January 4, 2008
Arbitrary But Consistent (ABC) Stop Management (Part III)
Here’s the third installment explaining the Arbitrary But Consistent (ABC) Stop Management method. The IWO short fell again yesterday, practically reaching the 4x initial risk level and formed another “down” bar on the daily. I suggest moving the stop to above the high of this down bar at 83.03.
Assuming you risked $500 on this trade, you’d now be sitting on about $1720 of paper gains, and would have locked in around $1160 of that gain using this new stop level. There is no such thing as “strategic” stop placement, there are just better and worse guesses about how price will behave. One person’s idea of “where they ought to be” is often no more valid than the next person’s idea. The best we can do is take trades where our initial risk is small in relation to our expected gain.
January 5th, 2008 at 2:46 am
Nice work there hotshot. I agree risk/reward is the fastball to focus on and stop placement is essentially guesswork.
March 7th, 2008 at 11:18 am
For the bar with a high of 83.03, it has
1) a higher high
2) a higher low
than the previous bar.
It sounds more like a “up” bar.
March 7th, 2008 at 11:53 am
meh: I think the intraday chart is confusing you. Refer to the *daily* chart to understand the high/low relationships.