100% Original Guarantee For All Products

Is the stop loss necessary?

The stop loss is essential when trading. Risk management and money management are, in my opinion, the most important aspects of trading and are grossly undervalued by many. When you place a trade, just like any other endeavor or aspect of life, you must have a plan and you must STICK to it.However there are two stop loss use cases.

One is your typical hard stop, which is one you set and forget until the stock hit’s that level which forces you to exit.

The second is mental. This is a practice in which you have an idea in your head that you will exit your trades at. However, mental stops do a few things for you, they allow you to let the stock hover for a second below the stop to see how it reacts (if it’s a fake out.) Also, if you subscribe to the theory that market makers move stocks in order to “hunt” stop losses, then obviously they cannot see your stop loss orders if they don’t exist and are only in your head.

Mental stop losses require much more expertise and patience to perfect, but they are definitely the way I suggest to go.

So use a stop loss.

Even if you use mental stop losses, be sure to setup an alert to let you know that price is getting to a critical level.

 

 

Leave a Reply

Shopping cart

0

No products in the cart.

%d bloggers like this: