What Is A Stop Loss Order & How To Control Yourself From Moving It

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What Is A Stop Loss Order

You need a trading strategy if you want to trade successfully. But you also need to have the discipline to follow that strategy. Today we’re going to talk about a question that I received last week and the question is: How can I control myself from moving my stop-loss order?

What is a stop-loss order? The Investopedia definition is: A stop-loss order is an order placed with a broker to sell a security when it reaches a certain price. Stop-loss orders are designed to limit an investor’s loss on a position in a security. Although most investors associate a stop-loss order with a long position, it can also protect a short position, in which case the security gets bought if it trades above a defined price.

How To Control Your Losses

When trading you need a trading strategy that tells you exactly what to trade, when to enter and when to exit. And there are two ways to exit, one is with a profit and the other one with a loss, right?

In order to control your losses you need to use a stop order a stop loss, right? I personally know exactly when to exit even before I enter a trade. And for limiting a loss I like to use a stop-loss order.

A few days ago somebody asked in one of my Live shows, “How can I control myself from moving my stop loss?” And I assume that this trader meant that he was thinking about giving the trade a little bit “more room.”

You know what I mean, right?

You enter a trade, then the trade goes a little bit against you and you know that you should get out of a trade but you don’t do this because you hope that the trade will turn around.

So this is probably what this trader who asked me, “How can I control myself from moving my stop loss,” was asking me. Because it’s very tempting at this point to move this stop a little bit lower to give the trade a little bit more room.

Have you ever given a trade more room? And how did that work out? Leave a comment below and let me know if you did this and how this worked for you. In the beginning of my trading career I did it and it did not work at all.

3 Ways To Have The Discipline To Stick To Your Stop Loss

what is a stop loss order

Right now I want to show you three ways to help you to have the discipline to stick to your stop loss and take a loss if needed, because losses are part of our business as traders.

Number One: You must have faith in your trading strategy

In order to have faith in your trading strategy you need to know that it is working, right? So, you must know that this is a successful trading strategy.

By the way, if you would like to have my trading strategy go to www.mytradingroutine.com  it’s a website that I set up for you where you see exactly how I pick the right stocks and options to trade, when I enter and when exit. You’ll see exactly how I limit my losses.

The key here is that I like to keep my losses small, and my profits are larger than my losses.

Because that’s another important thing, when you have small losses it is easier to swallow these losses because they are part of trading.

 Number Two: Don’t have a mental stop

You know what I mean. Some traders say, “You know what? I’ll get out of the trade if it goes against me,” but they never put the order in the market.

If you don’t do this it will be difficult to pull the trigger if the trade goes against you.

My tip: Put the order in the market, that’s what I do. As soon as I’m getting filled I am placing the order for my profit target and the order for my stop loss in the market.

This way it’s set it and forget it. And then, yes, you need to have the discipline to not touch the order, but this is where we talked about step number one, right?

Number Three: Don’t watch the markets

How you can make sure that you are not messing around with your stop loss is easy, don’t watch the markets.

For example, the way I like to swing trade is that I’m picking a stock or an option and I expect to be in this trade for 5 to 20 days so I don’t need to check every 5 to 20 minutes.

But I know that many traders are hooked, and of course, it’s fascinating throughout the day to check your phone and check the quotes, right?

And see how your trades are doing, but you see this will be very tempting for you when you watch the market and you see that the market is getting close to your stop loss to take your stop loss off.

So, tip number three here, don’t watch the market.

Quick Summary

Here are three tips to control yourself from moving your stop loss.

  1. Have faith in your trading strategy. If you’d like to have my trading strategy visit www.mytradingroutine.com
  • Don’t have a mental stop, put it in the market
  • Don’t watch the market because it will drive you crazy. Once you have your stop loss in the market there’s only one way you should move it, and this is closer to your entry price. Meaning that you reduce your risk while being in the trade.

Was is this helpful? Leave a comment below and let me know!

Read Next: Types of Trading Orders: Stop Loss vs. Profit Target

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