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>4) Learn to read the tape. Price action will allow you to recognize the
point of danger beyond which, if you are right, the market should not move.
Stewart, that is the point that says it all! That, for me, is the key...
Once you have learnt to read the tape, when you are in the market you will
be with, rather than against the prevailing move. Running the stops is an
activity before that event. If the market is going to come back against
you and where your stop is, you can either see it coming and are out well
beforehand, or if it goes past you, it will usually retrace and let you out
before the move in the opposite direction. Stops have to be played as
part of the risk/reward/ratio and other factors that I think of in terms of
environment and market structure.
Bonds virtually always stop and breathe en route for anywhere. Very
sudden spikes are usually just that, when your stop would be blown anyway,
with the most ghastly fill. My form of day trading the bonds means trading
in a total, holistic fashion, balancing a number of factors within the
market frame work - and I have not found an indicator working within a
day's trading to be of any value. I have searched enough and I only wish
there was one. But for obvious reasons I am not going to be drawn into
that
arguement.
Stops and how they are played have to be part of money management, as
indeed do the actual trades you take, according to the market
circumstances. If you flow in a large, broad estuary, you have time to
take evasive action, before the back-flow. The market, like a tide,
usually has a slack, as it turns from flood to ebb and back again. But a
fast running river like the Spoo would have to be played in a very
different way.
If 'reading the tape' is not one's style of trading, then I am sure that
you must have stops set in the market, in order to preserve capital -
particularly if it is mechanical system, for example. It is just that, to
me, if you don't day trade by being able to flow with the market, all the
stops in the world are not going to make you money. .
Provided that you make money consistently, it has to be a question of
"chacun a son gout..."
Bill Eykyn
www.t-bondtrader.com
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