The general principle with stops is:” either wide or tight“. Anything in the middle gets stopped out. That is why all typical stop methodologies are sub par (chandelier, parabolic sar, swing stops, support/resistance, asf). Counter intuitive stops, the ones that make one feel uncomfortable, typically are better stop methodologies. The problem however is that stops are very hard to implement and execute. This is especially true for longer time frame trades. Where to place stop orders?
Our quad exit tries to solve this problem. One gets a reward through financing a trade (taking 50% of the position off after initial profits). This allows for a mental relaxed state since now risk is eliminated. One plays with the markets money from now on. This allows for easier stop placement and execution. You will feel much more comfortable to allow for wider stops (necessary for trade development and taking advantage of possible longer term trends).
Where to place stop orders, daily chart, silver/US-Dollar 01/22/2020, “stopped out”:
Silver in US Dollar, daily chart as of January 22nd 2020
On the 13th of January we posted in our telegram channel an entry for a long position on Silver. As indicated in our last chart book the aim was to establish a larger time frame long term play, but keeping risk at bay in an expected volatile sideways zone. We were able to take profits the following day to eliminate risk. Counter signals warranted for more partial profit taking on the 20th of January. At this point the stop order was positioned to break even entry levels and shortly after the last part of exposed money got stopped out. This is an example of how an attempt to establish a large time frame positions fails, but failure representing that solid profits are being booked. This allows for further attempts to get positioned while your psychology will support you in these attempts.
Gold/US-Dollar 01/22/2020, daily chart, “gold still in play due to wide stops”:
Gold in US Dollar, daily chart as of January 22nd 2020
The gold position entered at almost the same time shows a similar development with one difference. The final part of the position due to a slightly more bullish tone in the gold market has not been stopped out yet. It might just provide for this opportunity that in addition to shorter term profits the last 25% of exposed capital being attributed to a possibly larger time frame trend with a long term profit horizon.
Where to place stop orders
When observing masters at work, no matter in what field/profession, the observer is always intimidated with what ease the highly skilled is performing his or her craft. Trading is no different. When stop placement feels cumbersome, it simply means there is rules missing that allow for ease of execution. Mastery in essence is nothing else but having overcome the principle of: “the devil is in the details”. Meaning there is more work to be done if there is a lack of ease. Ease stems from having worked out all the kinks. If there is friction, something is just not right. In trading this means there are typically rules missing. Stop placement is not excluded from these principles.
It is this implementation of the quad exit strategy on the daily time frame that allows for longer term positions to be built, to take advantage of monthly and annually time frame trades and trends.
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