Protective Stops Flashcards
Skilled Traders always have a protective Stop in the Market. As it is to protect me from myself, as traders get emotional and it derails a consistent winning strategy.
Skilled Traders always have a protective Stop in the Market. As it is to protect me from myself, as traders get emotional and it derails a consistent winning strategy.
What are the Different Types of Protective Stops?
Price Action Stops
Money Stops
Wide Stops
Stop Based upon a MM
Trailing Stop
It does not matter where I buy. Management (aka stop placement) is the same and is based on what the market is doing Now, not when I bought
It does not matter where I buy. Management (aka stop placement) is the same and is based on what the market is doing Now, not when I bought
Protective Stops - Several Types
Protective Stops - Several Types
Protective Stop - Several Reasonable Choices
Protective Stop - Several Reasonable Choices
A Beginner sees the Market as a Person Unknowingly Making a Mistake and wants to give the Market a Chance to see the mistake and redeem itself
A Beginner sees the Market as a Person Unknowingly Making a Mistake and wants to give the Market a Chance to see the mistake and redeem itself
A Beginner often Ignores Probability and Trend Change (see chart below!)
A Beginner often Ignores Probability and Trend Change (see chart below!)
A Beginner Always Finds a Reason to Deny Loss
A Beginner Always Finds a Reason to Deny Loss
A Beginner Loses because he is afraid to lose. He holds long here because is afraid to take a loss and then he see’s himself as a loser. As a Trader you cannot identify with a lose
A Beginner Loses because he is afraid to lose. He holds long here because is afraid to take a loss and then he see’s himself as a loser. As a Trader you cannot identify with a lose
As this Bear Extends a beginner finds new reasons to HOLD LONG
As this Bear Extends a beginner finds new reasons to HOLD LONG
Pros know when they’re wrong and they accept the loss and get out of the trade. When you’re wrong you exit
Pros know when they’re wrong and they accept the loss and get out of the trade. When you’re wrong you exit
The Beginner Finally Gives up at the Bottom
The Beginner Finally Gives up at the Bottom
Expert Sees in this same chart a Sell Climax
Expert Sees in this same chart a Sell Climax
Where I put my stop determines how much money I am going to risk. The amount of money I willing to risk determines how big of a position I am going to take. I never want to risk more on any trade than I would on any other trade.
Where I put my stop determines how much money I am going to risk. The amount of money I willing to risk determines how big of a position I am going to take. I never want to risk more on any trade than I would on any other trade.
Trading the “I DON’T CARE SIZE” allows me to properly focus on my trading and not worry about losing
Trading the “I DON’T CARE SIZE” allows me to properly focus on my trading and not worry about losing
Whenever I am looking to enter a Trade, I must first look where my stop is going to be, this determines my risk and allows me to determine how big of a position size I can take and than I can adjust the size of my position based upon the appropriate stop.
Whenever I am looking to enter a Trade, I must first look where my stop is going to be, this determines my risk and allows me to determine how big of a position size I can take and than I can adjust the size of my position based upon the appropriate stop.
Wide Stop - Big Risk so Reduce Position Size. Adjust Target based on Size of Risk
Wide Stop - Big Risk so Reduce Position Size. Adjust Target based on Size of Risk
Whenever the market is in a Triangle it is in BO in either direction. Therefore this Wedge Top is a reasonable Sell
Whenever the market is in a Triangle it is in BO in either direction. Therefore this Wedge Top is a reasonable Sell
Hitting a Stop can create a BO or a 2nd Entry for a Reversal
Hitting a Stop can create a BO or a 2nd Entry for a Reversal
Hitting a Stop can also Create a 2nd Entry for Reversal
(Note: It is not a big problem getting stopped out, if my trade ultimately still proves valid, I can always sell again)
Hitting a Stop can also Create a 2nd Entry for Reversal
(Note: It is not a big problem getting stopped out, if my trade ultimately still proves valid, I can always sell again)
Make your Stop a Logical Choice
Make your Stop a Logical Choice
Strong BO, where would the correct Stop be placed for this trade?
