Many traders have their own theory on how to place stops on their market orders, or whatever kind of order they place. With the recent market volatility this has been a challenging job to accomplish, because the intrabar turbulence has many a stop to be triggered and money lost. I still encourage, no……I insist that traders place their stops in a manner that gives them adequate protection. My stop ranges have been anywhere from 12 to 20 ticks, depending upon the nature of the market that day.
But I want to address those who trade without stops, and indicate what a terrible risk they are taking because a sudden spike, of which we have had no shortage in the recent month, my signal the end of your trading career. Stops are an important and essential part of any trading strategy to keep me from encountering catastrophic losses.
I also move my stops when a trade is in progross….let’s assume that I have made a good trade and am in the money and I have initially positioned my stop at 12 ticks…once I am 1.5 points into the money, I manually move my stop up to 4 ticks…once I have reached two points, my stops are at my market entry points, and if I let the trade run I continue moving my stops upward to protect my gain. Remember this…..NEVER LET A WINNING TRADE BECOME A LOSING TRADE…and stops are a great way to do this.
You might also use a trailing stop strategy, where once you reach a certain point in profit the stopo moves automatically according to a preset you put in before the trdeeeeeeeeeeeeeeee gooes in. Myself, I am much more comfortable moving the stops manually, which may be the remnant of the “old school” way of doing thing, but I feel much more comfortable placing my stops this way.
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