Why does cutting losses at the “right place” make you less likely to win
As mentioned in the previous discussion,
many traders place stop losses at the “right place.”
- Recent highs and lows
- Key levels on the Dow
- The “lines to protect” shown in textbooks
The reasons are also clear.
“If you break through there, the scenario collapses.”
Up to here, it seems perfectly logical.
But—
the market uses that “correctness.”
“The correct stop loss is too obvious
From the perspective of those moving the market,
- many individuals
- on the same time frame
- looking at the same rationale
- placing stop losses in the same place
This is already
a fountain of liquidity.
There,
- stop orders
- market orders in the opposite direction
- forced liquidations
all accumulate together.
In other words,
a single touch there will trigger
a cascade of orders.
Being whipped by the wicks, yet nothing happens
is something many people have experienced.
- stopped out
- and then immediately reverses
- ultimately moves in the original direction
This is not a coincidence.
That price range is
not used to “drive the market,” but
to gather orders.
So,
- touching it for a moment with the wick
- and once its role ends
- returns to how things were as if nothing happened
This is,
the true nature of why “correct stop losses” don’t work.
The reason you can’t win isn’t a lack of technique
At this point, you’ll understand.
The reason you can’t win is not
- poor entry
- insufficient study
- weak mental fortitude
That’s not the point.
As a premise,
you are standing on the side that is being used.
That’s all there is to it.
So, what should you do?
I won’t give the answer yet.
But one thing I can say is,
“If you don’t doubt the ‘right place’,
you won’t end the same way of losing.”
In the next discussion,
- where should you place it?
- is the very idea of “placing” itself correct?
We will organize that.
Next episode teaser
“The option of not placing a stop loss”
From here,
the discussion will diverge radically.