Strong Bull BO, where would you Buy here and where would you place your stop?
a mistake beginners often make is they focus on Risk and Forget about Probability. Here is an Example of a Bad Stop “Dead Skunk Stop”, between 2 Logical Choices
a mistake beginners often make is they focus on Risk and Forget about Probability. Here is an Example of a Bad Stop “Dead Skunk Stop”, between 2 Logical Choices
Beginner Traders need too minimize risk, only takes trades where stop is just beyond signal bar
Experienced Traders often uses a wide stop, they trade small… maybe scaling in;
they have many more entry opportunities
Beginner Traders need too minimize risk, only takes trades where stop is just beyond signal bar
Experienced Traders often uses a wide stop, they trade small… maybe scaling in;
they have many more entry opportunities
Strong BO - Use Correct Stop, Relying on Stop with your Premise still in form Holds Strong Value
Strong BO - Use Correct Stop, Relying on Stop with your Premise still in form Holds Strong Value
Price Action Stop Below Bottom of Bull Leg. If signal bar is likely start of Bull Leg, place stop below signal bar. If it might PB more, place stop below bottom of Bull Leg
Price Action Stop Below Bottom of Bull Leg. If signal bar is likely start of Bull Leg, place stop below signal bar. If it might PB more, place stop below bottom of Bull Leg
Does buying after a Strong BO increase the probability of a successful trade?
Yes it does. Remember even the the probability is higher the stop is now further away
If the market falls Below the most recent higher low in a Bull Trend what has most likely occurred?
the Bull Trend Probably ended
The Stop Location is sometimes not clear.
The Stop Location is sometimes not clear.
Bull Trend = Needs HLs
Once there is a strong BO to a new high, the HL is a Major HL. The Major HL is usually a HL in a Bull Trend, not just in a TR. Bulls will raise stop to below bottom of most recent major HL & if it falls below that Major HL the Bull Trend probably ended
Bull Trend = Needs HLs
Once there is a strong BO to a new high, the HL is a Major HL. The Major HL is usually a HL in a Bull Trend, not just in a TR. Bulls will raise stop to below bottom of most recent major HL & if it falls below that Major HL the Bull Trend probably ended
If Falls Below HL we are no longer in Bull Trend
If Falls Below HL we are no longer in Bull Trend
As Long as Above Major HL the market is still in a Bull Trend
As Long as Above Major HL the market is still in a Bull Trend
When the market falls below Minor HLs do the Bulls buy More or Exit their positions?
The Bulls Buy MORE as long as the context is good and the premise remains AIL
Protective Stop: Price Action Stop.
Price Action Stop = Below Bottom of New Bull Leg
Protective Stop: Price Action Stop.
Price Action Stop = Below Bottom of New Bull Leg
When there is a lot of small Bars and Prominent Tails on Bars, chances are the trend is about to Reverse, consider Tightening stops (Price Actions Stops are a great strategy to use.
When there is a lot of small Bars and Prominent Tails on Bars, chances are the trend is about to Reverse, consider Tightening stops (Price Actions Stops are a great strategy to use.
Trailing Protective Stop
Tight Stops lose less, but lose more often & Wide Stops lose less often but more per loss. This is why it is important to always use the correct stop dependant upon the context that is available.
Trailing Protective Stop
Tight Stops lose less, but lose more often & Wide Stops lose less often but more per loss. This is why it is important to always use the correct stop dependant upon the context that is available.
Stop in Bear Trend - Above Last Bear BO (Last Sell Climax)
Stop in Bear Trend - Above Last Bear BO (Last Sell Climax)
Stop in Bear - Do Not Wait for your Stop to Be HIT. Look at this swing Bear Trade that you have been Trailing. The Strongest Bear BO occurred late in the Trend making it a possible Exhaustive move(Sell Climax). After seeing this exit on a Reversal Bull Bar up or wait to see if the Reversal Bull Bar has follow - through and than exit. Other Bulls know this and they will go long at this point.
