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Since every broker in America tells their client to place a stop above
previous resistance or below previous support, I've been struggling with
that "following the crowd" mentality. I've been using "mental-written"
stops fairly effectively. But, day before yesterday I found myself up 20
points and wanting more in the S&P 500. Rather than taking my profits (or
some of my profits) and running, I decided to "go for" more. Long story
short, the whole trend changed and before I knew it I was out 39.9
points. I didn't pull the plug on the trade while it was still profitable
(although that's really hard to do because I was thinking "Well I could've
had 20 points, now it's down to 16, 14, 12, 8, etc) because I felt they
were taking the market up so they could take it down some more. Anyway, if
I had a stop placed I would have been stopped out in the first place --
which ultimately would have been better than what I did lose, but then
again, I wouldn't have had the "opportunity" to make 20+ points (hand I
chosen to take my profits when I should have).
I'm looking for advice:
Where do you S&P Traders place your stops? Do you base it soley on a
percentage of your trading capitol?... equity? If so, what percentage?....
I've heard 3 and 5% -- but if you're trading 2 or 3 contracts (like I do --
I built my account from $10,000 up to $50,000 in July -- yipee!) at 5% I'd
have to place a 3.3 point stop (Risking $833.33 on the trade). In the S&P
this is a pretty tight stop based on my limited experience of one-year.
Placing my stop above previous resistance or below previous support sounds
absolutely crazy to me -- all the floor traders know where the orders are,
and they DO run the stops.
Realizing that ANYTHING CAN HAPPEN in the market, it makes sense to
actually have stop orders in the market and working.... but I'm struggling
with where. George Angell is a brilliant S&P trader and on his "Sniper
Trading" course and his "Precision" book he says he never puts a stop order
in at the desk, but adhere's to his own stops just the same.
Anyway.... all opinions and advice are welcome. Any books I should read,
people to talk to, advice to pay for? Help!
Warmly,
Brian Keith Voiles
PS> I love this list!
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