Stop Losses by Malcolm Morley

Stop Losses by Malcolm Morley

Michael; there’s a lot of rubbish written about stop losses, and the relationship between t/p’s and s/l’s, so let me say that there are very few absolutes in trading; we all have to find out what works for us, and go from there.

Michael; there’s a lot of rubbish written about stop losses, and the relationship between t/p’s and s/l’s, so let me say that there are very few absolutes in trading; we all have to find out what works for us, and go from there.

For example in my personal experience I have found that stop losses of any point size are detrimental to my trading performance, so I only use them to protect my account against catastrophic ruin; not as a trading tool.

By this you can safely assume that I generally take profits at smaller intervals than when a stop loss is hit. This may go against popular wisdom, but it works for me – and that is all that is important. Somehow you have to get to the same place – ie find out what works for you.

My previous post was no more than an example that said the pure mathematical odds of success improve as you increase your targets. It was not advocating a 1:1 relationship between t/p’s and s/l’s. Try some different relationships for yourself – 7:1 5:1 3:1 1:1 1:3 1:5 1:7 etc., and see what works best for you. However, I can almost guarantee that if you use tight stops you will lose, because the spread (as explained above, and no matter how small) will get you.

~chaffcombe

I have lived and breathed trading ever since trading fx professionally in London, Toronto and Philadelphia in the early 70's (yes I know that shows my age!). While my professional career subsequently took me from the trading desk to designing treasury systems for some of the world's leading financial institutions, my desire was to always trade for myself. As a consequence, following 5 years with a major international stock-broker (the last 3 as... More