The subject of using Stops is a frequent question that I receive from the twittersphere. Some choose to use mental stops while some (like myself) choose to put in trailing or traditional stops once a trade is put on.
I received several questions today regarding a stop that I took in a VMW (Vmware Inc.) long position so I thought I would add a little more context for my trade exit. I trade VMW often so feel that I know the movement of the stock well and had opened a new long position today based on what I saw early. I had determined that I was going to use the 93 level as my stop as I wanted to keep a tight leash.
In watching the 5m chart through the morning, it became apparent to me that it was not going to have any real follow through and began to fade – so I let the stop hit for a loss. My trading style has several key aspects to it with one key tactic: keep the losses small.
Of course the flip side of this: keep the winners gigantic.