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Strategies & Market Trends : Trade What You See, Not What You Think -- Ignore unavailable to you. Want to Upgrade?

To: booters who wrote (38)	10/15/2000 6:55:43 PM
From: Threei	Read Replies (1) \| Respond to of 867

Boots, so if I got this right, your stop is not exact level but rather signal generated by your system, indicating that the reason for the trade is not longer valid? If so, I do like this approach and consider it to be very respectable - it takes great discipline, detached state of mind, unclouded thinking. Thank you for sharing! Vadym

To: booters who wrote (38)	10/15/2000 7:49:05 PM
From: TraderAlan	Read Replies (2) \| Respond to of 867

booters, I trade and teach the same way. There are several issues here. We're talking about stops and exits, which are really two different things. I want to know the price level that proves the trade was wrong before I enter the position. This is my failure target, for me based on charting features (I know this isn't a chart thread <g>). I also want to know my profit target, which is the first resistance that price has to face for a long or support that it must face for a short position. The profit and failure targets establish the initial reward-risk. The first trick is to enter the trade as close as possible to the point where you know that you're wrong, so that price only needs to move a small distance to negate the trade and signal your exit. Both the failure and profit points may shift with each tick after execution if they're based on fluid charting landscape features, like Bollinger Bands or moving averages. But then the trade also shifts into an active management phase, which opens up other reasons to stay in the position or exit. I strongly believe that every trading style should establish an initial holding period and stick to it until the trader understands trends and congestion well enough to pinpoint which price move they are really trading in any setup. I think most traders do a poor job with that. The holding period dictates a possible exit based on pure time, regardless of result. That is closely related to your exit on a Stochastics turn since they both respond to an underlying buy-sell swing cycle in the market. In other words, you want to get in when the cycle turns in your favor and be out when the cycle turns against you and starts to chew up your profit position. The obvious final point is that your holding period must align properly with this natural cycle or you constantly give back profits by being out of synch. I also exit when price reaches my target or new information in the landscape tells me that risk has increased. For example, I like to exit immediately if I ride a wide range bar out the top of a Bollinger Band because that sets up a short-term overbought condition. Or I'll exit because I hit a new failure target that I've established along the way to protect profit. For example, price moves into congestion after it pushes into a profit. The new failure target is a mental stop below the small range pattern or, more likely, I'm watching some short-term average move up against price and get out on the first violation. Alan