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$Bill's swing trading stop setting - low of the day - examples

From: user 8.
Sent on: Tuesday, October 13, 2009 2:13 AM
Hi Fairfax traders:
Great meetup tonight (Monday nite).  While I am working on Tuesday's homework to find some nice
setups for my new swing trading strategy, I thought I would give you a couple of examples
of my stop setting using "the low of day on the entry day" and "the low of the previous day" for
subsequent days.  When the stock breaks the low of the previous day, I get out stopped-out.  Usually, in a trend,
the stocks that I trade will run in the trend direction 2 to 5 days, or more. 
I do not make my stop loss orders effective until 10 AM (the earliest I can make them automatically trigger after 9:30 with the trading platform I now use), allowing the stock to move around a bit during the first half hour of the day.  I also watch the stock during this time if I need to take control of the trade immediately. More on this below.
My entry and exits are determined on the daily chart each evening during my homework.
Look at IBM for a trade entry on 10/5.  On 10/2, IBM pivoted bullish bouncing off the 50 ema. That evening I set an alert at the 10 ema,[masked], above and as close to which I would enter a bullish trade on IBM, buying IBM calls on 10/5.
The next trading day, 10/5, IBM initially dropped and put in a low of[masked] (which would ultimately be the low of the day) and then a trade entry setup pattern occurred on the 5-minute chart @11:01 am as IBM broke out above 119.57. 
I entered IBM bullish (buying call options) at IBM =[masked] on 10/5.  I set my initial contingency stop order at the (current) low of the day, which was 118.13.  IBM never went lower than[masked] on 10/5 after I entered the trade.  But look at where it is now = 127.04.  Throughout the current run, IBM never broke its low of the previous day.  As of 10/12, this IBM trade is up over 7 points.
On 10/5, I also entered trades on AAPL and FCX. Take a look - similar entry and stop strategy.
Note on my FCX trade, at the close of 10/5 (entry day), I was underwater, but not stopped out, so I remained in the trade.
Those trades are typical of what my swing trading strategy looks like.
There are several additional trading rules for managing these trades.  For example, if it gaps up significantly at the open when I have accumulated several previous days' profits to protect - I would set the new stop at the opening price, rather than the previous day's low.  And I would be stopped out (with profits) and my profit protected if it tried to fill the opening gap.
OR, if the stock gaps down at the open, below my stop, I would allow the stock to retrace up (if possible), as it (presumably) tried to fill that gap, and sell the position there, into strength.  If not into strength, then watching the technical patterns for a convenient (albeit painful) alternate exit.
There are a few more rules, but I think you have the idea.
I am not after 100% of the move in a stock.  I am after a significant portion of the middle of the move.  I enter a trade after the move starts and exit after the move ends, not trying to capture the entire move.  This systematic approach minimizes emotional stress, while capturing a significant portion of the momentum run of the stock.


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