How to Use the Stop-Loss Correctly?

Posted by Deb | Uncategorized | Wednesday 14 July 2010 11:12 pm

If you think I know the answer to the question in the title of this post, you are wrong. But I have to find out. Chason’s comment to yesterday’s post really hit the nail on its head. I am not using the stop loss order correctly.

If I am getting to losses of $400, and certainly if I am losing $1000, something is wrong. The stop-loss order should have dealt with this. That is it’s purpose: to stop your loss from getting so high. Monday’s loss may be categorized differently, as it was a matter of internet connections problem. But the initial loss I had on that day, of $400, shouldn’t have been.

That is the Achilles’ heel of the method I have been using lately, of adding contracts when the market goes against me instead of using the stop-loss and getting out of the position. Usually it makes me win more, but when I lose, I LOSE.

When I started trading I used the stop-loss and went out of the position when I started losing without playing with the stop loss and moving it further away as I have been doing lately. The problem was that I kept losing; I was jumping out of positions too quickly, only to see minutes later how the market is turning around and making my previous position a winning one.

So how do I recognize when the market is really going against me, and when is it just “playing games”, making some struggling signs before it turns around in the support or resistance line on which I entered the position?

Adding a contract made me not run away too quickly, as I saw the markets’ direction as going for me, because the additional contract made the position win even more when the market turned around. Am I able to find a better method?

Yesterday and today I have been taking off trading. I don’t think I will take off a whole week, as I did on May when I had my first “grand loss”. I want to take 2-3 days off, so I will be able to start with a fresh attitude. Yesterday I really wanted to trade, and had to hold myself. Today I didn’t really want to trade. I’ll see what I will feel about it tomorrow.

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11 Comments »

  1. Comment by tepka — July 18, 2010 @ 1:46 am

    it was very interesting to read.
    I want to quote your post in my blog. It can?
    And you et an account on Twitter?

  2. Comment by Deb — July 18, 2010 @ 7:17 am

    Yes, I will be honored to be quoted on your blog (but don’t forget to give the link back here).

    My twitter name is LeftHandGuitars (you can follow me on twitter by pressing the the corresponging sigh on the right of this page.

  3. Comment by anekdotes — July 27, 2010 @ 8:52 pm

    it was very interesting to read futurestradeblog.com
    I want to quote your post in my blog. It can?
    And you et an account on Twitter?

  4. Comment by Deb — July 28, 2010 @ 12:01 am

    Thanks for your comment. I will be honored to have my post quoted on your blog, as long as you link back to my blog. You can find the link to my twitter acount on the right hand side of this blog (under the title “follow our updates”)

  5. Comment by touch_of_sun — August 1, 2010 @ 4:10 am

    I would like to exchange links with your site futurestradeblog.com
    Is this possible?

  6. Comment by Deb — August 1, 2010 @ 7:35 am

    Ok.

  7. Comment by veterinary technician — August 5, 2010 @ 8:33 pm

    Great information! I’ve been looking for something like this for a while now. Thanks!

  8. Comment by vimax — August 8, 2010 @ 7:28 pm

    This is good information that will help others.

  9. Comment by mesothelioma — August 17, 2010 @ 2:41 am

    Interesting , how do I apply this?

  10. Comment by Backlinks — August 20, 2010 @ 3:56 am

    Keep up the amazing work!! I love how you wrote this and I also like the colors here on this site. did you create this yourself or did you outsource it to a coder??

  11. Comment by Deb — August 20, 2010 @ 8:21 am

    Thank you.

    The colors are from a free wordpress template I downloaded.

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