Stop in Bear - Do Not Wait for your Stop to Be HIT. Look at this swing Bear Trade that you have been Trailing. The Strongest Bear BO occurred late in the Trend making it a possible Exhaustive move(Sell Climax). After seeing this exit on a Reversal Bull Bar up or wait to see if the Reversal Bull Bar has follow - through and than exit. Other Bulls know this and they will go long at this point.
Protective Stop - Trailing Stop in Bear Trend
After every new Low Traders look to Trail their Stops.
Protective Stop - Trailing Stop in Bear Trend
After every new Low Traders look to Trail their Stops.
A lot of Traders like to use a Break Even stop even though there is no mathematic basis to a Break Even Stop. If I am being totally objective to the context of the market I will never use a Break Even Stop
A lot of Traders like to use a Break Even stop even though there is no mathematic basis to a Break Even Stop. If I am being totally objective to the context of the market I will never use a Break Even Stop
As the Bear Trend Progresses Lower Stop (Trailing Stop)
As the Bear Trend Progresses Lower Stop (Trailing Stop)
Bull Trend - Can Fall Below Minor HL
Bull Trend - Can Fall Below Minor HL
If Lower Low - Now in TR or Bear
(Note: in this LL it could possibly be minor as it is still above the previous Major HL & they may treat it as a TR but if the market falls below it the final Bulls will give up & the premise of a TR or Bull Trend is no longer valid.)
If Lower Low - Now in TR or Bear
(Note: in this LL it could possibly be minor as it is still above the previous Major HL & they may treat it as a TR but if the market falls below it the final Bulls will give up & the premise of a TR or Bull Trend is no longer valid.)
Bear Trend - Has Low Highs (and Lows).
Once it Rallies above LH, no longer in Bear Trend; Either in TR or Bull Trend.
Bear Trend - Has Low Highs (and Lows).
Once it Rallies above LH, no longer in Bear Trend; Either in TR or Bull Trend.
Higher High in Bear - TR or Bull Trend Likely
If the Market Rallies strongly above Major High, Bears give up and the Bulls get CONFIDENT.
Higher High in Bear - TR or Bull Trend Likely
If the Market Rallies strongly above Major High, Bears give up and the Bulls get CONFIDENT.
Higher High - If Minor, Then TR, Not Reversal. Which after in TR=BOM the TR converts to Bull Trend from TR
Higher High - If Minor, Then TR, Not Reversal. Which after in TR=BOM the TR converts to Bull Trend from TR
When there is Bars like this (Dojis, Bad Follow-Through after bars) odds are high that the market is likely to convert into a TR)
When there is Bars like this (Dojis, Bad Follow-Through after bars) odds are high that the market is likely to convert into a TR)
If Above Higher High - Now TR or Bull
If Above Higher High - Now TR or Bull
If the Premise in the market has CHANGED, DO NOT WAIT for Stop to Be Hit.
Be ready to get OUT if Always In reverses
If the Premise in the market has CHANGED, DO NOT WAIT for Stop to Be Hit.
Be ready to get OUT if Always In reverses
If the Premise appears as though it might have changed, look for signs of Change. On this Chart we had a Wedge Top that failed that lead to a Bear Break of a Bull Channel which became the final Bull Flag (TR) with a Buy Climax Exhaustion HH DT MTR that the Bears SOLD
If the Premise appears as though it might have changed, look for signs of Change. On this Chart we had a Wedge Top that failed that lead to a Bear Break of a Bull Channel which became the final Bull Flag (TR) with a Buy Climax Exhaustion HH DT MTR that the Bears SOLD
Bear Trend Scaling In
Bear Trend Scaling In
If Premise is No Longer Likely, Exit
If Premise is No Longer Likely, Exit
If the Premise is no longer likely what may the market be trying to tell me?
That it might now be in an opposite Trend
If Now in TR use a TR Type of STOP
If Now in TR use a TR Type of STOP
If Now in TR use a TR Type of STOP
If Now in TR use a TR Type of STOP
Where do the Scale in Bears Sell in a TR?
They Sell Near the Top of the TR (BLSHS)
If my Premise is no longer Valid do not Let my Stop to be Hit before I exit my position.
