Trading stocks education - Trading tactics & examples
Trading Triggers - Part 2
Not every major pivot point is marked by a reversal
bar. Continuation set-ups can still get you in a trade
relatively close to the pivot point. Continuation bars
are easily identified on a bar or candlestick chart. They
always start with either an inside bar or an outside bar.
Inside Bar - Today's high and low do not exceed
yesterday's high and low.
Outside Bar - Today's high and low both exceed
yesterday's high and low.
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Losses are part and parcel of trading. Successful traders learn to manage their losses, or shortly find something else to occupy their time.
Trade entries are relatively easy. You have an objective set of criteria and when those conditions are met you enter the trade. Stop losses are more difficult because now you are in the trade. The cool hand that pulled the trigger to enter is now firmly wedged between the rock of fear and the hard place of greed.
Just a few ideas for objective stop loss points. There are many more.
Pattern stops occur when price moves to an extreme that negates the working Elliott Wave scenario. For example, a Wave 2 entry is stopped out if prices violate the pivot price that initiated the swing (Wave Zero). All the pattern stops that we use are set out in the Trading Signals section.
Robert Miner, a successful trader and teacher, posits that three, two and one day bar extremes are logical stops. For example, for a long trade that is in the early stages of a Wave 3, the lowest low of the most recent three daily bars (including today) is an objective stop loss point. As Wave 3 progresses into its later stages the stop is moved to two bars or even to one bar. Miner does not count inside bars when computing the extremes.
Another method presented by Williams that ties into Miner's one day stop is the Zone Stop. When price bars have run for five consecutive bars in the same zone (shown as five consecutive red or green bars) place a one day stop and move it every day until it gets hit.
The important concept is to let the market, not your emotions, take you out of the trade - with a profit if the trade works out for you, and with a manageable loss if it does not. You don't know what the market is going to do next. Don't anticipate. You'll experience a lot less stress and probably make more money too.
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