of trader's quack!)

But a "Stop Loss" is defined as an order to sell in the future at a specific price, to my knowledge no one has previously tried to claim that a normal sell order is a form of "Stop Loss". Its certainly not in any online definition of "Stop Loss" that I can find.

As I said, its mad hatter's tea party stuff.

 

[tech/a]

Had to read back to gain context.

Now I understand
You believe in averaging down as a long term investor

Carry on

 

[cynic]

I dont even know what you are talking about!! (pardon my ignorance of trader's quack!)

But a "Stop Loss" is defined as an order to sell in the future at a specific price, to my knowledge no one has previously tried to claim that a normal sell order is a form of "Stop Loss". Its certainly not in any online definition of "Stop Loss" that I can find.

As I said, its mad hatter's tea party stuff.

One of the things I have often noticed, is the human tendency to conflate just one, of multiple possible expressions, for a single concept, with the concept itself.
This can give rise to some confusion to those having chosen from amongst the other possible expressions for that same concept.

On this occasion, risk mitigation, appears to be the concept, and the stop loss order, is but one, of the multiple available expressions!

 

[galumay]

....Carry on

Phew! I was starting to feel like Alice!

 

[cynic]

Better veg. eater, the cost for an organisation to trip a stop in order to cause financial loss would be phenomenol. They would have to sell down or buy up and thus incur losses of their own when price reverses.

Couldn't they just spoof, layer, or ratchet the market, like so many professional market manipulators have been known to do in years gone by?

 

[Wysiwyg]

Couldn't they just spoof, layer, or ratchet the market, like so many professional market manipulators have been known to do in years gone by?

Those practices do happen but there is a disincentive. My reply to the context of the post is still an individual is extremely unlikely to have their stop triggered by an organisation.

"Law360, New York (August 8, 2017, 8:39 PM EDT) -- The Seventh Circuit’s unanimous decision Monday to uphold the conviction of Michael Coscia for a market manipulation tactic known as “spoofing” is a landmark ruling that removes questions about the constitutionality of the law banning such conduct, strengthening government efforts to crack down on the practice, experts said Tuesday."

 

[cynic]

Those practices do happen but there is a disincentive. My reply to the context of the post is still an individual is extremely unlikely to have their stop triggered by an organisation.

"Law360, New York (August 8, 2017, 8:39 PM EDT) -- The Seventh Circuit’s unanimous decision Monday to uphold the conviction of Michael Coscia for a market manipulation tactic known as “spoofing” is a landmark ruling that removes questions about the constitutionality of the law banning such conduct, strengthening government efforts to crack down on the practice, experts said Tuesday."

Well there is an old saying: "you are not a criminal until you get caught!"

Those seeking to profit by foul means are hardly going to allow a few token laws, in a world bereft of adequate financial regulation and market policing, to stunt the growth of their business ventures!

When I see certain firms, of ill, repute getting taken to task, I'll start believing that our society, and it's financial regulators, are making more than a token effort. Until that time "caveat emptor".

 

[CanOz]

Spoofing still happens...not as often or in as many markets as I used to see, generally large lots are getting hit before they're pulled in my markets....

 

[Newt]

Thank you everyone.
Some interesting ideas here.

It's almost as if it's not worth putting a stop loss unless you've already gained some capital growth in a stock & can afford to put a stop loss in place to save a dramatic fall.

Thanks!

Hi bomz

Guessing from your posts you're more interested in the trading side of things, as described by pixel.

Some other things to consider, especially if your trading experience matches your post count (sorry if that assumption is incorrect):

- Initial stop should be determined and entered when you ENTER your position
- This protects you from downside loss and yourself - most traders find some (incorrect) reason to talk themselves out of taking losses until they have earned a great deal of experience
- Then once you have profit in longer term positions, consider trailing a stop
- Many strategies are actually worse off for stops - its a trade off in terms of risk reduction (and hopefully drawdown reduction) versus potential harm to profits
- As others have said, too tight a stop can be particularly harmful, too wide and you risk losing too much capital
- In rapidly moving markets, particularly where liquidity is tight, price may gap over your stop - there is no guarantee you will actually get to exit at that price

If I haven't confused the heck out you, perhaps also consider listening in on this podcast:
http://bettersystemtrader.com/037-cesar-alvarez-studies-stop-losses/

 

[Modest]

I post this post at 11:33PM Perth Time.

Crude OIL (CL Futures) I anticipate reaching 52.00 as overall target

If Charts are useless... Ignore me

20/09/17

Trading at 52.00

Dare I say what the next target is