If my Premise is no longer Valid do not Let my Stop to be Hit before I exit my position.
If Now Always In Short - Exit my Long position or if Flat I can Sell
If Now Always In Short - Exit my Long position or if Flat I can Sell
Protective Stop - Wide; the purpose of a wide stop is too give time for the premise to succeed. Never plan to let stop be hit. Always try to exit before if premise is no longer reasonable
Protective Stop - Wide; the purpose of a wide stop is too give time for the premise to succeed. Never plan to let stop be hit. Always try to exit before if premise is no longer reasonable
When placing Protective Stop I have two choices - a Price Action / Wide Stop OR a Money Stop
When placing Protective Stop I have two choices - a Price Action / Wide Stop OR a Money Stop
When I have a wide stop in place and the premise of the market has clearly changed do not wait for my stop to get hit, simply get out of the trade.
When I have a wide stop in place and the premise of the market has clearly changed do not wait for my stop to get hit, simply get out of the trade.
I Do Not Need to Pick the Exact Top; I can use a Wide Stop
I Do Not Need to Pick the Exact Top; I can use a Wide Stop
Money Stop Example
Money Stop Example
With the best stop here on this chart being above the Strong BO an account may not be able to handle that size of a risk so sometimes a trader will than use a stop just above the midpoint of the BO Signal Bar or 20 ticks above entry
With the best stop here on this chart being above the Strong BO an account may not be able to handle that size of a risk so sometimes a trader will than use a stop just above the midpoint of the BO Signal Bar or 20 ticks above entry
Strong BO - Minimum Profit Target is a MM
Strong BO - Minimum Profit Target is a MM
Protective Stop Placed Above Signal Bar Versus Placed above Bear Trend. Higher Probability with the stop above bear Trend(wider stop) It is not necessary but it does increase my odds
Protective Stop Placed Above Signal Bar Versus Placed above Bear Trend. Higher Probability with the stop above bear Trend(wider stop) It is not necessary but it does increase my odds
Protective Stop Below Buy Signal Bar
*Remember the minimum goal whenever I have a reason bottom (reversal) is TBTL up
Protective Stop Below Buy Signal Bar
*Remember the minimum goal whenever I have a reason bottom (reversal) is TBTL up
The first reversal up is usually minor (Bull Leg in a TR) but sometimes a minor reversal leads to an opposite trend/ a swing trade
The first reversal up is usually minor (Bull Leg in a TR) but sometimes a minor reversal leads to an opposite trend/ a swing trade
Size of Money Stop Guidelines
Size of Money Stop Guidelines
When using a Wide Stop give the market time for the Premise to Work. While the Trade is working I could use a Sell Climax Measured Move to see if the premise of this Bull Long Trade is still good, if it hits this wide stop it will confirm the idea is no good and to get out of the trade.
When using a Wide Stop give the market time for the Premise to Work. While the Trade is working I could use a Sell Climax Measured Move to see if the premise of this Bull Long Trade is still good, if it hits this wide stop it will confirm the idea is no good and to get out of the trade.
a Wide Stop Allows for a Failed BO Below an Obvious Stop level gives the premise some room to breath for my trade idea
a Wide Stop Allows for a Failed BO Below an Obvious Stop level gives the premise some room to breath for my trade idea
Wedges + Stairs Pattern (over lapping Gaps) = The Trend (Bull in this Chart) will soon be replaced wither by a TR or a Bear Trend
Wedges + Stairs Pattern (over lapping Gaps) = The Trend (Bull in this Chart) will soon be replaced wither by a TR or a Bear Trend
Measured Move in Bull Channel That Has Stairs
Measured Move in Bull Channel That Has Stairs
Stop Based on Other Support or Resistance
Stop Based on Other Support or Resistance
Strong Trend some Traders will Put their stop just Below the 50% PullBack
Strong Trend some Traders will Put their stop just Below the 50% PullBack
MM Stop based on TR; if it falls below the MM Stop target this means my trade idea belief is no longer valid. Another Wide Stop is based upon the larger TR which gives me time to allow the trade to go in my desired direction
MM Stop based on TR; if it falls below the MM Stop target this means my trade idea belief is no longer valid. Another Wide Stop is based upon the larger TR which gives me time to allow the trade to go in my desired direction
Traders use a Wide Stop when they are not certain; Traders took this short not confident that this is the Final Top. So they use a MM Stop because they’re confident the premise is right but not confident that it is the final top. This wide stop gives the trader breathing room for the short.
