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Ladies and Gentlemen,
Today I reflected over a number of trades I completed. Many were
winners, but some could have been bigger winners. I attempted to learn
from reviewing my plays, and I concluded what I already knew but did not
want to accept, as follows.
The ugly truth of the matter is that it is not profitable , over all, to
have intraday stops for orders entered intraday based on signals from
the DAILY charts. The reasons are as follows:
1. The logical places to place those stops are used by lots of traders.
Then they run the stops. Trendlines, support and resistance, and a tick
beyond the last bar's high or low are favorite places.
2. You don't give the play room to breath. I had a nice short on ORCL
today, thank goodness I let it breath.
3. You lock in your losses and cut your winnings.
So why do we "protect ourselves" with these stops?
We would like to believe we'll limit our losses. Instead we limit our
gains. THE REAL WAY to protect yourself from catastrophic losses on a
single issue is to have plenty of money and multiple positions,
expensive but true. Nothing protects you from an overnight gap or
trading halted gap.
For your consideration,
James
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