Honor Thy Stop...and Other Musings

Well, good morning. The markets are in panic mode and I even heard some chatter on Biz Radio this morning about the markets potentially being halted today. Right now that seems unlikely but we'll just have to wait and see.

As for honoring the stop, yesterday was a perfect example of how dangerous it can be to second guess yourself after you've made a game plan and initiated a trade. Perhaps QCOR is a little too volatile for a tight stop but that type of stop fits my personality. I have found that I can handle my emotions better by getting stopped out sooner and taking a couple of losses rather than using wide stops and sitting under water waiting for my position to come back. It works for me but not necessarily everyone.

When I take a position, I generally try to zoom in with an intra-day chart to pin-point a precise entry and if the position doesn't take off pretty quickly, it's usually a sign that I'm wrong and need to get out.

While tight stops may not be for everyone, one rule that does apply to everyone is honoring your pre-determined levels (whether they're stops, profit targets etc.). Had I lowered my stop or even just pulled my stop, I would be hurting today. Sure taking a small hit yesterday was not fun, but it's necessary and it's part of the plan. See the 15-min chart below. The green arrow shows where I went long and the red line shows where I got stopped out. More importantly the yellow line shows what I would have suffered through if I'd not have had my stop. Whew! That kind of drop can wreak emotional havoc on me and I imagine many other traders as well.

Bottom line, you've got to have a plan and stick to it if you ever want to even have a chance to make it as a trader. I'll be looking for new opportunities to enter QCOR and I'll let you know if I see a good set up.

Good luck out there.

TLT