Forum Archive Index - February 2000

["Tony Haddon" <haddon@ihug.co.nz>]

A stop loss is simply a mechanism to protect the traders liquidity...he/she doesn't end up running out of working capital because it's all tied up in stocks "waiting to come right ", which is ok if trading is only  a part time occupation and you're not relying on it for a living wage. A stop loss enables a trader to keep his capital working.

 

The notion that you only put money you can afford to lose in the market is in my opinion  damaging...sort of a self fulfilling prophesy......I use a  standard rule where I'm prepared to lose only 2% of my total trading capital on a single trade. There are other conventions, usually based on support, resistance , and trendlines, which I also use, but they take 2nd place to the 2% rule. It isn't easy, because no-one likes signing money away, and there are often the cyclical market considerations you mention.

 

There's my bit Peter..I'm by no means any sort of expert, but I have managed to survive 18 months in the game so far !

 

Regards

 

Tony Haddon