Frequently Asked Questions

Market Lab Report
Stop placement

Q: I have read your book and I am unclear on the appropriate location of stops. Do you use a fixed percentage stop, or do you place stops by the chart pattern? It would seem reasonable to use the previous days low of the pocket pivot move.


A: We place stops based on the chart pattern. That said, if the pattern is too volatile, we may not place the trade at all as we prefer to keep stop losses to 10% maximum, and generally under 6%. And yes, if the stock closes under a major moving average such as the 10dma, we often use the low of that day as a stop. How you want to handle it is up to you based on your own stop-loss risk preference.

Published: Oct 3 2010