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Strategies & Market Trends : DAYTRADING Fundamentals
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To: Matthew L. Jones who wrote (3902)9/13/1999 7:07:00 PM
From: Threei  Read Replies (1) of 18137
 
Matt,
my approach to stop loss:
1. Stop loss should be placed on the level of support for long entry/resistance for short entry.
2. Stop loss should be as big as you are comfortable with, your capital/risk tolerance wise.
3. Accordingly, your entry point should be not farther from the support level that what you are willing to allow stock to go against you (i.e., if support level is $20 and you are comfortable with 1/4 stop, you shouldn't enter the trade higher than 20 1/4. If you do, you risk to get shaken out BEFORE stock hits the support or you have to take the bigger pain than you were willing to).
4. Now and then stock will turn around after you got stopped out. It's quite OK, never take it emotionally. NO system can avoid it. If it happens too often it indicates that system requires bigger stop than you are willing to adopt.

Regards,

Vadym
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