booters,
Having blown a stop or two in my trading life, let me be bold enough or stupid enough to air the reason I think this happens to a lot of new traders. It comes from bad discipline, and all of those character flaws of course, but the tendency is reinforced by the frustration of accumulated stops that result in "lost opportunity". How many times have we been faithful to our discipline only to sell the exact bottom before a long trade we entered moves in our favor, or buy the exact top to stop out a short? As those events start to accumulate, and especially when not offset by a number of winning trades, it gets really easy to talk yourself into giving things more room, and then a little more and a little more.
It seems obvious that if this is happening there is something wrong with how stops are being set, or something wrong with entries that result in so many positions making an initial negative move, or both. Along those lines, I am inclined to agree with you that simply touching a price point is often not a good criteria for executing a stop these days, or for making an exit on a winning trade. I don't have the answer, but of late my observation has been that the faster price moves toward a critical level, the more likely it is that level will hold, even if it is pierced, which means that jumping in on a mo mo wave is far too dangerous, and exiting on one gets you out of a lot trades that ultimately move in your favor. Anyone who has the solution to this dilemma has my ear.
Dan |
