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I concur. When I'm examining a trade the first item I commit to in writing
is the stop, then I look at the prospective entry. If the difference between
the entry and the stop is beyond my comfort level, I pass on the trade. I
also use patterns and I fix my initial stop at the point where my pattern
analysis would be proven wrong and not infrequently set the stop up as a
stop and reverse. I trade electronically and the stop order is always
prepared and parked before the entry order is released. When the fill comes
in, the stop is fired off. I find that allowing the initial entry to run on
"autopilot" guarantees the discipline required to avoid the big losses.
While I find I can often trade my way out of a bad decisions (without stop
loss), the mental strain of doing so tends to ruin my market perspective.
The only time I do not put stops physically in the market is when I am day
trading, am prepared to monitor the price action, have a stop level marked
on my chart, and have a market order already ready to fire.
Earl
----- Original Message -----
From: swp <swp@xxxxxxxxxx>
To: realtraders <realtraders@xxxxxxxxxxxx>
Sent: Friday, June 25, 1999 7:50 AM
Subject: Stops
> I think this discussion of stops needs some amplification. There is more
> than one reason to have stops IN THE MARKET. One is for money management
> purposes. The other is for emotion management.
>
> Much like Stewart and Bill, I trade with patterns - Elliott Wave
> patterns - but patterns just the same. And, I always use stops. I know
> sometimes I get caught with everybody else and have bad fills and the
> like, but it is important, especially for inexperienced traders. It is
> very easy to get caught up in hoping that your position will come back.
> Recently, I had put on a trade - a day trade - which did not go my way.
> I did not have stops. I did not follow my own rules. There was a
> POSSIBLE analysis that said it was okay for this thing to go against me
> for a little while, so I did not put stops in. Unfortunately, the better
> analysis was that it could go way against me. But, I HOPED that it would
> go my way. I had no stop and I lost big. No stop, no emotion management.
> If I had gone with my analysis at the start, and placed my stop, I would
> have either been hit for a small loss, or would have been more
> realistic, realized the market was not working according to my analysis
> and gotten out at a profit (initial move was in the right direction but
> with the wrong pattern).
>
> The other point to realize is the horrible fills, more often than not
> can be known ahead of time. By this I mean, stay away from bonds before
> Greenspan speeches, major data, etc. Then you can place stops
> intelligently. Can the boys on the floor run them? Yes, Baldwin does
> sometimes when the market is slow, but that is the risk you must take.
>
> Do people trade w/out stops? My old boss did. But he was experienced,
> had all the flow info (primary dealer desk head) and had made millions
> trading bonds for many years. He considered stops a free option for the
> guys in the pits. But, mere mortals, and beginners cannot do that. I try
> to avoid ever seeing my stops hit, since if the patterns do not develop,
> I often get out ahead of them, but there is no guarantee that is doable
> and the risk of a bad fill is better than the risk of no fill, a
> hesitation and a continuation to turn a 1/2 point loss into a full point
> or worse.
> --
> Steven W. Poser, President
> Poser Global Market Strategies Inc.
> http://www.poserglobal.com
>
> Tel: 201-995-0845
> Fax: 201-995-0846
> Email: swp@xxxxxxxxxxxxxxx
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