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Strategies & Market Trends : Trading For A Living -- Ignore unavailable to you. Want to Upgrade?

To: Investor2 who wrote (1587)	4/19/1999 12:50:00 PM
From: William W. Dwyer, Jr.	Read Replies (1) \| Respond to of 1729

Good question, I2. I believe in using a stop-loss for anything except long term investments. For position trades, I try to set my stop just a bit below the immediate short-term support level, maybe 1/8 point below it. I like this support level to be less than 7% below my entry point, if possible, so that my loss will be limited to approximately 7%. Sometimes I might use 10%-20%, though, depending upon how long I expect to be in the trade, the type of stock and its demonstrated volatility. For example, with CMGI, YHOO, AMZN, AOL and the like, if I were planning to hold for 2-6 months, a 20% stop loss might be more appropriate, keeping me in the trade longer so I could avoid being shaken out by temporary weakness. These, of course, would be much more risky, so I would also be looking for much more profit in them. I might be much more careful about my entry-point in these, too. Using AIQ software, Trading Expert Pro version 5.0, I can set my stops in the software many different ways. For example, I could draw a trendline on the chart and the software you alert me anytime the price falls and breaks through my trendline, which I could also tighten up as market conditions dictate. I could also use a trailing stop loss of any value I select, such as 15%. Or, alternatively, I could chose to protect 95% of my capital and then after, say, a 5% gain, I could protect 90% of my profit. Many different ways to use it depending on your own personal preferences and your concerns about the market and the particular trade. I feel that it is important to always set a stop loss point on any trade. Gotta have some protection in case things get really nasty. I guess I want to know my maximum potential loss in case I'm just totally wrong. Interestingly, though, I've noticed that setting wider stops on some trades helps me ride them out for eventual profits, whereas the tight stops I used to use often (5%) got me shaken out of trades with pretty consistent losses. The key, of course, is careful selection of stocks and their entry points. I use F/A for the former and some T/A for the latter. I hope this answers your question. Best wishes, Bill