About 75% of the time we use Mental Stops instead of Hard Stops.
Why? Because Hard Stops (orders placed that are resting orders) become a target. IOW – traders will run the stops to take investors/traders out of the position only to watch price reverse and go higher. This is shown in the example below with AAPL today.
A Mental Stop is not a resting order placed into the accounts. Therefore a Mental Stop (a number in your head or that you are watching) is not triggered. If breached on a close – you then need to make a decision as to where to exit.
The advantage of a Hard Stop is if price continues to fall, – you were hopefully out at, or near the hard stop price. In the end – it all boils down to discipline. Stick with and hold true to the system that works for you. Learn from what you did right and acknowledge what you did wrong.
A losing trade does not mean you did it wrong and a winning trade does not mean you did it right. The worst case in when you do something wrong or break your rules – and it’s a winner. That’s not discipline – that’s closer to luck.