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As any veteran trader will tell you, having your stops run is not a pleasant experience. However, it doesn’t need to be a financial disaster. While the connotation surrounding the word loss is ominous, do not be fooled ― the stop loss order is often a trader’s best friend.
Buying on support and/or selling against resistance are not new concepts. Chances are you have traded on both of these ideas. But what about the times when you were wrong? What happens to the price action after you were stopped out? Was there a trading opportunity missed?
If a trader would like to place an order to enter the market on a stop, is it acceptable for the trader to simultaneously place a profit target at the same time?
Stop orders are primarily used to protect losses on a position, lock in profits on a position, or enter a market on a breakout. Learn why Stop Orders may be rejected.
Stop orders can be used in futures trading as a great way to help manage risk and protect losses, lock in profits, or enter the market on a breakout. The downside to using stop orders, however, is slippage.
This article orginially appeared on June 04, 2010 in FutureSource’s Fast Break Newsletter, where Brian is a regular contributor. How difficult do you find it to enter into the market? If you think about it, “getting in” is not that difficult. The common problem that many traders face is not getting into a trade… the… Read more.