What hurts you the most?

stargazer · 10 August 2008

Hi all

Have read numerous articles on STOP LOSSES on the use of them and the non use of them.

I thought i would take this to the field so to speak and ask:

What hurts you the most:

1. Buying a stock use a stop loss, stop loss triggered and sold to then rally and make the gains you had expected.

Or

2. Buying a stock to see it go down in price and having fallen through where you would have placed a stop loss but still being comfortable in your mind that it will come back to vindicate your postion.

Cheers
SG

korrupt_1 · 10 August 2008

yeh good question...

i think traders should view stop losses as not an evil thing but an insurance policy against blowing your account up. (just like normal insurance - you pay a premium... and never hope to use it...)

if your stop loss gets triggered, and the price bounces, then it's probably your timing was a little early or you did not leave enough room for it to 'breathe'. You can definately increase your stop distance by decreasing your position size if you feel that your stock has high volatility.

stop loss is a discipline thing. once upon a time during my naive trading habbits, i never used stop losses... the lessons learnt were invaluable. i use stop losses and i can sleep at night...

It's all about RISK MANAGEMENT...

... to answer your question, i'd say #2 would hurt more... if the stock is falling, there's a reason... that is enough of a reason for me NOT to hold the stock anymore.... holding a potential time bomb could see your account get blown up. I'd rather see my stops get hit, and the shares bounce, than sit on a potential financial ruins.

there would be other setups to trade and although i've lost one trade, i know that i have money to trade another one when the oppurtunity arrives...

theasxgorilla · 11 August 2008

stargazer said:
What hurts you the most:

1. Buying a stock use a stop loss, stop loss triggered and sold to then rally and make the gains you had expected.

Or

2. Buying a stock to see it go down in price and having fallen through where you would have placed a stop loss but still being comfortable in your mind that it will come back to vindicate your postion.

2.

You choose 1 you are unlucky, you choose 2 you are undisciplined and for that you earn the right to inflict pain on yourself.

CanOz · 11 August 2008

Agree, 2. It would make me feel sick to know that i had left a position unprotected and now hold it with a loss great than planned. Although its happened with order problems before. I would liquidate upon discovery for sure now and have done so.

As far as number one goes i think i have nearly mastered the ability to forget small planned losses and move onto the next trade knowing there will be new opportunities....But its the combined draw-down of many losses together that i still struggle with.

Cheers,

CanOz

tech/a · 11 August 2008

In BOTH cases you need contingencies.

(1) A buy back strategy.
(2) A buy back strategy and a psychologist.
Psychologist first then the strategy.

If both are in place then there wont be any pain.
Pain and disappointment come from poor planning.

white_goodman · 11 August 2008

stop losses are just a business expense they are to be expected

Fishbulb · 11 August 2008

definitely the #2 option

it means you're not sticking to your rules and that's a bad sign

strudy · 11 August 2008

Making the same mistake again just after you let your emotions get in the way you go and do it again.

The Emotions of fear and greed are the ones I have particular trouble with.

With the fear of missing out on a rising stock and then chasing the share price only to see it reverse leaving me high and dry.

white_goodman · 11 August 2008

strudy said:
Making the same mistake again just after you let your emotions get in the way you go and do it again.

The Emotions of fear and greed are the ones I have particular trouble with.

With the fear of missing out on a rising stock and then chasing the share price only to see it reverse leaving me high and dry.

just happened to me with arh...trade halt then a merger announcement, gapped up i removed my sell order , 2 hours later it had gone too low for me to sell... oh well

agro · 11 August 2008

getting kicked in the balls

IFocus · 11 August 2008

Agro has the right answer

Stop loss's are nothing without a tested strategy / method of trading

Once decided where the stop loss fits within the method then there is no further discussion IMHO.

cordelia · 11 August 2008

Definitely number 2.......You can take the capital you have left and live to trade another day

Working out where to place stops is tricky......Calculate how much you can stand to lose and work around that.....

MichaelD · 12 August 2008

2. will hurt you more because not respecting your stops will put you out of the game. No money=you can't play any more.

There will always be stocks that whipsaw you out only to take off, but there'll be plenty enough that trend nicely to make up for those. Respecting your stops will allow you to survive until the nice trenders come along.

There are NO "good" stocks or "bad" stocks, merely stocks that either do or do not conform to your required pattern.

It's Snake Pliskin · 13 August 2008

I would have to say having my protective stops- non gsl, gap ****** in the mornings by volatile action.

What hurts you the most?

stargazer

korrupt_1

theasxgorilla

Problem solved... next bubble.

CanOz

Home runs feel good, but base hits pay bills!

tech/a

No Ordinary Duck

white_goodman

BOC

Fishbulb

strudy

white_goodman

BOC

agro

IFocus

You are arguing with a Galah

cordelia

MichaelD

Not fooled by randomness

It's Snake Pliskin

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What hurts you the most?

Problem solved... next bubble.

Home runs feel good, but base hits pay bills!

No Ordinary Duck

BOC

BOC

You are arguing with a Galah

Not fooled by randomness

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