Stop loss is a common topic in trading. As for stop loss, it is not only whether to set or not to set a stop loss. In many cases, prejudice or improper views on setting a stop loss will also cause problems in transactions. The important role of stop loss is reflected in preventing accidents and assisting in the judgment of the market, and establishing a reasonable concept of stop loss is of obvious importance to trading. So about the stop loss, at least a few points should we pay attention to?
The author often receives a lot of friends in the official account "how to untangle after being trapped", how to untangle and I will not go into details here, but there must be a problem in it: there is no stop loss. As for the stop loss, the author must ask everyone to set it. If you don’t set it, you can only make an order at noon, because sooner or later the position will be liquidated!
Haha, this is a joke. But the topic of stop loss is still a hurdle that we can't get around in the trading process. This time, the author no longer emphasizes how important stop loss is, but to say something about stop loss. You may wish to take a look!
1. Setting a stop loss will reduce my correct rate?
A considerable number of investors have an obsession with carrying orders, not just the friends we said last time who switched from the stock market to the foreign exchange market. After all, once the stop loss is swept or the market is exited, the floating loss will turn into an actual loss, and there is always a certain probability that the order can be carried back, which is especially true in the consolidation market. Therefore, there is a point of view: setting a stop loss will reduce the correct rate of transactions. So is this view really OK?
Theoretically speaking, under the premise of long enough time and sufficient funds, this point of view is no problem, just like martingale trading strategy, this strategy has no concept of stop loss.
But in fact, on the one hand, stop loss is used to control risks, and on the other hand, it can also prompt whether the judgment of the market is correct or not. After a reasonable stop loss is realized, it shows that the current judgment on the market trend is wrong. If there is no stop loss for positions, investors are required to set a stop loss in mind, and then close the position manually after the market reaches an appropriate point.
Therefore, without setting a stop loss, it requires an excellent ability to grasp the market and thorough execution ability. Of course, it is necessary to keep an eye on the market for a long time. But most investors do not set a stop loss, I am afraid that it is just a way to relax their vigilance or paralyze themselves, or they are lazy!
In addition, there is another view about not having a stop loss, that is, there is no stop loss in the trending market. Well, without jumping out of the original question, you must first confirm that your operation direction is following the general trend, and confirm that the trend does not reverse.
2. Get out of the market every time you sweep the stop loss
Many novice traders have experienced one thing more or less, that is: get out of the market after sweeping the stop loss! So what went wrong?
The author once gave an explanation for this problem, and I will explain it again here: unreasonable stop loss can easily lead to such problems. The reason is that the grasp of the entry point is not accurate, so what should be done is to try to improve the entry point and make the control of the stop loss more reasonable. In this process, will it temporarily solve some problems if the stop loss is brought a little more first?
3. Questions about protective stop loss
In addition to friends who like to carry orders, there are also some friends who cannot accept any backtest on the market. Once there is a profit, they will quickly move a protective stop loss to ensure that the position will not lose money.
This may allow us to survive in the market, but this kind of operation is likely to cause a problem. The market that may have made a lot of money is due to a protective stop loss, but a small profit or a cost price exits the market. variety, profit will appear to be very difficult. Besides, being too greedy will blind our eyes, but it is not suitable for trading without any ambition~~
Setting a protective stop loss at will shows that you are full of fear of market fluctuations. At the same time, you are trying to limit the normal band of the market, and lose the unexpected function of stop loss.
The author reminds in the trend trading method that after a new position increase point appears, the stop loss of the previous order is moved to the new stop loss point to complete the setting of the protective stop loss.
4. Stop loss, move or not move?
Of course, unreasonable stop losses have to be moved, but reasonable stop losses should not be moved.
Stop loss can be said to be a risk barrier that investors set for themselves. Trailing stop loss means that when the stop loss is about to be wiped, in order to prevent the floating loss from turning into an actual loss, the stop loss is continuously enlarged, in anticipation of a reversal in the market. However, Murphy's Law often comes into play at this time. The more you want to maintain the position by moving the stop loss, the more you will lose. When you finally can't bear it, you still cut the meat to close the position, and then you start to regret why you moved the stop loss in the first place!
After setting the stop loss, don't move (unless the conditions for setting a protective stop loss are met), and sweep the stop loss if you want to. Of course, on the other hand, the author does not recommend manually closing positions when quickly scanning stop losses. The author has experienced many times that when there are 1-2 points away from the stop loss, the market moves in the predicted direction, and finally realizes the stop profit.
In addition, let me talk about a small detail. Don’t set the stop loss exactly at the previous high or low price. It is more appropriate to add 3-5 points (short-term). As for the reason, if the market just stops at the previous high or previous low, But this wiped out the stop loss, isn't it a pity?
Trading is a science, and so is stop loss! I hope everyone will stop losses and make good money!
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