If you feel your skill set falls into the beginner level of trading the Hershey Method (as discussed throughout Journal One) then set your initial stop at 5% below entry. As the position moves further along into profit, tighten up the stops over time.
Eventually, a trader wants to arrive at a place where stops trigger only in a catastrophic event. In other words, the trader enters and exits based on the input parameters available, and not as a result of a 'triggered' stop.
Correct.
As you continue along with your reading, you'll eventually arrive at the 'Stop Offset' discussion. This presents a far superior method for calculating stop points. Newer Versions of the Hershey Chartscripts (Version 4.0 and newer versions still under development) automatically calculate the stop levels for you.
Market orders provide an immediate entry into the marketplace, but may do so at a cost (slippage), and often, not at the best price (especially when spreads are wide). A limit order allows for an order fill at a certain price level, but also at a cost. If the market moves away from your price, you may not ever receive a fill. Jack recommends always using market orders to make sure the trader receives a fill. I have often used limit orders to 'limit' the slippage only to watch the market move away without me. From my own experience, it seems silly afterward to miss out on a two dollar price move, because I concerned myself over 3 cents.
As always, your mileage may vary.
- Spydertrader
