RM Mechanics #2 — Stop Losses Aren't Optional

Here's what a lot of people do: they set a stop loss, the price gets close to it, and they move it down because they "don't want to get stopped out." Then it gets close again. They move it again. Eventually the position goes badly wrong, and the stop that was supposed to protect them does nothing.

A stop loss only works if you leave it where it is.

Moving a stop isn't analysis. It's hope. The position is in the red, and moving the stop feels like giving it more room to recover. What it's actually doing is removing the protection you set when you were thinking clearly.

Stops should be placed at a level that invalidates your reason for being in the trade — the point at which the market is telling you your thesis was wrong. That's different from placing them wherever limits your pain. Those two numbers are rarely the same.

Rule: Set your stop before you enter. Don't touch it unless the underlying logic of the trade has genuinely changed — not just because the price moved against you.

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