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Stops are there for a reason. Cutting a winner short out of fear is detrimental to the long run. The only time I know my trade is wrong is when my stop is hit. I know it sounds so simple, but in the heat of battle it can be hard.
That is why I try to keep in mind that this is a business and businesses have expenses. |
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I take the opposite view. The view shared by the Phantom of the Pits and many other successful traders.:
When you enter a trade, don't wait for the market to prove you wrong, look for the market to prove you right.
Why sit and wait as price moves against you and hits your stop? If you are on the wrong side, get out. Enter a trade looking for price to prove you correct by moving in your desired direction from the start. If it does not, does price really have to move all the way to your stop loss for you to know you are on the wrong side? Of course not. Place the stop, but get out prior to price hitting it.
Losses are indeed an business expense in trading. But you can strive to cut your losses short. One good way to do that is to not wait to be proved wrong. Remember, trading is a losers game-he who loses best, wins.