1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

How reliable is Stop Loss?

Discussion in 'Beginners Bootcamp' started by RMSTrader, May 18, 2010.

  1. RMSTrader

    RMSTrader Private

    Joined:
    Feb 16, 2010
    Messages:
    25
    Likes Received:
    0
    Hello.

    I am a new trader who has been successfully demo trading my system for 4 months now. I am approaching going live.

    I realize that NO broker 'guarantees' stop loss, and theoretically SL is a function of liquidity at any given moment in the market.

    Here's my question for you veterans:

    How reliable is Stop Loss? What have been your experiences? Any horror stories?

    My belief is that I will NEVER have more than a certain $$ amount with a broker....with the vast majority of my trading capital existing safely OUTSIDE my brokerage account.

    I appreciate any input on this subject.
     
  2. Eric Alyea

    Eric Alyea Master Sergeant

    Joined:
    Jun 16, 2008
    Messages:
    365
    Likes Received:
    2
    Your account is your stop loss.

    Just an outside of the box thought:
    Think of your account with a broker as the amount that you are willing to lose.
    Some time or another you “WILL LOSE”. As a part of money management consider the size of you account as a possible loss and always take funds out as a "TEST" of getting your money back from the broker to be included in your account/money management checklist.
    Multiple accounts:
    I do Sell’s on this account.
    I do Buy’s on this account.
    This is my long term account.
    I don’t know how you do your bookkeeping, but this is a suggestion:
    LIMIT each account to what you can LOSE. Think of a broker as a bad wife that you have to limit the amount of money/allowance that you put in each seperate managed account for differant purposes. (sorry for that phraseology, but It IS the most effective)

    Testing pulling money out and in, (If you have to put in go back to demo). Your account "IS" your stop loss. That is just one thought, I hope we get others here.

    Watch your margin, WATCH your Margin, “WATCH YOUR MARGIN”!!!
     
    #2 Eric Alyea, May 18, 2010
    Last edited: May 19, 2010
  3. Ricex

    Ricex Sergeant

    Joined:
    Jun 30, 2009
    Messages:
    359
    Likes Received:
    2
    This is wise, you really shouldn't treat a broker like a bank. Only put in what your business plan and strategy require, not a penny more, and Erics advice about testing your brokers withdrawal system is also very important. I guess if all else fails that is your ultimate SL.

    I've never had a problem with my broker in respect to being stopped out at the price I indicated. Some people complain because they forget to add the spread and think they've been stopped out prematurely.
     
  4. RMSTrader

    RMSTrader Private

    Joined:
    Feb 16, 2010
    Messages:
    25
    Likes Received:
    0
    Great ideas Eric and Ricex....

    "Think of a broker as a bad wife that you have to limit the amount of money/allowance that you put in...."

    Yep. Exactly how I'm looking at it. :)

    "you really shouldn't treat a broker like a bank. Only put in what your business plan and strategy require, not a penny more"

    Again....right along the lines of my thinking.

    Thanks for the confirmation.
     
  5. Boko Maru

    Boko Maru Sergeant

    Joined:
    Oct 11, 2007
    Messages:
    250
    Likes Received:
    0
    Just another comment for you...

    Yes, sounds like you have the right perspective (most new traders DO NOT).

    Re. stop losses, I've never had major issues, but it's also important to remember at any broker that a stop loss is a stop order. A stop order is an order to buy/sell at MARKET once the stop price you've determined has been hit. So, in a fast moving market especially, your fill will be wherever it will be, not necessarily at the stop price (in fact rarely at the exact stop price). This is the case at ECN's at least, but at a fixed spread broker there's more probability of getting filled at the exact stop price.

    You probably already know this, but just in case...best wishes :)
     
  6. ali syed arsalan

    Joined:
    Dec 23, 2009
    Messages:
    10
    Likes Received:
    0
    Many a times Stop Loss is a loss but it stops us from a heavy loss.
    :p
     
  7. Recognara

    Recognara Recruit

    Joined:
    Jun 8, 2010
    Messages:
    5
    Likes Received:
    0
    ^

    Ow, I like your perspective m8.

    Tho, I learned that hard way... :(.

    If I place SL, I could just lost maybe 20-30 pip. But, at one time, I don't, for my indicator (and my gut feeling) told me that the chart will reversed in just few ticks. But then, the only one reversed just my equity.. :D
     

Share This Page