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At 05:32 PM 10/25/97 -0400, Jim Peeke wrote:
>John,
>I have observed that when various people who are good technicians have their
>stops hit it is time to see if a reversal is about to occur. I observe in
>your comments the 941.60 area was your stop. The fact that the market ran
>past the stop and immediately reversed I thought may be more than just an
>interesting observation.
>
>I would be interested in your comments regarding this as part of a trading
>strategy
>
>Jim Peeke
Jim,
Sorry it took so long to get back to you. I was on vacation and I
received over 500 pieces of mail which I am still reading while trying to
trade this very volatile market.
With respect to stops, the reason why I use them particularly with
symmetry wave is that we need to know at what point a wave structure fails.
As you probably know, SymWave uses a leeway of 20% of the original
magnitude decline. Therefore, if a future decline exceeds the plus 20%
leeway, it suggests a failure of the structure. Simply, if it fails, get
out... that is why I say to use stops.
However, when it comes to the actually placement of the stops, I leave it
up to the reader to determine the EXACT location of the stop. For Example:
If I say in my commentary, that the plus 20% leeway on the SP Z7 is at
the 94000 level, any move below 94000 would indicate a wave failure, thus
set your stop just below this level. However, if you or I saw a major
support zone at the 93800 level, I most likely would NOT put my stop at
93950 and may give it just a little bit more room, but it would be a very
tough call. Reason, you need to follow the system rules. And in the case
that you mention above, the leeway was broken, the stop was take out, and
then we got a reversal. However, ultimately the SPZ7 really broke down
only several days later.
So in my opinion, use the maximum leeway as your primary stop loss zone
BUT if you see FANTASTIC support IMMEDIATELY below that zone, you may want
to consider that zone as your potential bottom. But note, if the price
does proceed through the leeway and then finds support shortly thereafter,
it is in your best interest to then recognize that decline as a NEW wave
structure.
Hope this helps,
John Boggio
For recent commentary and more informations regarding SymWave, please go to:
Commentary: http://www.realtraders.com/boggio/disc7_toc.htm
Info regarding SymWave: http://www.realtraders.com/boggio/boggiobio.htm
Thank you.
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