During a group meeting a New Trader shares,”I set my stop at 75c.”
I say, “Set it at 74c.”
Later a New Trader discussing another stock shares, “I set my stop at 35.04.”
I reply, “Set your stop at 6c.”
Yesterday in The SMB Blog we asked one of our readers to consider a better stop for a trading play. There is no exact manual where to set you stops for every trade. Choosing your stops is a skill that you will develop with practice, experience and study. But there are some prices that generally are better stops than others.
What do we mean by better stops? Prices that are significantly less probable to get hit, stop you out of a good position and mathematically so worth an extra few potential pennies of loss.
Better Stops for Longs
99c is better than the whole / 89c is better than 90c / 74c is better than 75c / 49c is better than 50 / 44c is a better than 45c
Better Stops for Shorts
1c is better than the whole / 16c is better than 15c / 6c is better than 5c / 26c is a better than 25c / 51c is a better than 50c
A caveat for all the above is if there significant volume at the tape at say 4c, a seller not lifting, then the better stop is 5c and not 6c.
There can be a very fine line between being an under-performing trader (UPT) and a consistently profitable trader (CPT). One reason may be your stops. Perhaps the above can help you find better stops for your trading.
Author, One Good Trade