It's important to note that the trade4cash guy only commits a very small % of his account to any one trade, which is what makes his stance on stops viable. He could ride any one stock down to 0.00 (not that he would actually do that) and not hurt too badly. In contrast, any small daytrader that's committing most of his or her account to each trade could be put out of business without some reasonable "uncle" point.
humble1
· 2 years ago
Great site. You should look at Van Tharp's work on stops. It is an eye opener. Also, most traders have no way of confirming tops and bottoms properly and will place stops in the wrong place to begin with.
ArizonaChartist
· 2 years ago
Is there any way for a retail trader to either know or guess with a reasonable probability of being correct where there are a large number of stops set?
Brian Schumacher
· 2 years ago
Corey,
I just recently learned of your site, and was surprised to see a reference to my article at Trade 4 Cash regarding the use of stop losses. Richard is absolutely right - I only devote 1/12th (8.3%) of my total capital to any one trade. So if the stock ceased to exist, I would only take an 8.3% hit to my account.
The use of stop losses is a decision that each trader must make for himself. There are good points to be made on each side.
BTW I like your site, and will be adding it to my blogroll in the next day or two. Keep up the good work!
Corey
· 2 years ago
Brian,
Thank you for your comment and excellent blog. I have gleaned valuable insights from your weekly post series and am looking forward to more!
Thank you for the clarification as to your stop-placement method. I was unaware until Richard pointed this out to me and it makes sense. Your point is also valid, as is your research, of course, regarding not using stop-losses as hard rules (or at all). It's hard to argue the data and conclusion you found and I wanted to give your thoughts credence to the readers and contrast it with Richard's notion of taking a stop before the market hits it.
I've fought and struggled with stop-loss placement and have tried volatility stops, technical analysis stops, range stops, but have never tried "no" stops and I think the point is at least worth considering.
Thank you for the compliments and I look forward to hearing and reading more from you!
All Comments
I just recently learned of your site, and was surprised to see a reference to my article at Trade 4 Cash regarding the use of stop losses. Richard is absolutely right - I only devote 1/12th (8.3%) of my total capital to any one trade. So if the stock ceased to exist, I would only take an 8.3% hit to my account.
The use of stop losses is a decision that each trader must make for himself. There are good points to be made on each side.
BTW I like your site, and will be adding it to my blogroll in the next day or two. Keep up the good work!
Thank you for your comment and excellent blog. I have gleaned valuable insights from your weekly post series and am looking forward to more!
Thank you for the clarification as to your stop-placement method. I was unaware until Richard pointed this out to me and it makes sense. Your point is also valid, as is your research, of course, regarding not using stop-losses as hard rules (or at all). It's hard to argue the data and conclusion you found and I wanted to give your thoughts credence to the readers and contrast it with Richard's notion of taking a stop before the market hits it.
I've fought and struggled with stop-loss placement and have tried volatility stops, technical analysis stops, range stops, but have never tried "no" stops and I think the point is at least worth considering.
Thank you for the compliments and I look forward to hearing and reading more from you!