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Thank you for a very good and complete answer. Read this you rookie traders.
It's about as good advise on using stops that I have seen. One for 5 is
good! I'll admit that day trading requires some sort of physical protection.
I have been told of day traders using options for that purpose as well.
Brent
-----Original Message-----
From: Stewart Taylor <staylor@xxxxxxx>
To: BrentinUtahsDixie <brente@xxxxxxxxxxxx>; REAL TRADERS
<realtraders@xxxxxxxxxxxx>
Date: Thursday, June 24, 1999 11:56 AM
Subject: Re: GEN: Stops
>
>
>>out for a loss frequently, often, 50/50, sometimes, seldom, or never.
>
>Less and less as the years have gone by. Im pretty aggressive and
>oftentimes I run close stops. In fact, I had a lot of trouble learning how
>to keep my stops intact and often felt pretty helpless over the early part
>of my trading life.
>
>I do try and recognized when a trade isn't working out and exit before my
>stop is hit. Probably 1 (if Im trading well) out of five get hit.
>
>>I've watched as traders have used stops in about every way you can
>describe. >Time after time they get burned.
>
>Again, I think it comes down to learning to recognize setups and patterns
>that have a high degree of correlation with change. I seldom trade a
>breakout in terms of going with it. However, once a market has broken out
>I will wait for a corrective pattern to set up and then buy/sell the thrust
>from the pattern. This puts you away from the best entry point and further
>from your initial stop, but by making the market prove it to you by
>thrusting you vastly increase in the odds of the move continuing.
>
>I also seldom make the assumption that support or resistance is going to
>hold. I use to get stopped out a ton just by buying oversold at support
>and selling overbought at resistance. Now I make the market prove it by
>running the stops (spiking above resistance and failing for instance) or by
>thrusting and taking out a level either beyond either support or
resistance.
>
>Look at today's setup in the Dollar index. A prior strong level of
>resistance.... the market broke the uptrend on the original rally and now
>goes and upthrusts the resistance. If you took a short position in
>anticipation of the market failing... you got burned and stopped out in the
>upthrust. If you are a breakout trader... you got long and then stopped
>out... Note that after upthrusting and running stops and inducing new weak
>longs.... the market promptly turned and took out yesterdays low.
>
>This is a good example of a market where the stops have been run and it is
>a fairly safe bet to enter (not a recommendation).
>
>As far as getting burned, it happens. It is a cost of survivorship.
>
>Sure if you can keep track of all the
>>potential events that could make the market explode you might be ok.
>
>I only keep track of one or two things. Frankly, I know when employment
>and PPI are coming off and I pay little attention to anything else.
>
>From
>>what I could tell with all the possibilities for disruption you just don't
>trade and that way you don't get in at the wrong time.
>
>Stewart Taylor
>Taylor Fixed Income Outlook
>Voice: 501-219-9774
>Fax: 501-228-0963
>E-Mail: staylor@xxxxxxx
>Web Site: http://www.cei.net/~staylor/
>
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