RE: Stop Loss Positioning Guide
(2019-01-05, 10:08 PM)Red Barron Wrote: A stock is in Stage 2. i'm using the investor's technique. The 30WMA starts to decrease its slope, which is my cue to move the sell stop up to just under the the next dip, regardless if that is above or below the 30WMA. Do you wait to place the stop until the price after the dip almost reaches the previous peak before the dip, or do you place the stop sooner than that?
If the 30 week MA is losing momentum, then the chances of Stage 3 are increasing, and you may find that the stock doesn't reach the previous high again. So normally you'd get more aggressive at this point and move your stop up once there was a clear swing low in place, or if the stock had made a swing low, and moved higher, but was starting to shows signs of serious weakness.
I find dropping down the timeframes is best at this point, as you can use Stage Analysis across all timeframes, so personally I like to use the daily and 2 hour charts in conjunction with the weekly charts to assist with timing once you believe it to be possibly topping, as if it's breaking down into Stage 4 on the 2 hour chart, and then into Stage 4 on the daily chart too. Then there's good reason to be tightening stop losses, taking partial profits, or getting out altogether.
(2019-01-05, 11:26 PM)Red Barron Wrote: I'm using investor strategy. A stock breaks out into S2.Â
Should the first dip be minimum of 7% before moving stop up?Â
You shouldn't use set percentages, as every stock has it's own normal range of movement. I find the best tool for this is the Average True Range (ATR), as once you know a stocks daily and weekly average true range, it can guide you as to what is a normal or abnormal move in the stock.
(2019-01-05, 11:26 PM)Red Barron Wrote: After the stock has been in S2 for a good while, what is the minimum percentage drop for a dip required to move the stop up? And, does that % change after the 30WMA's slope first begins to depreciate/flatten?
Again, the ATR is the best guide for this. But using the investor method and weekly chart it is normally very clear on a chart, as it will have pulled back for many weeks or even months, and hence be a significant pullback, and then moved higher again. Remember, you are not supposed to raise the stop loss until the stock has neared the previous high with the investor method. As previously, I find dropping down the timeframes useful for determining a significant pullback, as the stock will normally go through the major Stages on the lower timeframes, such as the 2 hour chart, and then be showing signs of Stage 2 once more.
isatrader
Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill - Reminiscences of a Stock Operator.
Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill - Reminiscences of a Stock Operator.