Why Stop Loss Should Be Part Of Your Trade

I played MR again, trying to short it below $40, since it was a pivot resistance point. Confident from my previous short attempt i was hoping for a repeat. I shorted 600 MR @ $39.99. This was exactly the same trade i played earlier. However the only difference this time was I decided to short more of MR if it went up, due to the fact that it wont hold 40+ for long. (since it couldn’t hold it in the morning too). My next short entry was 600 MR @ $40.29 (making my average 1200 MR @ $40.14). This plan turned out to be a horrible trade because that meant I didn’t setup a stop loss. With no stop loss in play i was left vulnerable to any spike up. This is exactly what happened. In the last hour of trading MR took a bounce from $40.10 to $40.82 leaving me angry at myself for not putting a stop loss and cutting short my loss.

At this point I had to 2 options, to hold my short overnight and hope for a drop or to cut my losses and run. Overnight positions are very tricky and can sometime lead to huge loss. I decided to cut part of my loss and covered 600 MR @ $40.60 leaving 600 MR overnight. Really silly trade caused me $450 loss. Yikes !!

Rule: Always play with a stop loss.

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