If you are a regular reader of my articles, you will be aware that as the result of my trading system support service, I get asked a lot of questions.
One particular question that I am asked on a fairly regular basis is - "Do I really need to use a stop loss? After all price always returns sooner or later doesn't it?"
Well no actually, it does not, but I can see why I am often asked this question.
Price is very capricious. Price loves nothing better than to lead us traders into a false sense of security, take all of our hard won money, and then to smile sweetly over it's shoulder as it waves us goodbye.
What do I mean by this?
A recent question that I received sets the scene quite nicely:-
"Why is it necessary to set a stop loss? I have been setting stop losses as detailed in the trading system, but I find that sometimes I get stopped out and then price moves back in the original direction and makes a lot of pips. Even when price runs against me it nearly always comes back".
Did you spot the dangerous word in that question?
It is a strange phenomenon that we traders fool ourselves into believing something to be totally true, when in fact it may only be true most of the time, and in trading, this could be a very costly mistake.
Well, if you haven't guessed, the dangerous word was "nearly".
You see, if price ALWAYS came back, we could - given deep enough pockets - hold on in there, watching our losses grow, but certain in the knowledge that sooner or later we would see those losses reduce and then turn to profit.
This does happen quite often, but quite often is not often enough because if we are prepared to let our loss run, at some point the loss will keep on increasing until we are completely out of funds, at which point we will be forced (possibly by a margin call) to liquidate our position and this will likely more than wipe out the other times when we profited from price making a return to the levels that we had hoped for.
Price can come back nearly every time, but it only has to fail to do so once to wipe you out if you do not use a stop loss.
Setting a stop loss is a very sensible and essential thing to do.
Setting a stop loss should be an intrinsic part of your trading method. You should be in the habit of setting your stop loss on every single trade, at the same time that you place the trade.
Selecting your stop loss position is something that should be calculated prior to the placement of your trade, and you should at that time also consider the amount that you are about to place at risk in relation to your money management objectives.
Sure, sometimes you will get stopped out for a small loss and price will then carry on in the direction that you had hoped, leaving you on the side lines. On these occassions you will not gain all of those pips of profit.
In the long run though, setting your stop loss will keep you in the game, and staying in the game will allow you to make your profits from the many times when price moves just the way that you want it to.
Who decided that the best way to ventilate a tunnel ceiling was to suspend the basement floor over our heads? A 3-ton concrete section of the Central Artery Tunnel connector crashed onto Milena Del Valle's car, crushing her. Friday we learned 300 problem areas exist with connector bolts that suspend the concrete slabs overhead. The CAT cost taxpayers over $14.6 billion dollars by 2006. Shoddy work for such a hefty pricetag. Who benefited from the largest public works program that has commuters fleeing for safety? With the Joint Venture of the Massachusetts Turnpike and Bechtel/Parsons Brinkerhoff long gone we may never know.
On a simmering Tuesday morning I learned of the death of a Jamaica Plain woman. A 3-ton concrete section of the Central Artery Tunnel connector ceiling crashed into her car while she and her husband were traveling to Logan Airport on Monday night. By Thursday we learned that at least 50 more such problem areas exist in just the eastbound lane of the Turnpike connector to the Ted Williams Tunnel and more than 300 “problem" connector bolts that suspend the concrete slabs were revealed this week. From 1990-1996 I chronicled the development of The Big Dig in a series of documentaries for WGBH and the City of Boston, Community Development ( www.polarisproduction.com/about.html ). I felt a deep regret over this Big Dig failure, sadness for Milena Del Valle who lost her life and for her husband, Angie, who escaped the accident but may never escape the memory.
In the early years it was hard to find fault with the CAT project. The Big Dig helped to bail out Boston in the wake of political and economic recession following Mike Dukakis’ failed race for the Presidency. The Big Dig provided high paying jobs for managers, engineers, designers and skilled building union workers. The money flowed from the federal spigot and most people were happy…even the neighbors who were mitigated out of the neighborhood into financially greener meadows. Word was out in the media to not rock the gravy boat and to keep coverage positive or access would be denied. Media access was highly controlled at building sites. So what happened to turn our rosy, cozy dream of a snarl free Boston into today’s CATmare? The same thing that seems to happen every time people have an opportunity to spend federal money- insufficient due diligence.
The Republican administration put Bechtel/Parsons/Brinkerhoff in place to “manage" the project and to dole out contracts to Republican cronies. The Democratic Legislators and Congressmen made certain that every worker had to join a skilled building union including those working for tiny contracting firms. Altogether this was a recipe for graft and corruption. As the pockets of the politicians grew with donations from contractors, union halls and pension funds, the will to open the Washington wallet remained. Oversight was overlooked. State managers, joint venture partners, contractors and union bosses got so busy counting the money that they forgot to ask what was happening with the project. Sometimes we would show up with cameras at embarrassingly empty sites and have to wait for workers to be assembled by the public relations team that always accompanied us. Taxpayers paid managers too much money to pay attention to the project. None of us paid enough attention to the fact that it was too much money for the project.
Has anyone stepped up to the mike and apologized to Angie Del Valle and Milena’s family for the 3 tons of concrete that landed on her besides Mayor Menino of Boston? I have no desire to participate in the finger pointing blame game that is going on right now in Massachusetts between Governor Romney, Turnpike Chair Matt Amorello and Attorney General Tom Reilly. They should all resign in shame for not providing the leadership needed for due diligence of this project from the minute they each took office. The CAT budget raced from $2.3 billion in 1988 with a 3 year timeline to over $14.6 billion and almost 18 years to completion. No one noticed? When leaders of both major parties do nothing to stop a runaway train, it’s obvious that the fix is in on both sides of the aisle. Bechtel/Parsons/Brinkerhoff took $2 billion and are no where in sight. So much for the wonders of Public/Private Joint Ventures.
Tom Reilly says he knew there were problems with ceiling panel bolts since a report warning about the bolts was made available in 1999. Why did he wait until someone was killed to investigate? As Attorney General he’s supposed to protect the public and now he's running as a Democrat for the Governor’s job? I am just as incredulous at the Independent candidacy of Christy Mihos who was on the Turnpike Board. Republican Governor Romney wants to be President? Well, he would fit right in with today's Republican administration and a Congress that supported Bechtel-Parsons-Brinkerhoff in Boston, Enron in Texas and have handed the keys for the port-a-potty to Haliburton in Iraq.
I shudder to think of compromises made in Washington. It’s amazing that the Massachusetts Democratic delegation stopped at $14.6 billion-or maybe they didn’t. Perhaps now that the project is nearing an end it will simply live indefinitely through a series of mishaps and investigations, roadway fixes and criminal investigations, lawsuits and political maneuvers. Each of these twists, turns and efforts to “fix" the tunnels will, of course, cost a tidy sum of funds from the state and federal coffers, but will be “necessary" to “restore public confidence and prevent more lives being taken".
Both Martin Bottomley & Dale Orlando are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Martin Bottomley has sinced written about articles on various topics from Forex Guide, Forex Trading Forex and Forex Guide. Martin Bottomley is a full time professional forex trader, acknowledged author, forex tutor and co-developer of forex trading software including The Amazing Stealth Forex Trading system.You will find more information at:. Martin Bottomley's top article generates over 3600 views. to your Favourites.
Dale Orlando has sinced written about articles on various topics from Forex Guide, Politics and Fitness. Dale Orlando offers consulting services with Polaris Production LLC and video footage of Central Artery Tunnel construction at