Trader Scott
This article from Zero Hedge should be a warning for all of us. I personally never use market orders, only limit orders, to enter a position, but do use market orders to exit a position (profit or loss). When we do the right thing and sell winners into strength, we seem to often see our market orders executed above what the price was when we originally entered the order. And on the flip side, when we’re selling a loser into weakness, it’s the reverse. But I don’t use physical stop losses, due to the games, like sell stop runs. (Here is a coordinated? sell stop run in action for gold in late 2016.) I use market orders for stops, and at less likely places where there would be sell stops/buy stops. Because as a floor trader/market maker for 10 years, I know the games (completely legal and legitimate BTW) that are played by the market makers. I did it myself, and don’t want to get screwed on my exits from markets. There are a slew of stop losses in markets right above resistance/below support. Don’t put stops in these spots. There are several ways to adjust for that situation – learn them and implement them. Your account will thank you with these “simple” adjustments.
Remember we’re going from a “no-RISK” situation by being out of the market, thus we’re in the drivers seat in that situation. When we go in and enter the market, then we’re at RISK. So just be patient. Take advantage of sitting with no risk. One little way to get a bit of an advantage is by using a limit order to enter. Meaning we plan and prepare, then we should just let the market come to us. And putting that limit order at the support zone, (or below it, which is my preference – use the sell stop runs to your advantage), lowers our risk/increases our probabilities even more. But when we’re already in a market, then we are already at risk. We never want to get cute with risk. If, for whatever reason, we want/need to sell, just do it. Don’t get cute. Even if it means getting screwed on our market orders. We’re moving from being at risk to “not being at risk” in the latter situation. There are a lot of nuances about markets. Our focus in markets should always be centered on RISK. This is just another part of it.
“There are a slew of stop losses in markets right above resistance/below support. Don’t put stops in these spots. There are several ways to adjust for that situation – learn them and implement them.”
you mention your preference for market not physical stops to exit to avoid runs, can you elaborate on other ways to adjust from the sell stop runs?
thanks!
Good question. Yes mental stops (market), not physical (sitting with the broker) stops. Let me work on a quick post for that with a chart, be much easier to see.
Muchas Gracias dawg