[RT] Stops and Who Needs Them

[ric ingram <ringram@xxxxxxxxxxxxx>]

Bob,
At 01 Nov 01, you wrote:
   From: "BobR"
<bobrabcd@xxxxxxxxxxxxx>
Subject: Re: RT:ODDBALL
Last year when Mark published his article in Active Trader I asked him
about
stops, particularly the risk of overnight exposure.  He acknowledged
the
inherent risk, but he also said that was one of its strengths in that
the
gaps tended to benefit it more so than not.  He also emphasized the
basic
system was an example of how simple a system could be and yet be
quite
profitable in the long run.  Yet, who in the real world can trade
without
stops?  
When I traded market direction I too used stops for stop
loss or trailing exits or used long options to try to limit
risk.
I still take the occasional market direction based trade - for example
when the market has tanked so much, so fast, the index futures premium is
very negative and the rebound, when it comes will be huge, but few know
when it will come(and I am not one of them).   Then I trade
market direction and use a stop loss stop, realising that it may well be
traded through in a fast market.    A good example would
be the DAX falling from the 6000's to the 3000's and rebounding well over
1000 points.
Stops are also often used for entry into trades by those using a
volatility breakout type of system.
Other types of trading system types such as;
        -       arbitrage
and other spreads,
        -       selling
covered calls,
        -       market
making,
        -       ...
either can make limited use of stops or stops actually defeat the purpose
of the approach.
As a traders coach it never fails to amaze me that one type of client
does not know what a stop is, some know of them and use then
occasionally, and another group cannot conceive of how it is possible to
trade without them.
So the answer to your question :
Yet, who in the real world can
trade without
stops?  
is twofold:
        -       many
traders,
        -       all
of us could be more open to new ideas.
I never cease to be amazed at how little I know; and I just love having
previously cherished beliefs destroyed and replaced with better
ones.
Trading with good feelings, Ric.
www.traderscalm.com




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