Funky day

Today it is raining, actually it is supposed to rain all week so this is likely to be a funky week.

I have one position that is really in the doghouse. I bought the December option for 80 cents and it is around 25 cents today. I only have two contracts so it is not a huge problem, but that is how I am sizing these trades, I can lose the entire trade and it represents a small portion of my account. This one is about 4% if I let it expire worthless, but that is not the plan as I will close the trade with some value left unless a last minute rally looks promising. I don't hold much faith in last moment rallies though.

It is worth noting that I bought the option when the stock was in the $18.50 range and it is now at $17.10ish. That is a $1.40 per share drop had I just bought the stock and I would likely have used something just south of $17 as a stop loss so, if it continues to head south I would expect $1.60 or more as a loss. In this $1.40 drop the option has lost only 60 cents AND i have no need for a stop order that may or may not do what I want when I want...and I certainly don't have to keep checking at the open to see if I need to adjust my stop.

I have a few other positions that are in far better shape, but I will not close them yet. Most of the trades are at technical lows for their respective current trend, touching on support. I could have waited for the stock prices to approach these support areas before getting in but I was not doing technical studies for these. I will be starting that back up soon to help determine good exit points and stop loss on some of these trades. As much as I can let the whole trade hit zero, I would rather not if it is plainly obvious that the stock is more likely to depreciate than not.

My exit stops would be in the 50% of the trade mark depending upon the circumstances.

There is not much to talk about with these trades. Even though there are 15 active trades and two active orders I have done very little chart work other than a cursory glance. This makes for rather uninformative posts.

I have some waiting to do while the market sorts itself out and decides which direction it is likely to head next.

Jeff.

Stop Orders and Options

I have placed a few stop orders in the past for some of my option positions but I have just placed limit orders more often in order to catch a particular profit level. As a result I was never totally sure of how the stop orders were executed.

I watched an order that I placed today on a position that I was looking to get out of. Maximizing profits was not my goal so I set a stop order. The spread was 30 cents and the bids ranged from $4.50 to $4.70 near the start of the day.

I noticed that, unlike a stop on a stock position, the stop was not triggered when the bid price hit the stop price. Stock stop orders get executed as market orders as soon as the bid hits the stop.

My stop was set for $4.50 and I moved it up to $4.60 as the bid moved up. I was trying to get hit but wanted to see how the execution occurred as the price moved so I kept my stop at the bid.

I eventually got hit and the position closed at $4.30. Seeing as the spread was 30 cents and upon checking the bid at the time of the order execution, it was $4.30.

So, as I suspected, the stop orders get executed when the ask hits the stop, not when the bid hits.

This certainly makes difference in how I will choose to place stops in the future as losing the spread all the time is not really what I have in mind.

For the record, VTSOs do not work, which makes sense as the trailing stop is set by the last trade price and options may not trade all day while the prices fluctuate wildly. I think that the VTSO could be easily tied to the bid or ask but that would take the broker changing their platform to accommodate this. I suspect that the market (NYSE, AMEX etc) will not support a VTSO directly and Questrade does not handle orders as they are strictly a direct access discount broker. The most they do is to hold GTC orders over.

Jeff.

Stop loss, VTSO and the US market.

Well, I did some playing today in the NYSE after some morning trading in the TSX.

Stop Loss Orders.

I can place the much desired stop loss order with a market execution...I have a position right now in DZZ which Deutsche Bank Gold Double Short ETN...as close to equivalent to HGD as I found easily. I have a stop loss placed so I can walk away and feel reasonably comfortable leaving it. I was not really analyzing this one for a good entry, just a decent entry to try out the stops with a 50/50 chance of being right. Limit order to get in, stop loss to hold my losses to $10. The rising 200sma is above my stop so if the price drops past that point I want out anyway.

Virtual Trailing Stop Orders (VTSO)

Seeing as the stop loss issue was a TSX restriction I figured I would also try this out as a VTSO is basically a trailing stop loss executed as a market order once triggered...and market orders are not allowed so....

VTSO works just fine. I have not had one executed yet but I am pretty much going to plan on switching over completely to NYSE issues now. I only have to deal with the dollar conversion for my trading allowance. At least I know that I can hold USD in all of my accounts.

I need to do some research to select the proper stocks and ETFs...and ETNs I guess.

The easy ones would be AEM.TO, YRI.TO and ABX.TO as they have US equivalents, AEM, AUY and ABX respectively. Major banks are all traded on both as well so financial issues are fine as well.

More on this later I am sure.

