Why do I stop stocks out at a predetermined level?

To STOP losing money

To STOP giving back profits

But this only works if you act on them, otherwise why set them?

CAPITAL PRESERVATION is my foremost objective, even above making profits.


You have to be in the game to win it. If you lose your capital you can’t win nor do you have any money left, so its imperative you protect it. That’s a simple motivation for using them.

Sometimes it frustrates us when we get stopped out a (temporary) low point. That point of reference can change quickly. One day it makes sense because the market goes down and the next is doesn’t because the market goes up, or simply we may get it wrong. It happens.

It is the ‘overall’ result we are interested in and that means taking losses, which initially might appear to be at a low point but really what happens next, is irrelevant to a trader. He makes his decision at a point in time and moves on and in the end is overall profitable.

The success metric varies from outperformance to simple profits to absolute returns. My simple objective is absolute returns because that’s what my primarily SMSF based membership want and this gives a degree of certainty, which my members also want.

Don’t be frustrated by ‘a’ trade or a period of bad trades. No good trader does because he knows he will take losses on the way to an overall positive return as measured by his/your own metric.

Keep the faith.