The Stop Order - the true art of trading?

[TRADERCJ]

As I was trading today, placing stop orders and watching my stocks repeatedly hit my stop, then turn and tear off in the other direction. I realized, the stop order is important, but where you place is even more important. I have been placing stop orders usually $.25 to $.50 below my entry. Where does everyone else put their stops at? Do you place it below support, no matter how far away it is from your entry, a percentage of your profit you wish to have, todays low or ???????

 

[dac8555]

very good post and question.

to me this is vital. I recently swicthed platforms becuse of the lack of GTC Market stop orders. here is how i use them.

1. I do my traditional daily screens (i swing trade... not intra day, but i imagine the prinical is similar).

2. Look for your 3:1 reward to risk in regard to technical set ups (support, resistence trend lines, channels etc). make sure you have 3x the the potential reward to potential risk. if you dont, dont enter the trade.

3. I set a stop slightly outside the support for a touch of "wiggle room" becuse tech analysis is not an exact science. if support is at $59...i would set a stop around 58.75...maybe more depending on liquidity. dont set stops in logal places (like on 56.00,57.50, 58.00..becuse pros will try to hit those levels to fish you out.

4. I reset stops at the end of every day to new sopport levels if one exists.

 

[djxput]

Quote from Bearbelly:

The trick, my friend, is to get better entries. Who the hell knows where to place a stop. There are a thousand different ideas on the subject, but, if you are getting stopped out all the time your entries SUCK!

That's funny Bear ... and true