Logical Stop Placement
November 15, 2006 by Trader Rich
Since I have deemed this week, "Money Management Week", I felt like I should mention a new Investopedia article titled, "A Logical Method of Stop Placement." I'm not overly impressed by the article but you might find it more useful than I did. The author gives a brief overview of 5 different types of stop methods:
- Hard stop - placing a stop a predefined number of pips away from the entry price
- ATR % stop - stop calculated by taking a percentage of the current ATR
- Multiple day high/low - placing stops at predetermined day's low or high
- Closes above/below price levels - placing stops above or below specific price levels (ie: double zeros)
- Indicator stop - stopping out a position based on the value of a certain indicator (RSI, ROC, CCI, etc)
You can read the article in its entirety.
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