Today I'd like everyone to welcome Michael Michaud from Invest2Success.com. Today he'll be bringing us the finer points of stop losses...enjoy and please feel free to comment!
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Do you use stops on all your trades? Trading without stops is the ego wanted to never be held accountable to admit that a position was a mistake if a certain level is breached or if a certain set of circumstances play out in an unexpected manner.
Let the market take you out. This takes your ego out of the decision - this decision on what stop level to exit should be calculated before entering the trade. Again you want to prevent your mind playing tricks by rationalizing a new reason to hold on to a poor performer. I review my trading journal each day in order to remind myself of the #1 Entry Driver for the positions and key stop levels. If any of these are broken, I have lost the edge projected and should exit such busted trade’s immediately.
