Free Info – The Traders Secret Art of Setting Stop Losses – Guaranteed To Boost Profits

Futures Trading Systems HeaderFutures Trading Systems Spacer

Futures Trading Systems

The Traders Secret Art of Setting Stop Losses – Guaranteed To Boost Profits



Free eBook

Free Articles


Free Offer

Futures Trading Systems SpacerWhen traders first begin considering their stop losses, keep in mind this comment from Tom Baldwin, a leading day-trader. He said, “The best traders have no ego.”

Successful traders are faced with losses constantly, and they swallow their pride and get out of the position when they have to. This allows traders to survive in the market long enough to be successful. Traders set their stop losses, and then stick to the plan.

How do traders go about setting stop losses? There are several different ways. Traders could base a stop loss on a percentage retracement, where the allowed share prices retrace a certain percentage of the entry price before the exit. Different indicators can be used to identify where the stop loss is going to be set. Traders could also use support and resistance stops to set the level at which exit is made. The key is to simply have a stop loss in place.

Personally, I find these options too subjective. I prefer having a mechanical way to calculate my stop losses, so I use a volatility based stop. The reason I use this type of stop is because volatility generally represents a measurement of how quickly the stock either rises or falls (market noise). Consequently, if I measure the stocks volatility, and take a multiple of that value, I’m probably going to have set my stop loss beyond the immediate noise of the market. This ensures I am not stopped out of a position too often.

Traders can measure volatility by using the Average True Range (ATR) of a stock. This value can be found with most charting packages. Basically, the Average True Range (ATR) indicates how much a stock will move on average over a certain period. For example, if traders had a one dollar stock that moved up five cents on average over the last 20 days, that doesn’t tell traders whether the stock is moving up or down. It just tells traders on average how much the particular stock moves. The average true range is a great tool and that can be utilized in the traders trading plan for more than setting stops. If traders are not familiar with setting stops, I recommend traders to do research. One place for excellent article sources is at the System Trading Blog .

Traders use indicators in calculating the stop loss by subtracting a multiple of the Average True Range (ATR) from the entry price. For instance, I could take two times the ATR and subtract it from my entry price. If we look at the example, I just touched on, with a one dollar stock, an ATR value of five cents and a multiple of two the amount is ten cents. Which, subtracted from our entry price of one dollar gives a stop loss value of 90 cents.

Before traders even enter a position, they should know where the selling point of the stock should be. If the share price doesn’t move in the traders favoured direction, but moves against them, traders will know when to sell. Emotions are removed from the equation, and they simply follow what the stop loss dictates.

This is how most successful traders limit their losses. They know when they’re going to sell before they begin trading. Although their methods of calculating this stop loss may vary, all traders have a stop loss in place. The stop loss is a crucial part of the traders trading system. Without it, even the best designed trading system can’t deliver profits.
About the Author

Discover the “secret formula” of trading that anyone can use to consistently generate BIG profits.


Futures Trading Systems

Day Trading Success-The Key is Survival
A lot of traders, especially new traders, are looking for a list of simple trading rules to follow. “Rules-based trading” is better than an undisciplined approach, that’s for sure. But simple mechanical rules have not worked for me. Like every…

Simple Techniques for Mastering The Best Trading Systems That Turns Big Profits
Once you`ve developed the best trading systems that accuratelyreflects your goals, and can respond to any market situationwith clear actions, you are ready to take the next step in yourtrading. These are some principals and techniques that I…

Are Past Losses Keeping You From Being A Winner?
Trading losses are no fun. In fact, they hurt when we react emotionally which most of us do. If you have traded at all, you undoubtedly know exactly what I am talking about. You have suffered a loss, possibly a big loss, possibly a string of losses….

Forex Trade: Main Drawbacks of a Forex Trader
Why is it that very few traders succeed in the Forex tradingenvironment while the grand majority of traders fail to achievesuccess? Although there is no hard answer to this question,there are a few things that will put you one step ahead and…

Forex Training: Deadly Forex Mistakes That Assure Failure
Before venturing into your trading journey there are some thingsyou need to be aware of, otherwise you could succeed on yourtrading adventure, and we don’t want that to happen, do we? ThisForex training guide will help you track the most…





SitemapLink to Us

© 2005 by The Smart People Company for Futures Trading Systems

‘3’) {data=data+’&cd=’+screen.colorDepth+’&rs=’+escape(screen.width+ ‘ x ‘+screen.height)+’&tz=’+ntz.getTimezoneOffset()+’&je=’+ navigator.javaEnabled()};i=new Image();i.src=nhp+’://’+’?v=1&s=26&acct=freetradinginfo’+data+’&tks=’+d.getTime(); //]]]]>]]>

Leave a Reply