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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Knyyt who wrote (7501)	3/18/2000 6:24:00 AM
From: Eric P	Read Replies (1) \| Respond to of 18137

Knyyt: Welcome to the thread. I think you make an excellent suggestion in terms of using a binder to print out and organize information on trading. There is simply so much information out there that you'll never be able to keep track of it all without some kind of organized method. Regarding initial stops, you mention three ideas of possible stop placement locations: a) Set stop at 1-2 percent below entry price, b) Set stop for a maximum loss of 1-2 percent of account c) Set stop just below (or above for shorts) the last low (high) prior to the upswing. Personally, I vote for option c. You express concern that this stop point is sometimes 1-2 points away, which sounds excessive to you. One good way to alleviate this problem is to not take trades in which you cannot find an acceptable stop placement. For example, the stop can be set below that last low, AND must be no more than 1-2 percent of the stock price away, AND constitute a loss of no more than 1-2 percent of your account. If a stop point cannot meet all of your criteria, then simply pass on the trade. For daytrading, however, I believe an arbitrary stop at 1-2 percent of you account value is a bad idea. Note that this can be an upper limit for a stop loss, but not the criteria for setting the stop, since it is arbitrary and based only on the size of your account and the number of shares you have purchased. I think a stop loss solely based on a percentage (e.g. 1-2%) of the stock price will also have substantial weaknesses, since it doesn't take into account the volatility of the stock. A volatile stock can move up/down by 2+ percent in 10 seconds, while a very slow moving stock may not move this far in a week. Again, this can be a very effective criteria for setting an upper limit on your stop loss however. To summarize, I believe the best stop loss points are based on chart locations. Other criteria, such as you mention, should be used as good filters to ensure that the chart stop point does not entail too much risk for you. Good luck, -Eric

To: Knyyt who wrote (7501)	3/18/2000 8:40:00 AM
From: TraderAlan	Read Replies (1) \| Respond to of 18137

Knyyt, The best stops are those placed just behind the point that you know that you're wrong. The most effective way to do this (as Eric implies) is to take trades where price only has to move a short distance for this to happen. That's why entry right at clear support-resistance or tight congestion works so well. <Mostly i am entering when stocks are at their highs of the day> As a "beginning daytrader", this is one of the riskiest strategies you could take. It's an invitation to disaster unless you know clearly why you're buying certain highs and passing on others. This trading style works but needs specific market conditions, very strict discipline and great timing. You also have little choice but to use arbitrary stop loss as price can drop very far without damaging any of the technicals for the trade. Alan