CHAPTER CHECKLIST
The chapter title is, Do Stops Work? The answer is complicated. One fund manager said that if you wanted to be stopped out, then use a stop. The tests showed that being stopped out means profits get whacked in half and yet the risk of loss does not diminish much. In other words, traders have to be selective in how they use stops.
Here are some tips to consider when using stops.
What size gain is required to overcome a given loss? See Table 3.1.
Hold time loss is the largest potential loss during a trade. See What Is Hold Time Loss?
A mental stop is one kept in your head and not placed with a broker. Only seasoned traders should use mental stops. See Mental Stop: For Professionals Only!
Avoid placing stops where other traders place theirs. See Minor High or Low Stop: A Good Choice.
Avoid placing stops at round numbers (those ending in zero). See Squaring Off Round Numbers.
Chart patterns represent good stop locations because they often act as future support and resistance ...
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