Hi simonfudge - Good disicpline to always set an automatic stop-loss. This can be at a trading level, so that it will trigger if the trade starts to exceed your comfortable loss (you can work this out from the percentage of your total trading capital you are prepared to risk per trade: 2% is a common figure). The problem with these is that if you are consistently only a little out in setting the right trigger price you will find yourself stopped on the majority of your good trades, sometimes almost as soon as you have opened them.
Some people also set a 'catastrophe' stop, in case of very low probability calamities like major terror attack, presidential assassination, unexpected miltary aggression, or of you become suddenly hospitalised. This will be way beyond the expected trading range of your chosen instrument, but at least you won't lose the house.
Stockbrokers and the like insist that SB is high risk. They are only technically right. If you invest money through them, let's say £10,000 in shares, the maximum you can lose is therefore £10,000, and this risk is both known and fixed. However, if you short the Dow at £1 per point via SB, as there is no limit to how high the Dow might go, it is impossible to quantify your risk, so technically, yes, you have risked your house and all your chattels on this one modest position. SB companies however, actively promote the use of stops to their clients, which is one thing in their favour that does not appear to feature much in investment managers' promotional blurb. Its healthy to recall what Woody Allen said about stockbrokers - 'someone who will invest your money until it is all gone'.