Stop Loss Orders... not in Canada Eh? Pity.

Well, unlike the tea that is only available in Canada stop loss orders are not.

I thought I had everything nailed down and here comes a rather large issue that I had not expected. I have talked to people over the last year and change and the topic of stop loss orders had been talked about but I guess nobody knew that they didn't exist...go figure.

With Questrade I was told to set a stop order that I had to enter a limit price at the same price as the stop price...without clarification. I have used them often and had very good success doing so, stops were hit and positions closed very close to my stop price, sometimes higher (or lower for short positions).

I had noticed the odd stop that was triggered and was subsequently cancelled by he ECN, infrequent enough that I was not overly concerned about it. Not a major concern.

Lately I have had a number of stops not get triggered. I happened to be watching one as the price headed down past my stop and I ended up cancelling the order, which I should not have been able to do once the price triggered the stop, and just exiting manually. I chalked it up to a glitch. So it happened again and I decided to hold it and see exactly what would happen as I really didn't expect the price to keep going down...the order was not triggered until the price came back up to the stop price... basically it became a limit sell order as the price passed it on the way down and sold once the price met it on the way back up.

So, ever the curious one I contacted Questrade and asked about these orders, was told that what I was doing was right and they explained that they are a limit order...but I didn't want a stop limit order. "Oh, just hit the market order box". Trading was done for the day, (Thursday), so I tried it yesterday.

Market stop order does not work. Yesterday I got a CSR that knew what to look for... He recognized that I was trading on the TSX... The TSX does not support stop market orders.

HUH?

That was basically what I said...although I was online chatting so it didn't come across that way.

Apparently it is a Canadian trading rule and has nothing to do with my broker. I emailed the TSX bunch and got the same answer.

So, I cannot rely on a stop to work the way I thought they were. I will still use them but need to set alerts to tell me when a price is getting close to my stop so I can manage the trade closer, that was not my goal as I wanted to be able to walk away from a trade once it got to a certain point with the knowledge that once the price I set was breached, no matter what, I would be out of the trade.

Today I spent a few minutes checking out other avenues of trading to allow for stops. The main one is to trade NYSE issues instead, perhaps emini futures or forex. If I was trading full time I would not be as concerned about this but I do not want to have to babysit trades once I get into trading longer term timeframes. I can easily just trade NYSE issues that are TSX counterparts, stocks traded on both exchanges, as they track each other easily and are represented on the indices that I am familiar with but I think the best bet is to end up trading US exchanges exclusively.

Most of my trading right now is in my RRSP account so there are no US tax implications, just exchange rates for currency most likely. The TFSA is not so lucky but at least there are no CDN tax issues there.

What to do.

Back to the regular stuff for now I guess. My alert volume is turned up a bit higher now.

Jeff.

VTSO and stop order executions

The Stop Order

(In order to keep some of these older posts current I will comment on the VTSO and stop loss orders here. I have found out that the stop loss and VTSO are no longer available on the TSX market, this has nothing to do with the broker as the exchange just does not support these orders. I had, in the past, placed and had VTSOs work fine so I am not sure at what point this changed.)

(from a previous post)

A Stop order is an order to sell a stock when its' price hits a preset price to lock in a profit (profit protection) or to limit a loss (stop loss) when the price drops. The reverse is true for a short position.

Once the order is triggered it becomes a market order which is an order to sell the stock at whatever price it will go for. The only problem with this is that it COULD sell for less than anticipated due to market conditions...I have had it happen once or twice when the difference was more than just a few cents. There are other concerns but they are less of a concern than not setting a stop at all.

While this is true, generally, I will clarify a few things.

Quotes vs price for market orders.

The price a stock has traded at is history as soon as the trade is made. This means that the price you just saw on the chart may not be the price you will trade at. The quotes, on the other hand, indicate what traders are willing to pay (bid), or accept (ask), for the number of shares indicated.


This is the uncertain future.


Any automatic stop order uses the quotes to determine when the order gets triggered, not the price. So a stop order to close a long position set at $34.00 will trigger and become a market order when the bid hits $34.00 or less. The last traded price could still be well above the $34.00 mark but the market order will likely execute at $34.00 or perhaps less.



This is what the stop order does, it goes by the quotes not by the last traded price.


Virtual Trailing Stop Order (VTSO)


This can be a handy device if used properly. I have tried a number of methods to employ the VTSO and really have found none to be very good mainly due to me having a very tight loss stop in mind. Basically, I was not really using then properly even though they worked reasonably well and I was able to make some decent profits with them. I'll mention the profitable uses later.


