Pulling out the Stops
I've been trading for nearly four years now and I can only think of a couple of times that stops helped me out. Maybe the bad days overwrite any good days in my memory (I've only been keeping a trading journal for a year), but I think I would remember times that I got my tush saved by a stop. It just doesn't happen enough to justify all the blood, sweat and tears that I put into calculating them.
I know stops are an important part of many traders' toolboxes. But the way I trade doesn't seem to benefit from most of the stops I set.
So from here on out, I'm banning my use of stops. I will ride out the good times and the bad without worrying about support levels, moving averages, or market crashes.
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1 comment:
Hi Scott,
I found this about how Zweig sets stops , hope it helps.
Zweig follows strict selling rules. He generally places a stop order at 10% to 20% below the current price when he buys a stock. The exact level depends on the stock's recent trading pattern. He says he's "out with no second-guessing when a stock violates a stop." Zweig says that a "random move might take you out, but so what? There's always another stock. In the long run, the probabilities favor using stops."
While Zweig doesn't spend time analyzing fundamentals, he emphasizes the need for discipline when buying and selling. "I measure what's going on," he writes, "and I adapt to it. I try to get my ego out of the way. The market is smarter than I am, so I bend."
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