Debate: Hard stops or mental stops?

[Soultrader]

Whether a trader use hard stops or mental stops is the traders preference. I personally use a hard stop. As soon as I enter, I place a 10 point stop on all my trades. As the trade works in my favor, I will adjust my stops accordingly.

One topic I want to discuss is the difference in using hard mechanic stops to mental stops. For a new trader starting out in trading, I always recommend a mechanical stop. But like all new traders do, they will tend to move their stops when they are in a losing position.

This topic was inspired by this article: http://www.tradejuice.com/elliot-wav...stops-EWI.html

Bob Pretchter argues that stops should be used by real-time analysis and not by price. I agree to an extent that a stop or exit signal should be based on what your initial reason for entry was. If your entry signal was based on a indicator, your exit should be based on that indicator as well.

It is common knowledge that floor traders like to push prices to trigger stops.
This is because new traders tend to place their stops in the same exact location. How many times have you seen a market break the low by a few ticks, take alot of new traders stops out, then reverse? Plenty.

I personally use mechanical stops. This is because my trades are done strictly around price levels without the use of indicators. I know that if price drops 10 points past the pivot, I am wrong. This is automatic.

I would love to hear more on this topic for anyone who may find that article interesting. Thanks

[luke24.5]

I place stops on the fly according to what I'm reading in the volume. If market moves agaisnt me, I may scale in to improve my entry price or I may get out and wait for the market to confirm it's direction.

[Soultrader]

You mean you average down on a losing positon? How many times has that helped you?

One of the rules I follow is to never average down but I am aware that for some people it does work. Most of your stop placement is done at or near high volume areas?

This is interesting because this would mean your core trading philosophy is volume based.

[extradosage]

I use stops based on fibonacci levels. As prices then move in my favor I will adjust them by fib levels. Eventually I do want to start using mental stops. This way I may be able to exit faster when I know I am wrong.

I have a tendency to know that the trade is not going to work and will let the markets stop me out. This can become a costly habit.

[Reaver]

I use both. I have a bottom line puke point hard stop that I put way off in the distance, for backup, but as far as my working stop, I keep that mental. I like to make sure I know what the markets are doing before I let something like a hard stop arbitrarily take me out of the trade.