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Guy,
About the stops, it is my almost 30 years experience that you can put NO
STOPS at all. There may happen a completely unforeseen event that will triger
a huge move and you need a sfety net. It does not mean that stops should be
used as a normal way to get out of a position. Your stops may ne very far
(and in such a case your position shouls be reduced accordingly) and never
get hit. But they are there just in case.
As for the initial margin, teh exchanges take into consideration the
volatility to ask for the initial margin. In fact taking into consideration
the initial margin as a mesure of the risk, you are indirectly taking into
consideration the volatility, which makes sens . But you can not really rely
on the exchange for that because they have their own policy which does not
take into account exclusively the volatilty into account. I have seen initial
margin raise from 3 or 4 % of the contract's value to % of the contract
value. That's a big risk!
Jean Jacques
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