A trader\'s money management system

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c07 JWBK182-McDowell April 25, 2008 15:58 Printer: Yet to come

Stop-Loss Exit Rules 59

FIGURE 7.2 Illustration of a Trend Line Stop and a Regression Channel Stop.

Source:eSignal. http://www.eSignal.com

YOU CAN SET YOUR INITIAL STOP 3

PERCENT BEYOND SUPPORT

This isnota method that I personally use since my trade entries and ex-

its are determined by theARTtrading software, but this method does

satisfy, to some degree, the need for placing stops at junctures relating

to current market dynamics. The key with this method is to effectively

identify meaningful support areas. Test this method and see if it works

for you.

If your trading system has determined an entry point, but does not pro-

vide an exit based on market dynamics you would first identify an area of

support. Then set your stop 3 percent away from the support. For example

in an established bullish trend if you have an area of support at $26.89 you

would set your stop three percent below that.

Formula:

Support Price× 0. 97 =Initial Stop Loss Price

Example:

$26. 89 × 0. 97 =$26. 08