Are Your Stops Being Hit Too Often?

If your stop loss orders are being hit too frequently, here are some possible causes:

•      Bucking the market trend.

•      Through impatience, you anticipated a market change and entered a market before it gave a clear signal.

•      Failing to decide in advance where the right points of support and resistance are located.

•      Improperly placing your stops, moving a stop too soon, or moving it too close to the market price — Fear.

•      Incorrectly judging the potential of a trade — Greed.

•      Failing to weigh the risk / reward ratio properly.

If this is happening to you, you should review your judgments about potential market movements, and/or about where you have chosen to place your stop. DO NOT, under any circumstances, abandon the use of Stop Loss orders. If your stops continue to be hit too frequently, get out of the market and stay out until you have located the source of your difficulty.

Rather than becoming irritated at such a situation, be thankful. The stops are sending you a clear message that something in your technique is out of kilter. Persisting to defy the market will only damage your bank account, your confidence, and your ultimate goal of success.