[quote=“Falstaff, post:1, topic:127878”]
Which got me to wondering whether the “narrative instruction” to use “Tight Stop - losses” was in fact comparable to the wearing of these apparently worse than useless "Crash helmets"
What say we ? [/quote]
Personally, I believe that stop-loss policy should be an integrally defined component of the specific trading approach that one is applying. And it can be very different in different situations.
The trader has backtested a method that produces a success rate of 50% with a 1:2 risk/profit ratio. In this case, he is not bothered whether any individual stop gets hit or not as long as it averages out at not more than 50% of his trades. His main concern is that the slippage on either of the exits (stop or limit) is minimal.
A position trader aims to hook into, and stay in, the long trends. He does not wish to get prematurely stopped out on spikes and would normally expect to exit all his trades manually from chart signals. His application of a stop-loss is only to limit his loss on a major unexpected and sudden move - the “air bag” survival stop-loss.
A discretionary trader who looks for moves of anything from a few hours to a few days (but rarely longer). He has three exit points. First, a pre-defined target, Second, a pre-defined chart-based exit/reversal signal, Third, a stop-loss at a price level that, if reached, nullifies the criteria for having entered the trade in the first place.
Of course, there are many more such scenarios…
But the more general concerns about stop-losses include the afore-mentioned issue of “reasonable” slippage, broker manipulation via spreads, and black swan events, etc. These relate more to the topic of forex trading as a business in general rather than how to apply stop-losses appropriately in specific trading situations.
I am not sure if I am in right ball park as to what you were looking to investigate here but at least its a few thoughts on the topic!