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Someone asked me:
"Thanks very much for sharing your experience on this and other issues.
I sometimes wonder if I should always enter a stop well off the market
price in the event of something unexpected. Maybe you could post to
the group on this?"
Unless I have a very large profit in a position and the position is only a
portion of what I normally trade, I do keep a stop-loss in the market unless
that particular market's day trading limits are smaller than I would set my
stop. For example, I have a wheat position on that I have been building and the
stop loss on that position would be further than limit for a day, so that
position didn't have a stop loss on it yesterday and today.
I know some people don't keep stop losses in the market, but I do tend to keep
disaster stop losses in most markets I trade. Earlier this week, I was short
yen. I had run a stop loss overnight and when I got up an checked the market,
the position was at a loss, but had not reached it's stop loss. After doing my
quick morning check on positions and looking at the overnight charts, I decided
to run out and get something for breakfast [My wife is due to deliver our first
child soon and she was fast asleep...so I didn't want to make noise klunking
around the kitchen]. I waited the extra five minutes for my floor brokers to get
in before leaving, then gave them orders and headed for the food. When I got
back 10 minutes later, the yen was well past my pain tolerance and I called down
to get out of the position--of course, when the phone rang and they gave me my
fill, I was happy I had left the stop loss order.
It's always painful to get stopped out of the market at a loss, but once out,
you can reassess the market. Personally, when I get my fill on a stop loss, I
always feel lighter, as if the weight of the losing position was dragging me
down and blurring my sight and judgement. Better to get out while still
alive...you can always find a new position. Once your capital is gone, it's
gone.
Best,
Tim Morge
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