Stop losses-which do you use and why?

Trailing stop, hard stop, breakeven stop.

A much bigger question than many might think.

I respect TA-based stop initially - one that the TA indicates entry may have been right but the market has proven the move isn't going to work. Raghee Horner explains this very well in a clip on YouTube - she terms it the Point of Validity - it is the earliest price level that indicates the market is not going in your chosen direction, but, more than that, TA suggests its likely to accelerate from there in the opposite direction.

Once I'm in profit, a TA-based target kicks in and I usually get fully out when this is hit.

I'm awful with using price level stops... I always pick the wrong ones or am too tight. So I prefer to use a fixed size stop which reflects the market conditions. Keeps things simple. Like me.

Hard stop at a technical level - Only moved if market conditions change and another technical level appears at which to place the stop. Trade is exited when either the stop or profit target are hit.

The reason for this is it allows me to 'set and forget'. My biggest problem is discipline so if my stop and profit targets are at technical levels which make sense to me I can let the trade run and just look at the close of each daily bar to see if any adjustments need to be made.

Edit: Forgot to add reason why.

I tend to put my stops in regards to price action. Don't like monetary stops – only use stops based on technical levels and adjust position size accordingly. Also I monitor target and for short time trading do not enter if risk/reward is worse than 1/1. If I'm confident that my strategy is more than 50% successful than 1/1 is OK. If not than anything less than 1 to 1.5 (risk to reward) is doomed statistically to lose money. I decide on trade size based on the size of the stop and rule not to risk more than 2% on a single trade.

IMO Most important is to know why you entered the trade at the first place. If the market proves you wrong (the reason you entered trade is no longer valid) the best thing is to close it (it doesn't matter if it goes your way eventually – no need to lament, sooner or later there would be another opportunity coming your way)

Trailing stop based on highest high/lowest low for n number of days. The method pioneered by Donchian a long while back.

My opinion is:

I'v never liked the idea of relying on stop losses to exit losing trades. Stop loses defiantly have use through and I think if their used as a way of exiting a trade to avoid account blow-ups (disaster stop losses) then they can be effective. Obviously there must always be a way of exiting normal losing trades, so if the trader can try to exit normal losing trades faster and at a lesser loss than that of their rivals (who use stop losses) a worth while benefit can be had.

I think this is especially relevant to traders who operate a mean reverting or swinging methodology.

I use a hard stop loss and it's function is to protect me if my platform/connection expires.

I rarely let the stop get hit. I guess there are 2 ways to know if you are wrong about a trade.

1 - your stop gets hit
2 - the price does not start moving the way you expected it to after entry

I prefer the latter. If the market does not move positively in the way I expected it to, I'll close out the trade which may be in profit or loss at that point.

tomorton said:

A much bigger question than many might think.

I respect TA-based stop initially - one that the TA indicates entry may have been right but the market has proven the move isn't going to work. Raghee Horner explains this very well in a clip on YouTube - she terms it the Point of Validity - it is the earliest price level that indicates the market is not going in your chosen direction, but, more than that, TA suggests its likely to accelerate from there in the opposite direction.Once I'm in profit, a TA-based target kicks in and I usually get fully out when this is hit.

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I love posts with; brevity, clarity and relevance, nice one Tom...

Bennie said:

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yeh but what stop loss do you use?

I enjoy trading penny stocks so I use them every time with out a doubt!

should've added 'i hedge' and 'hard stop but i move it from time to time'

I use ATR for stops. Let the volitility decide unless its out of your Risk Management.

DionysusToast,...Just for my edification, if you please,..what size stop do you use,..and how long in the wrong direction does you position have to go before you close it? ,..Oh,..and does the same apply to all markets,...Fanks : )
( I only trade the forex)
BTW: Could you please make this a meaty response