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I think that Bill (DruBroff) has done a good job of summing up this
discussion. This is not a new argument. One of the first things I read about
trading was the New Market Wizards, and the same argument (mental versus
physical stops) was in there.
I have always felt that using a stop was very close to giving a gift to some
pit trader. Time and again I've seen my stops and other peoples stops taken
out even if "they" had to go more than 3 standard deviations out of the
range to do it. I can't count how many times I was stopped out in my early
trading. It wasn't 1 of 5 either more like 4.7 of 5.
Using some form of protection is essential. If you use a metal stop and you
are good enough at it, it's probably ok. Use a physical stop and you are
good enough at it, ok. Use an option and you are good enough at it, maybe
even better:-)
As far as risking too much and ending up broke or dead, don't do that. My
rule is don't risk funds that you can't live without, and never put good
money after bad. If you have a disaster don't panic just sit down a think
about your alternatives. Sometimes you can think of a solution that didn't
occur to you at first. I had a fairly disastrous trade in Oats once and
after some clear thinking I was able to rescue about 1/3 of my loss the next
day.
In defense of Bill (Eykyn) I don't think that he has committed any high
crimes here. He has responsibilities in his country that require him to be
decisive and judgmental. He isn't twisting anyone's arm and he has the right
to his opinion, as we all do. If you want to follow Bills advise do that and
do it well. The mistake that many traders make is being inconsistant. I've
done that a lot, it's my largest weakness.
If you can learn to identify when the train is really leaving the station as
Stewart obviously has, then using stops as he does makes very good sense. If
you have learned to get out of a trade when it starts to move against you as
Bill has, then that makes very good sense. I quickly found out that using
options for protection was the answer for me. I could sit back and say "yup
there they go again" and be all smiles.
Brent
-----Original Message-----
From: William DuBroff <mcsquare@xxxxxxxxxxxxx>
To: Realtraders <Realtraders@xxxxxxxxxxxx>
Date: Saturday, June 26, 1999 9:00 AM
Subject: Maybe final stop note
>Folks:
>
>The argument, as I understand it is mental versus "in-the-market"
>stops. Both types of people are using stops. It appears that the point
>that is not getting
>through is that some people, whether day or position trading, feel or
>know that they do not have the temperament to pull the "stop trigger" at
>the right time, or do not want to watch the market tick by tick, and,
>therefore, need an "automatic" trigger puller, even if some slippage
>results. This being the case, can we all agree that stops are good, and
>that matching the style (mental versus in-the-market) to personality and
>whether one watches the market tick-by-tick is a valid approach, and
>that for those who cannot trade without emotion or watch the market
>tick-by-tick that bad fills on stops are better than no stops? If so,
>then has this issue been resolved? If not, then at the risk of
>extending this discussion, I have not seen a valid argument to the
>contrary, i.e., that bad fills on in-the-market stops are worse than no
>stops or unexecuted mental stops.
>
>Bill
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