"I always use stop losses." That's what Tom Bradley said. Then he moved one. And then another. And then another.
Tom was a disciplined trader. At least, that's what he told himself. He had rules. He journaled his trades. He set stop losses on every position. He'd been trading options for three years and was consistently profitable — up about $45,000 over that stretch.
Then came the trade that changed everything.
He bought NVDA calls ahead of earnings, expecting a beat. He set his stop loss at -20%. Disciplined. Rational. Textbook.
NVDA reported mixed results. The stock dropped 8% after hours. His calls were down 35% at the open. His stop should have triggered. But it was an options position, and the gap happened overnight — his stop was meaningless.
Instead of closing the position at the open, Tom did what millions of traders do: he moved his stop. "Just a little lower. It'll bounce."
It didn't bounce. He moved the stop again. And again. By Friday, a trade that was supposed to risk $2,000 had lost him $11,400.
Three months of profits. Gone in one trade. Because he couldn't follow his own rules.
Source: Journal of Behavioral Finance — "The Disposition Effect in Options Trading" | CME Group — "Managing Options Risk"
The Stop Loss Myth: Why "Having Rules" Isn't Enough.
Here's the uncomfortable truth about stop losses:
Setting a stop loss is easy. Keeping it there is nearly impossible.
Research from the Journal of Behavioral Finance shows that retail traders modify or cancel their stop losses over 60% of the time. They set the rule. Then, when the trade moves against them, they override it.
Why? Because a stop loss forces you to do the one thing your brain hates most: realize a loss. In the moment, your brain generates a dozen reasons to give the trade more room. "The support level is just below." "Volume is declining — it's exhausting." "It'll bounce at the moving average."
These aren't rational analyses. They're rationalizations. Your brain is manufacturing reasons to avoid the pain of a loss.
And even when stops DO trigger, options can gap through them. A stop set at -20% can easily result in a -40% fill on a gap down. With options, stops are suggestions, not guarantees.
Rules you can override aren't rules. They're suggestions. And suggestions don't protect capital.
The Real Problem: You Can't Be the System AND the Trader.
This is the core paradox of self-directed options trading:
You are both the rule-maker and the rule-follower. You set the stop, and you're also the one who decides whether to honor it. That's like being the judge and the defendant in your own trial.
You will always find a reason to give yourself more room. It's human nature. The best traders in the world struggle with it. That's why the best firms in the world don't let humans make these decisions.
They use algorithms. Because algorithms don't negotiate with themselves.
The System That Follows Its Own Rules. It Costs $0 to Try.
The tool that sets the stop loss AND follows it — the one that can't be overridden by your emotions — is available with a free 3-day trial.
It's called DragonAlgo.
When DragonAlgo sends you an alert, it includes the entry, target, AND the stop loss. The algorithm has already determined the maximum acceptable risk. Your job is to execute the alert — not to manage it, modify it, or move the goalposts.
The difference between human stops and algorithmic stops:
| Your stop loss | DragonAlgo's stop loss |
|---|---|
| You set it | Algorithm calculates it |
| You move it when scared | Predefined, not adjustable |
| Based on hope | Based on data and volatility |
| 60%+ get cancelled by traders | Built into the alert — not optional |
| One bad trade erases months | Risk defined before entry |
Trusted by thousands of American traders
What DragonAlgo Members Are Saying
"I always thought I was disciplined until I tracked how often I moved my stops. It was embarrassing. DragonAlgo took that decision out of my hands. The stop is the stop. Period. My account has never been more consistent."
"The exit alerts are the most valuable part. I used to let winners become losers because I got greedy, and let losers become disasters because I got stubborn. Now the algorithm tells me when the trade is over — both ways."
Discipline Is Not a Strategy. A System Is.
If you've ever moved a stop loss, cancelled a stop loss, or told yourself "just a little more room" — you already know this is true. Your rules only work if something besides your emotions enforces them.
- Over 60% of retail traders modify or cancel their stop losses
- Options can gap through stops, making manual stops unreliable
- You can't be the rule-maker and the rule-follower simultaneously
- DragonAlgo builds the stop loss into every alert — no negotiation
- Every alert includes entry, target, and predefined exit
- The free trial takes 2 minutes to start
Tom thought he was disciplined. He wasn't — he was human. The algorithm doesn't have that problem. Try it free.
Sources:
Journal of Behavioral Finance — "The Disposition Effect in Options Trading" | CME Group — "Managing Options Risk" | Kahneman & Tversky — "Prospect Theory" | DragonAlgo.com
Advertiser Disclosure: This is a sponsored article. MarketWire may receive compensation when you sign up through links in this article. All opinions are our own. Trading options involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results.