In the VTSO you set the price difference you are looking for when you place the order and it adjusts the stop based on the last traded price. Other than this ratcheting of the order price it is the same as a stop order.


For example, you are in a long position and the price is at $34.00 and you determine that you want to sell if the price drops 50 cents. In Questrade's Questrader Pro you select the VTSO box and enter 0.50, it will set the stop at $33.50 immediately and you will see the order in the account box to sell at $33.50. The first time I did this I had to call to verify that is how it worked as I did not want to accidentally sell my position for 50 cents, that would have been a real bummer to find out the hard way.

Interestingly the stop order does not appear with the correct price until a trade has occured.


Now when the price moves up to $34.50 the stop price automatically ratchets up to $34.00 and will not go back down. This continues as long as the bids never drop to 50 cents below the highest price since the order was placed.


Keep in mind that the stop is set by the price but triggered by the bids. This can be a problem at the opening of the market, especially now with the volatility that we are seeing. The bids can be way off of the actual first trade price. Today on a stock that is around $50 I saw the bids over $2 higher than the actual open price...it can be lower just as easily and if the market opens and that low bid stands for the first second you will become the first trade of the day as the VTSO is hit, passed and executed at the fastest possible price.

I have had stops and VTSO's in place overnight and had to either cancel or change them to allow for a huge gap between the price and the quotes for fear of having my position closed prematurely.

It is worth noting that pros in the market, big players, will intentionally drive the price down to a point where most safe traders might have placed stops in order to have those stops executed. This is actually a strategy to "clean out the stops" and garners a better price for them from the flood of market orders that get executed as a result. When this is obvious it makes a very good point for a daytrader to jump in with a long position trade to catch the resulting rebound of the price.

There are good technical stop positions that are sort of "traditional" to watch for. I have learned to place a stop then adjust it a bit farther out from where I first considered it as my stops often get nailed to the penny and I miss out on further gains.

For the record, this is partly why I have migrated to daytrading as there is no stop order in place, or at least not one that is likely lto get hit unless I want out of the trade at that price. I should be placing a worst case stop for each trade opened just in case my connection fails but I am lazy as it takes and extra step and I would rather watch the price move along and exit quickly than have another step between me and a clean exit, even though it can only be one click to cancel.

The profitable applications of the VTSO for me were the longer day trades. I have not used them recently though. What I did was forecast a move of a stock price early in the day, place the order to buy then place the VTSO at a certain distance from the price. If my stop was hit then I was wrong and wanted out anyway, if the price moved up then my stop moved along with it. I might use a 20 to 50 cent VTSO for these. I would set these and shut down my platform and go for lunch or do what ever I might do in the afternoon. then check them at the end of the day. Depending on my confidence I might let them go overnight. I got lucky doing that once with a $6 gap up in price the next moring...I actually thought that there was a problem and could not figure out why my account balance jumped so high. As soon as I did I dumped the stock as it should not have been so high, I was right. That was when I realised how easily I could have been on the wrong side of the gap and lost as much as I gained, at least on paper, until I sold.

I now consider these to catch some of the afternoon runs that take hours to resolve,
I have yet to try them again though. One of my primary tenents is to remove emotion from the trade, that was the main reason I used the VTSO, that and time management.


Final Comment:

I don't recall if this option is available in the basic browser platfomr or the Webtrader, it may not be. I do know that they will not allow limit or VTSO's in anything other than even lots of 100 shares...it's been a while but limit orders might also not be allowed for odd lots either. In any case this is something that you should check with your broker about as some even charge different commissions based on the order type.

I will be considering stepping up to the Questrader Elite in February as it gives some more automation and alerts that might be nice to have as well as for different methods of entering trades right form the quotes.

Jeff.

Various stops

I ran across an interesting idea while surfing the net this evening.

I like using stops, mental stops now, manual trailing stops a while ago, and I used virtual trailing stops (VTSO) extensively early on. So far, while they all have their place in trading, I like the mental stops the best...although they get me in trouble more frequently than I would prefer. So I need another tool to keep me on track as I don't want to have to place a hard stop order.

So I am now going to include a cute little idea that I should have come up with before.

Time stops.

I know that once a trade is entered there is a certain expectation of price movement within a certain timeline. This is one thing that I have been trying to pull out of my trading lessons lately. Today, for example, I had a number of trades that I should have pulled the plug on once I realized that they were not going anywhere quickly, or more appropriately, they didn't do what I expected when I expected.

