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PLACING PROTECTIVE STOPS
According to every broker-dealer I have met, most traders do not
place protective stops
on their trades. They trade like gamblers trying to swing trade,
with hopes that a trade
gone bad will eventually come home for a profit. I have seen
traders stay in a trade for
days, creating stress while the trade is in the negative, until
it comes back into profit and
the trader exits proudly with two or three pips of profit. In my
opinion, this is not good
trading sense.
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TRAILING STOPS
A trailing stop offers a bit of protection to traders once the
trade is showing profits; however,
I have often found that when the market is really ready for a
large move, the trailing
stop is often taken out too early. In my opinion, the only
acceptable way of chasing the
market is the old-fashioned way: hands on. This hands-on
approach is done by changing
the stops to a position just below a newly formed support if the
market is moving
upward, and just above a newly formed resistance if the
combination is bearish.
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