Jump to content
GordonDK

Mental vs hard stop loss

Recommended Posts

Hi,

 

I've been using mental stop losses, but sometimes (more than I'd like) I let a stock slip before exiting, often ending up with profit/risk < -1.0 to -2.0.

 

I've only traded live for a little under 2 months, so I'm definitely a beginner. What do you guys do with regards to stop losses? Mental or hard? I'm hesitant to use a hard stop loss due to the risk of slippage.

 

Would be nice to know what the rest of the group is doing.

 

 

 

Jimmy

Share this post


Link to post
Share on other sites

Jimmy, this is a very common problem that many of us face. At least once a week I find myself freezing like a deer in the headlights. It usually happens in the first 20 minutes when prices fluctuate wildly. There is just not enough time to manually enter a hard stop loss. I'd say I stick to my mental stop losses 90% of the time. But the 10% of the time where I don't, the outcome is usually very ugly.

 

I am trying to correct this bad habit through repetition. Hopefully it becomes muscle reflex given enough time. I believe the root cause is fear. We are afraid of being wrong--of losing money--so we convince ourselves that the price will come back. As Andrew mentions in his book, it is better to take the small loss than letting things spiral out of control. Commissions are cheap; you can always get back in.

 

Regarding slippage: usually the amount is a few pennies. Isn't this more favourable than stopping out 0.25 or 0.50 beyond your original stop loss?

Share this post


Link to post
Share on other sites

Hi Robert,

 

Yes, I do appreciate the psychology of it all. However, at the moment, I think I am better suited to a hard stop, since my P&L is slowly creeping the wrong way mainly due to my exceeding the stop loss on some stocks that I have traded. Wanted to know from others who use hard stops, if they have experienced significant slippage in the form of spikes that has led to losses greater then the intended stop loss? I would think not, if we stick to trading stocks with high volume and stay away from low float stocks (which I am not ready to trade anyway)? However, I have seen momentary spikes in stocks that I have been following, so.... Anyone who is using hard stops who can say something about their experience??

 

 

Jimmy

Share this post


Link to post
Share on other sites

And I’m of course talking about slippage here, because a hard stop would be a stop market order.

Share this post


Link to post
Share on other sites

My last simulator platform was easy, click, set, and forget as far as stops go. All done right on the chart (right click or hotkey). But you would get the stop out on those random outlier prices that sweep the stops. When I switched to DAS, I decided to practice the mental stop. What I'm finding helps is that I'll place a horizontal line where I want my stop to be. If the price hits that line, I close out, no questions. I give a decent slight delay to make sure it's not just a random excursion to a really low price. The only *actual* stop I place into the market is when I move to breakeven (e.g. I've taken profit on a target).

So far, having that line as a mental trigger has worked.

Edited by KyleK29
  • Like 2
  • Thanks 1

---------------------------------------------------------
Profile / Project Pages (Dynamic Hotkeys, StreamDeck Files, and other contributions are located here)

Share this post


Link to post
Share on other sites
On 6/15/2018 at 11:22 AM, KyleK29 said:

My last simulator platform was easy, click, set, and forget as far as stops go. All done right on the chart (right click or hotkey). But you would get the stop out on those random outlier prices that sweep the stops. When I switched to DAS, I decided to practice the mental stop. What I'm finding helps is that I'll place a horizontal line where I want my stop to be. If the price hits that line, I close out, no questions. I give a decent slight delay to make sure it's not just a random excursion to a really low price. The only *actual* stop I place into the market is when I move to breakeven (e.g. I've taken profit on a target).

So far, having that line as a mental trigger has worked.

@KyleK29, I am looking for a way to automatically draw a line at my stop level whenever I enter a trade. I need the visual reference as I am unable to effectively respect my stops.

Do you know any commands that will draw a line at a specified price and of a certain color?

Share this post


Link to post
Share on other sites

you can display the entries and exits with the triangles and then add easily a line to that level if you need to by hitting page down and clik on that level.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.