Here is an important note quoted from Van. Tharp’s Trade Your Way To Financial Freedom, 2nd Edition. Just to note it down here, and hopefully it helps some of the 12 readers.
Given your goals in terms of returns and drawdowns, what kind of initial risk stop do you want? If it’s close, will you be able to get right back into the market so that you will not miss a move?
Stops, in my opinion, should be a violation of the reason why I wanted to get into the trade in the first place. And yes, I always have a way to get back into the trade.
My stop is a function of the market and what it’s doing. It’s only in directly related to risk – unless the risk is too big for me to even take a position. I control risk as part of my position sizing.
Have good trading week ahead.
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