Traders use a Wide Stop when they are not certain; Traders took this short not confident that this is the Final Top. So they use a MM Stop because they’re confident the premise is right but not confident that it is the final top. This wide stop gives the trader breathing room for the short.
It is important to trade small enough to keep risk within comfort zone. Allow big PB, as long as premise remains valid
It is important to trade small enough to keep risk within comfort zone. Allow big PB, as long as premise remains valid
When the Risk is Big buying Options are an alternative to Trading Small
When the Risk is Big buying Options are an alternative to Trading Small
Strong Bull Trend; any reasonable stop is good but wider stop gives higher probability. (See different stop examples below)
Strong Bull Trend; any reasonable stop is good but wider stop gives higher probability. (See different stop examples below)
Beginners often make the mistake of pretending the Risk they are exposing themselves too is really not as risky as they think. (see example on the chart below) If you cannot risk this much do not take the TRADE!
Beginners often make the mistake of pretending the Risk they are exposing themselves too is really not as risky as they think. (see example on the chart below) If you cannot risk this much do not take the TRADE!
Remember, Your Stop sometimes does get Hit!
Remember, Your Stop sometimes does get Hit!
Breakeven Stops are Rarely the Logical Choice
*Remember there is no mathematical basis for a Breakeven Stop because the stop choice is not related to my entry price (it is simply an emotional thing).
Breakeven Stops are Rarely the Logical Choice
*Remember there is no mathematical basis for a Breakeven Stop because the stop choice is not related to my entry price (it is simply an emotional thing).
A lot of the time Scalpers will use a Breakeven Stop as they do not want the market to get back to their entry price after getting within 10 - 20% of their target
A lot of the time Scalpers will use a Breakeven Stop as they do not want the market to get back to their entry price after getting within 10 - 20% of their target
Bulls usually allow one PB below entry price. However once the Bull trend Resumes with another BO, Traders do not want a 2nd PB below entry price or Below HL
Bulls usually allow one PB below entry price. However once the Bull trend Resumes with another BO, Traders do not want a 2nd PB below entry price or Below HL
Perfect BO Test Misses Breakeven Stop by 1 Tick. Keep in mind this Breakeven stop has zero mathematical basis. Usually it is not best to use
Perfect BO Test Misses Breakeven Stop by 1 Tick. Keep in mind this Breakeven stop has zero mathematical basis. Usually it is not best to use
Big Up + Big Down = Big Confusion, TR is likely.
Test of Last BO Low in Bull; BUY
Big Up + Big Down = Big Confusion, TR is likely.
Test of Last BO Low in Bull; BUY
Bottom of Last Bull BO - Buy at and Just Above. As long as the premise is still valid Bulls will continue to Buy on Reversals Long
Bottom of Last Bull BO - Buy at and Just Above. As long as the premise is still valid Bulls will continue to Buy on Reversals Long
Do Tight Stops Cause Scalpers to win more often or lose more often?
Tight Stops cause Scalpers to Lose more often. This is a horrible Strategy
Does a Swing Trader using use a Tight Stop or a Wide Stop?
Swing Traders often use a Wide Stop
Some Skilled Scalpers use Swing Stops (Wide Stops)
Some Skilled Scalpers use Swing Stops (Wide Stops)
The bottom of the BO is usually a magnet and that is why it is best to put the stop at the bottom of the trend. Even though a Stop below the BO is still valid odds are higher that due to it being a Test magnet.
The bottom of the BO is usually a magnet and that is why it is best to put the stop at the bottom of the trend. Even though a Stop below the BO is still valid odds are higher that due to it being a Test magnet.
Scalp - Exit or Scale In…
Scalp - Exit or Scale In…
