July 31, 2009 at 7:52 am | | Comments 3

Stop Loss Placement, Part 2

As we dive deeper into this series on stop loss placement, I want to be sure you caught Part 1 because it helps lay the groundwork for this ongoing discussion.

I’ll be posting segments of this series one segment at a time, both for convenience and better consumption on your part.  I want you to have a thorough grasp of how this can all work.  After all, it’s a topic every trader faces, regardless of risk tolerance or timeframe or style or the market we’re trading.

Let’s keep it moving…

The Importance of the Chart

Just as we discussed the value of timeframe & personality in Part 1, here in Part 2 we’re going to talk about the importance of the chart.

Given that my entries are determined by the chart, it’s logical and consistent to allow the chart to offer an exit.  That might be based on an important reversal, or simply a failure of the pattern being traded if I need to stop out of the trade.

In each case, I’ll show you in the clip below exactly what I’m talking about, along with an explanation of why this works for me.

The beauty of basing entries and exits on the chart is that it’s consistent across multiple timeframes. The same principles will apply on an intraday 3-minute chart as they will on a daily chart.  That means once you gain an understanding of it, you can use it for both day trades & swing trades.

Watch this clip and let me explain more thoroughly. It was also posted over at the Trading Videos site, but I’ve embedded it here for your convenience.

And if you have questions pertaining to stops, add them to the comments section or contact me directly and I’ll try to work those into the next few segments.

Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.

Update:  Check out Part 1, Part 3 and Part 4 of this series!

Thanks for stopping by and I’ll see you here soon with more. Until then…

Trade Like a Bandit!

Jeff White

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