I know I needed another indicator or trigger to help me get out of the game while the getting is not too bad, if not good.

Now, I think that closing the trade at a certain time is not always the most prudent method if the price has started moving as expected. If it has not but it has not gotten bad enough to cut according to loss allowance, technical indicator or it is just moving horizontally then when the dinger goes.... The thing about prices that keep not really moving is they tend to get less predictable. Waiting for the price to move as expected leads me to not see other setups that might tell me that the trade is going to reverse. Sometimes I catch these and reverse the trade, sometimes I at least get out before the plummet but not always. Time stopping would have solved these issues and made my decision for me.

So now to decide how long a time stop to use.

Jeff.

VTSO or mental stop order

I still have not gotten around to testing the viability of a VTSO in day trading yet. I feel that the volatility would have me out of trades too often but I like the idea of a safety in case I had to walk away from a trade.

I used VTSO's extensively when applying my CTP plan earlier in the year and found that they were too quirky. One steep day (this was medium term trading) and the VTSO is brought up too tight to the price and an exit was inevitable.

Alternately I can set a stop order as a safety, and just modify the order as needed to follow the price. I do this mentally and execute a market order to close the trade so using a stop will do the exact same thing and give me the security of knowing that I have an order in place should I have a glitch in my platform which makes exiting impossible, it has happened on occasion.

Normally I choose a price to exit based on the quotes, not the actual trading price, and often I will exit a trade immediately upon seeing a certain indication of a turn. This would mean having to cancel the order in place and placing a market order to close. I have had cancel requests take a long time, in the scale of DTing 10 seconds can seem like an eternity and can make the difference of giving up as much as 60 cents per share of gains. This means there is a chance that I cannot place a market order right at the moment that I want it... I will have to experiment and see if this is an issue of more concern than the possibility of getting stuck in a trade. Usually I see these points approaching so cancelling the order ahead of time should not be an issue in most cases...modifying the order might be quicker than cancelling it too.

Testing needs to be done.

Jeff

ATD/B - deconstructing the trade

Well, my ATD/B long trade did not go well and I compounded the problem by dinking around with the stop rather than really double checking the chart properly. The stock price hit my price and sold yesterday so this is not really hindsight as it is very recent and this stuff was already in place for me to see before yesterday. I thought that the price was going to rally any time now and I lowered my stop setting to try to stay in below the possible bottom, not in the plan so I got emotional, always a bad move.

This link to HF deconstruction is a post where I deconstructed my failed HF long trade. It outlines what I would have done for the short sell stop progression leading up to the long trade. Notice on that chart that I left the stop above the upper trend line longer than I have been based on the previous history as I noted "it bounced last time so I might expect it to bounce this time." So I might have expected ATD to do something similar based on the last twoTWT up. The HF study waas a hindsight one but again all the indicators were there.

The difference with ATD/B is that the price dropped below the last low point this time ...which still puts it above the lower trend line and indicates that the TWT is still heading down.
This is where the MACD could comes into play. The high momentum from this last TWT peak is lower than the peak from May 12th, the previous TWT high. Trading based on the MACD at this point would have me selling to get out of the trade if I was long and holding if I was short.
It is worth noting that the TWT downtrend that we just came off of has something else to say.

I plotted the initial TWT line (green) from May 12th to May 31st while I held a short position, then on June the 9th I ammended it steeper and adjusted my stops to follow the new line. Today I extended the original line and the current rally in price hit the old line...I should know that the first plotting is significant and kept an eye on it.

I keep saying how significant these lines are but I don't follow my own words and adjust to reduce losses or increase gains too soon and I do not get the results I aim for. So not only should I have expected the bounce and rally, I should have expected the peak of the rally and realized that the TWT down may not be completed yet. So when the price bounced off of the lower trend boundary on June 11th the plan could have been: (considering I had the same short position)

Short then Long trades

1) cover the short as I did

2) enter long as I did but perhaps earlier...I waited an extra day but I would likley still do the same again, that fits the plan

3) expect a possible peak at the original TWT down line and tighten the stop, not loosen it as I did once the price started down

4) stop out could have broke even or close

5) a) perhaps re-short on Friday's open, given the price activity I thought of it, I try not to trade on Fridays though so no go

b) hold and wait for the TWT resolution...next low bounce watching for the original TWT line to act as resistance this course of action will likely produce more trades and more opportunity for small gains...not really a great plan.

c) hold and wait for the TWT resolution...next time the price crosses above the old TWT line convincingly, buy. Best plan

My CTP strategy involves letting long positions run once a downtrend reverses. This is an example of letting the short position run being the better choice rather than looking for the target trade and had the HF example for stop setting been followed the result would have been:

The more ideal Short Trade, "the one that got away"?

