Stop loss orders are great insurance policies that cost you nothing and can save you a fortune. They are used to sell or buy at a specified price and greatly reduce the risk you take when you buy or sell a futures contract. Stop loss orders will automatically execute when the price specified is hit, and can take the emotion out of a buy or sell decision by setting a cap on the amount you are willing to lose in a trade that has gone against you. Stop loss orders don’t guarantee against losses but they drastically reduce risk by limiting potential losses.
With my system the only stop I use is what I call an emergency stop. My stop loss is automatically made when I make my initial trade at two points. It is only for emergencies, like news I wasn’t expecting, or anything that will make the market gyrate drastically and I never enter a trade without it. However I never expect to use this stop loss to exit my trade. I simply will not let the market move against my trade entry more than a tick or two. If I find that I exited the trade too soon I just reenter the trade but if the trade continues to move against me I have saved the loss of one or two points per....
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