Q: Quick question regarding stop-loss.
I often get stopped out for placing a stop too close to the support line.
About what % below the support line would be the optimal place for a stop loss?
Learning massive from you .Thank you!
A: If you move your buy point lower, that problem will start to take care of itself. However the flip side is you miss trades. I have chosen the “risk” of missing trades, over the getting stopped out more often path. Whatever is the most comfortable. Read all of my stuff about springs, that is why I do that setup. So I use stops based on 4 things: the technical position of the market itself, how volatile something is, my win/loss (net profit %), and how much leverage I’m using. So here’s the point – if something is more volatile, then if you take a smaller position size, then your overall account can handle a wider stop. Make sense? You have to tailor it. But like I said, if you lower your buys, some things take care of themselves, but I miss trades. I really think tho to start, while you’re considering this stuff, 5-7ish%, something like that.
Q: Sometimes I buy exactly at support and I place a stop just 1% below it. In that case it is too tight?
Or it is better stay with a 5-7%?
your opinion.
A: You’re going to have to tell me your time horizon, and what you’re trading. If you are doing real short term, like some of my videos, then a tighter stop is needed. And if you’re doing something volatile, like NUGT, then you need to cut back position size and you can use wider stops. Stops are in relation to other things, think in terms of an approach to markets. Stops are part of the approach, just like the method, and the trading skills. Nothing we do in markets is on its’ own. So if you cut your position size, you can use wider stops. But yes 1% is way too close.
Q: I recently started swing trade stocks like IBM, HOG, POT, MOS and BDK. Some of these stocks like HOG(stopped out) and DBK are on a uptrend; I try to buy when the price hits or is very near the ascending trend-line. What keeps getting me out, is when the stock drops below the trend-line triggering the stop-loss before a bounces back . More often then not I will get stopped out.(especially on a uptrend)
I’m thinking of a 2-3% instead of a .5%to a 1% but not sure if that is still too tight.What’s your opinion.?
Not always I buy at accumulation phase. I may trade at a temporary support/resistance on a participation phase like the IBM and HOG.
On a participation phase don’t you think that 5-7% below the support too much?
A: I highly, highly recommend – DO NOT use trendlines to enter into positions. Trendlines are not support to trade off of. They can be support, but trendlines are just what they are called – trendlines. They are VERY wide areas to emphasize the trend. But they are not tools to enter into a position. Only use the true support, like gaps or old lows, or tops of old trading ranges. You can use trendlines in conjunction with the others, but it’s the others which are the important ones. I like your idea of sticking to stocks in uptrends, and buying on reactions. That’s good. Now start honing your support areas. That alone you will see a big improvement. So support, combined with understanding Ending Action will hone it even more. And then be patient to watch the setup unfold right in front of your eyes. And yes, 7% is a lot, my preference is 3ish%
Sometime I enter a long position on a major pull-back near a support line. At times the price keeps dropping.
If that happens I have two options as far I know.
A) Have my stop triggered.
B) Just hold for a longer term without a stop loss or a much-much lower stop.
Since I’m already buying into weakness will it be better to just hold till the prices move back up?
I’m trying to figure out which of these 3 trading strategies has a greater probability of success on a long position. A)Buying at 50% retracement
B)Buying at a breakout of a resistance
C)pull-back to the resistance after a breakout.
What is your opinion?
Scott. About what % retracement would you consider an opportunity to go long?
Scott: How do you estimate the moment of coming move of some stock using Wyckoff’s approach? I know how to estimate price target of move only.
Leave a Reply