Hi Split,
I think this statement must come with a huge public health warning, especially for newbies. To trade without stops you a) need enormous discipline; and b) must never leave your trading screen. Without a stop, you could potentially lose thousands whilst you go to get a cup of tea (I know, this is rare but I'd rather not take the chance). Another factor to consider is trade size/duration: I guess if you're working with long duration trades (>1 month) using small stakes, you could get away with it.
I must admit that I don't use stops myself before 9am (due to unrealistic quotes on low volumes) but if a trade goes past my stop during that time a very tough decision must be taken on whether the move is just a spike or whether to close immediately at whatever price I can get. Overnight, of course, you're quite right - a stop is not going to help you if the price opens sharply against you in the morning. To ameliorate this, if a trade is moving against me and is close to my stop just before close of business, I may close the trade then, rather than risk it going past my stop the following morning.
Something else to bear in mind: in the case of a sharp market move against you with a stop in place, you are likely to get a better price than if you try to close the trade manually at the same time. If the price is moving fast, with a non-negligible trade, you'd get a constant stream of requotes & have to decide whether to accept the requote or not - a tough discipline.
In my experience, with deal4free, the price I get using a stop is always better than the one I get executing a trade manually at the same time. It can be very useful to deliberately enter and exit trades using stops too. When stopped into a long trade, I find that I tend to get the BID price at the time the trade executed (or at the ASK price for a short trade), i.e. the spread is avoided! D4F (and I imagine this also applies to other SB firms) doesn't, however, let you place stops very close to the current price, so this technique only works if you place the stop some time before the price reaches your stop-in or stop-out level. On the rare occasions I've queried stop execution prices, D4F have advised me that the stop is executed at the price at which a quantity of real shares equivalent to the trade size actually traded. When I've checked this against LSE Level2 data, the executed stop price has always agreed with this. This policy avoids being stopped out as a result of "quote spikes", where no shares are really traded at the quoted price. It also means that your stop out price is the same as the one you'd get if you placed the order using direct market access (DMA). In the vast majority of cases, the stop is executed at the price that I set.
Best regards,
Mark
. The maximum amount I risk per trade is 2% of my trading capital. I'll probably be reducing this temporarily to 1% in the light of my recent poor performance, until I've sorted myself out.
