Stops…Damned If You Do, Destroyed If You Don't!

By: Leslie Burton

Trading in commodity futures can be a very challenging plight and the risk plan may mean the difference between a long-term trading life and a short-term trading life. Of course, there are traders that simply do not believe in stops and swear that the other brokers and/or traders are gunning for their stops.

First off, a stop may be a protective stop to offset a long or short position to limit the losses if the market moves against you. You may also use a stop to enter a market as channel breakout traders may want to buy and go long if a market breaks through support or sell a market if the market breaks through support. Buy stops are placed above the current market price and Sell stops are placed below the current market price. A stop order turns into a market order when your price is elected. In a liquid market, it may be at or close to your price. If you are in an illiquid market, the stop may be elected, but your fill price may be further away from your price depending on the market activity. A “static stop” remains fixed on a position until executed. A trader must remember, if offsetting the trade manually, to cancel the stop. A “trailing stop” may be used to lock in and protect profits as well. It may be set to follow your position by a certain number of points or ticks to move the stop up or down with the market. This may be done manually or by a bracket automatically. There may be conditions such as a limit moves whereby the market may be moving too fast and may pass through your stop price without triggering in creating more of a potential loss than anticipated. The term "limit up" and /or "limit down" is the amount of points, ticks or cents that a market may move within one session. The Daily Limits are set by the exchange to control the volatility until the market returns to a more stable state. Continue reading "Stops…Damned If You Do, Destroyed If You Don't!"

Trade with a Plan – Using a Stop Loss

If you follow our blog, then you are definitely familiar with trader Larry Levin, President of Trading Advantage LLC. We have gotten such a great response from some of his past posts that he has agreed to share one more of his favorite trading tips as a special treat to our viewers. Determining the direction of the market can be tricky and just plain confusing at times, but Larry’s expert opinion keeps it simple and straight-to-the-point.

If you like this article, Larry’s also agreed to give you free access to his Double Stop trading technique.

Today he’s going to talk about how to include stop orders in your trading plan.

In my opinion, every trade you consider should be laid out ahead of time with a roadmap. A complete map should have an “off ramp” or a place where it makes sense to enter the market. It should also have exits for your destination (profits) as well as off ramps for emergency exits. This part of your plan will likely include stop orders. Continue reading "Trade with a Plan – Using a Stop Loss"