1) Leave the stop above the upper trend boundary until it settles into a down trend (May 14th to June 1st)

2) Once the price crosses the 50 SMA it is pretty committed so the stop can track steeply until it hits the 50SMA line (June 5th)

3) A good built in stop line can be the 50 SMA line so I would track along that next, gives the price room to move (June 6th to date)

4) Once the price hits the lower boundary it is time to start tightening the stop closer to the price to maximize profits should the price bounce. (lower the stop to near the TWT line but not past) So according to my own plan, which I didn't really follow, I would not have been stopped out on the latest bounce from a short position and my original short would not have been stopped on the previous little bounce in late May. So not only would I be farther ahead in gains I would not have entered the long position that I did and would not have lost anything. Depending on how steep I followed the stop after the bounce would determine if I were still in the trade or stopped out for a profit.

The point is that either way, had I used my plan I would be much farther ahead in either circumstance. My plan is now to wait until the green TWT line is broken before considering re-entering a long position. I should note that it is worthwhile extending TWT trend lines until they intersect the boundary line that they are approaching as they can act as resistance...ATD/B a case in point.

Something to keep in mind is that a trend is more likely to continue than to reverse...this is definitely true of the larger trend but can also be applied to the Trend Within a Trend to a lesser degree in so far as it applies to setting the stops. Time to start paying more attention to my own ramblings. So, if you extend the lower trend boundary line and the green TWT line they go for some time before they intersect...the price very well could bounce along between the two for a while yet creating a good short position but not a high probability one. I am going to wait it out.

U did the same thing on the way up and I waited for the price to break down past the upward red TWT line before shorting it on the 11th.

I didn't have to but it beat watching the price perhaps bounce of the line one more time, and it is working well. My stop is still near the 50sma and will follow the 30 sma once it crosses the 50 on the way down. I think that following the moving averages and using the various intersections on the way down as targets for the stop may be the way to go...more research needed though.

JD

HF deconstruction

OK, so my HF position got sold on the stop today. I had been second guessing my trade on this one since Tuesday. The only thing I could have done at that point was to sell and get out and maybe break even but I chose to lower the stop instead. Down $0.60 per share with commissions.

In my post about Setting Stops I used HF as the example.

It convincingly broke the lower trend line on the way down today. I remember saying "...it looked good. Still does but ...", so as it turned out crawling along the line was not what the price had in mind.

Three quotes from my May 28th post that should have been red flagged by me...but I had already entered the trade and emotions got in the way of clear thinking and I didn't re-read it afterwards. Had I, I might have sold on the 30th or 2nd of June for a small profit.

#1) "I am entering this stock later than I would like"

So, if there is always another trade, as I always say, why did I feel the need to enter this trade at all. I could have...should have...kept looking.

#2) "The last six months is all I have made notes on as it is the most relevant and the most defined trend."

Nothing wrong with that...except if you tie it in with the last but not least by far of the quotes...

#3) "This does look like a very shallow downtrend over the last year."

I should have realized that the "most relevant and the most defined trend" was in fact a downtrend once I zoomed out to the one and two year charts. The moving averages should have clued me in as well.

So, late stage entry against the prevelant trend with no prior gains to back it up and a chance for a profit exit prior to the drop.

DUH!

Lesson

Don't let emotions get in the way. As much as I thought I was analyzing this one right I missed all the signs telling me I was wrong as I was hoping for a nice gain from what looked like a decent setup, as late as it was. Now for the most necessary part...

Would have, Should have, Could have...

Had I been watching this one using my CTP approach I would have short sold April 18th or 21st. Once past the mid May hump I could have followed the price down with a stop until the price drops below the moving averages:

I added two Simple Moving Average lines (SMAs), one at the 10 day average (red wiggler) and one at the 50 day average (blue wiggler). I assume a buy in say, at the $13 mark to make the math easy and to fudge against me a little.

I used the solid purple (pink?) for my stop guide as follows:

#1) Leave the stop above the upper trend boundary until it settles into a down trend, it bounced last time so I might expect it to bounce this time. I should already have some profits to allow me to be a little looser withthe stop as well.

#2) Once the price crosses the 50 SMA it is pretty committed so the stop can track along this steep line which more or less tracks the price down. The stopped profit at the end of #2 would be about $0.70 per share.

