Here is an exchange on our trading desk in NYC today.
Trader: She got stopped out of her position today. It’s a shame because the market has pulled back in a bit.
Me: You have to trade with stops.
If you were stopped out and then thereafter a stock/product/market traded in your direction too often trader laments their bad luck. Most often this is not bad luck. When you have a healthy stop, It does not help you improve wondering if your stop was too tight. Or the market gods are against you. Or your trading psychology is not strong enough.
Better to consider whether you were too big too early. Better to consider how you could have stayed within your risk parameters and caught the reversal.
Sustaining traders trade with stops. You have to trade with stops. If you get stopped out and the trade reverses, well that is part of the game for the winning trader.
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A conversation on an insufficient stop loss in Valeant
*no relevant positions
