Mental Stops are Bullshit

• Posted by Robert Sinn
• on December 12th, 2011

Yeah I said it! Simply put, from my experience in short term trading/scalping mental stops are bullshit. I am thoroughly convinced of this fact, not only from my own experience but also from observing and speaking with other traders. Hopefully we are all adults here, but I will inject a couple of caveats that should really go without saying: I am referring only to short term trading (seconds/minutes/hours), trading is all about performance so if you have a long term track record of solid risk adjusted profitability then please do not read further and continue to do what works for you.

Reasons why mental stops are bullshit for short term trading/scalping:

• The market can make huge moves in a very short time frame which leaves those without a hard stop in a highly unfavorable risk/reward dynamic.
• There will always be a reason (real or imagined) to talk oneself into allowing “just a little more room” in a trade – this can become a very BAD HABIT which when analyzed over the long term leads to lower expected values.
• I have personally never known a good/great trader who didn’t always have a hard stop in the market during a trade. As I said before this doesn’t mean that they aren’t out there, I just believe it is quite uncommon (please comment if you know of a long term successful trader who does not always use hard stops).
• If the profits (target) are defined then the risk must also be defined.
• From my experience/observations by not using a hard stop one greatly increases the tendency to commit the cardinal sin of trading which is averaging into/doubling down into a losing trade.

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