#3) A good built in stop line can be the 50 SMA line (blue) so I would track along that next, gives the price room to move. I might use a 30 or 20 SMA line depending on what the chart looks like. The stopped profit at the end of #3 would be about $1.00 per share.

#4) Once the price hits the lower boundary it is time to start tightening the stop closer to the price to maximize profits should the price bounce. I drew the line a little later but I meant it to reflect today's drop through the trend line.

From this point on I would move the stop by following one of the shorter period SMAs (10 or 20) or leave it looser by following the 30 or 50 lines. The shorter lines will be more likely to get hit if the prices jossles around a bit. At this point the profits are already locked in at $1 per share or more so there is some wiggle room.

It may do some bouncing at $10.60 or $10 but if it doesn't then there really isn't any particular bottom. Perhaps this will start a new steeper downtrend with some further CTP opportunities or just bounce back up and sort of continue the current trend...it's possible bu not a chance I was willing to take.

JD.

Setting stops

The Stop Order

A Stop order is an order to sell a stock when its' price hits a preset price to lock in a profit (profit protection) or to limit a loss (stop loss) when the price drops. The reverse is true for a short position.

Once the order is triggered it becomes a market order which is an order to sell the stock at whatever price it will go for. The only problem with this is that it COULD sell for less than anticipated due to market conditions...I have had it happen once or twice when the difference was more than just a few cents. There are other concerns but they are less of a concern than not setting a stop at all.

Picking the stop price

I am trying to pick a nice conservative stop setting rule for my trades that leaves enough room for the price to do it's thing, keeps me from losing my shirt if I am wrong, and lets me use the stop as an exit strategy farther into the trade.

Stay outside of the lower boundary line longer, the Stop Loss Order

The best I can come up with is to leave the stop outside of the trend boundary line (upper and lower blue lines on the chart below) by a certain margin until the price has moved far enough to justify moving it tighter or just higher. In my conservative approach I have moved them tight soon only to have to move them back again as the price moved back toward the trend line. I move the stop quickly to lessen the possible loss should the stock reverse, I need to rethink this action.

I should always consider that if I would be willing to lower the stop again to stay in the trade I should just leave it where it is until there is a large move in the right direction and a good Trend Within a Trend is established. The stop in this case is there to prevent a large loss should the price drop substantially.

Follow the new TWT line, staying in the game

Once the TWT has been plotted (green and red lines on the chart below) it now becomes my new low trend line boundary and I can work with that to get the stop Into The Money.

Tighten it up near the top, Profit Protection

As the price approaches the upper trend boundary line the stop can be tightened up to maximise the profit while still leaving some room for the price to break the trend up. Of course I can also choose to just sell the stock or set a different kind of stop (Virtual Trailing Stop Order VTSO) to follow the price up should it keep going.

Here is a prime example: HF

$11.60 on May 27th

Red dashed horizontal is my buying price, $11.60 on May 27th. I like to use three days after the bottom as a guide to buy in on this trend style. It allows some level of confirmation of the price action...it looked good. Still does but I just have to have some more patience as the price crawls along the line.

Current Stop $11.15

Purple dashed is my stop price...currently $11.15. On May 30th the price jumped to $12 so for Monday I moved my stop up only to have to move it back down as the price started back down again. You can see the tail on the price for today went below the lower trend boundary...the tail indicates that the trading price went down that low...$11.30 or so...but went right back up again. I'll talk about these "candles" another time, now that they can be seen I should mention them.

The few cents below the line I would just consider part of the margin for error in the trend line setting, it isn't that precise as the lines are drawn on the 6 month or more chart and when we zoom in to 2 or 3 months the margin can be seen clearer. I might move the line to reflect this slightly lower low to accommodate the next cycle low...might as well be closer.

Case 1) Tight stop

The trouble is that a stop set too tight can sell the stock too soon, this is called getting "stopped Out" and I may see a loss or perhaps a small gain but will miss out on a large move right afterwards. Even if getting back into the same stock with another trade the commissions must be paid again and if the price moved up at all that potential profit is lost.

Case 2) Wider stop

The potential loss remains higher for a longer period of time.

The happy medium

This is where the strategy gets a little grey and the gut kicks in. I'm not certain that a plan of attack can be setup to leave enough room for the price to move but keep it close enough to reduce loss off the start. Experience will likely play a big part in getting this right.

I think that certain moving averages may work depending on the expected price change, a long uptrend can easily use the 50 daily moving average while a shorter TWT may be OK with the 10 or 20 daily moving averages. Historical checks seem to lean this way anyway.

JD.