Once You've Built a Solid Trade Plan, Stick to It!
You’ve done the hard work—analyzed the market, created a well-thought-out trading plan, and included your stop-out level. Now comes the part where most traders slip: actually following through when the trade goes against you.
There are two main ways to exit a trade when it’s not going your way:
-
Automatic Stop (using a stop-loss order)
-
Mental Stop (closing it manually when your level is hit)
So which one is right for you?
That depends on how disciplined you are.
Ask yourself:
Do I have the mental strength to close a losing trade without hesitation?
Can I stay calm and objective when the pressure is on?
The reality is, many traders—especially beginners—second-guess themselves when the market turns against them. They start hoping instead of following their plan:
“Maybe it’ll bounce back if I wait just a little longer…”
🚫 Nope. That’s not how this works.
If the price hits your stop, it means your trade idea is no longer valid. Close it out. No excuses.
Use Stop Loss Orders to Remove Emotion
This is why stop loss orders are your best friend.
If you’re new to trading, always use limit orders (also called stop-loss orders) to automatically close your trade at a set level. It helps you stay disciplined—no need to be at your desk, and no chance of talking yourself out of it.
Pretty convenient, right?
As you gain more experience and understand how markets behave, you might consider using mental stops. But even then, it’s still a smart move to stick with limit orders for most of your trades.
Why?
Because trading manually opens the door to all sorts of mistakes—like fat-finger errors, wrong position sizes, power outages, or even an untimely coffee break.
Don’t leave your trade exposed. Set your stop and let the system handle it.
3 Golden Rules for Using Stop Losses
Since stop losses can be moved, let’s go over three essential rules you should follow when managing them:
🔹 Rule #1: Never move your stop based on emotions.
If you’re panicking and tempted to shift your stop “just a bit lower,” stop right there. Any adjustment should be based on your original plan—not fear.
🔹 Rule #2: Use a trailing stop to lock in profits.
When your trade moves in your favor, move your stop along with it. This helps protect your gains and manage risk, especially if you're scaling into a position.
🔹 Rule #3: Don’t widen your stop!
Widening your stop only increases your loss if the trade continues to go against you. If your stop gets hit, accept the loss and move on. That’s part of trading.
Widening your stop is like removing it entirely—don’t do it!
Final Thought
Trading is all about planning ahead. Decide what you’ll do in each scenario before you enter a trade. That way, you’ll avoid emotional decisions and costly mistakes.
And most importantly…
NEVER widen your stop. Ever.
Or you could end up just like that guy… (we’ve all seen him, and you don’t want to be him).