It all comes down to risk. how much can one take? THink of a poker tournament. If you are the big stack you can push people around and play mediocre hands and in a lot of instances win the hand because you were'nt risking a high percentage in comparison to your opponents. If you are short stacked... well everything changes. You have to be more patient in waiting for a good hand but that has its downside as well. to answer the question: I have to use them.
Once i tried not using them and a big move happened and in the few seconds it took to get out of hte posistion I had grossly exceeded good risk tolerance rules. had i held on to that trade for the rest of the day I would have made out like a bandit......but what IF it had never come back??.........Like i said, I think ,its a double edge sword.
"Napoleans severest comment on his beaten enemies - that they "saw to many things at once""- Hart
Unfortunately in the leveraged futures market using a stop loss order is a cost of doing business. Think of it like health insurance, you don't like writing a check for the monthly premium and it can seem like a waste of good money until the day you really do need it.
In the futures market it is not a matter of IF a big move will go against you and never come back to let you out, but WHEN that day will come, and it will. So using a stop loss is the only way to protect your working capital, your trading account, from a single large loss that can put you out of business.
Another thing to consider, and this may not apply to you, but what I have seen is traders that get into the habit of not using a stop loss more easily drift into the habit of adding to a small loss with the hope of working the trade back to breakeven quicker. In honoring a stop loss in the first place, you are much less likely to develop the habit of adding to a losing position.
Be Patient and Trade Smart
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In my opinion, having your stops hunted is part of the cost of doing business with those 'longer term' trades. One thing I try to keep in mind (and I welcome other opinions on this) is that if you have selected a good entry price, other market participants will be on your side and the stop hunters won't be able to move the market to your stop against the 'current'.
My advice is to ensure you are taking high qualtiy, high probability entries using whatever analysis method you use. If your stops still get hit a lot, look at your analysis and see if it can be improved. Easy for my to type this advice, very hard to actually do. It's something I work on all the time.
Just my two cents, could be totally wrong.
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That is my hang up currently. I'm in the general level for entries but notice how often there seems to be that one last push in the opposite direction. Working on smaller time frames to see if I can pinpoint the reason. Also noticed 2 weeks in a row at 6 am on a Wednesday, someone, somewhere has driven the price of the GBP/AUD pair up. You can be sure I will be tuned in this upcoming Wednesday. Hang on a sec.
Yep, on a 5 minute chart, the pair was moving long between 5:30 and 6:30 the last 2 Wednesdays. Thanks guys for giving me incentive to do some private eye work.
Computers/algos/robots cannot see where your stop orders are. It just feels like it when you get stopped out. That's why traders will say that, but the reality is an algo is not going to trade through a couple hundred of lots to take out a 3 lot retail stop. That being said, having a stop at a predictable level like just above a swing high or swing and you can be picked off, usually by a local type day trader. If the depth of market is thin to that level they may try to fish for stops and move the market there if they don't need to trade much to get to it. I have done it.
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During my trading I normally use 2 stops, a mental and a "hard" real one. The mental is where I think I'm wrong, the real is a catastrophic stop in case of some quick ugly action or a platform crash or something. I usually don't get my hard stop hit but it is there for emergency situations for insurance...