In my years of experience trading commodities, it seems the only time mental stops should be used is by a large trader who doesn’t want his open stop sitting in the market for the fear that someone might run their stop.

For most other traders having mental stops is a serious flaw in their trading. These traders are afraid of getting whip sawed. Well they might avoid getting whip sawed once or twice until the time the market sears through their mental stop and destroys their trading account. As Ed Seykota has said so many times, ” If you want to avoid whip saws..Don’t Trade!”.

What I have seen with mental stops is the commodity trader freezes. All it takes is one bad trade to destroy a trading career. I have seen one successful trader that was a mutual fund manager for decades freeze and blow up his personal trading account.If you have never seen something like this you are fortunate.

Not using pre determined stops are one of the main reasons of failure. In my opinion mental stops are an invitation to destroy your trading career. If you are allocating to commodity trading advisors …make sure you understand how they place their stops. Understand their risk management. NEVER>>>NEVER…simply just rely on past trading results.

Andrew Abraham
www.myinvestorsplace.com

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)

© 2009 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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