Trader Risk Profiling and Position Analysis
■ (^) Significantly clear and obvious supportive and resistive confluences or convergences
■ (^) Horizontal and vertical counts on the Point‐and‐Figure charts
■ (^) Any price‐based triggers, which may also be used as potential price targets
26.5.4 stoploss Levels
Stoploss levels represent the price levels at which positions are fully or partially
exited, either for profit or loss. Stoploss levels are usually based on price. Some
examples include the test or breach of:
■ (^) Support levels for longs and resistance levels for shorts
■ (^) Supportive confluences for longs and resistive confluence levels for shorts
■ (^) Overlay barriers
Not all stops are technical stops. Some stops are constructed on money man-
agement principles, and may therefore be based on a simple fixed‐dollar risk or a
percentage of current or initial capital.
26.6 Confirming and Non‐Confirming Price Action and Filters
In order for a reversal or breakout to occur, the exact price of entry must be
known to provide confirmation that a move has indeed occurred. As seen in an
earlier chapter, the application of entry filters helps traders fine tune an entry, with
the intention of filtering out unwanted price action and noise and in the process
potentially reducing the probability of experiencing false breakouts or reversals
that may interfere with an otherwise good entry.
There are two important caveats. First, no filter is foolproof. And second, the
act of filtering tends to attract or encourage more filtering as the trader attempts
use a second filter with the intention of correcting one or more defects in the origi-
nal filter. This process may keep repeating, in a relentless feedback cycle, as the
trader struggles to create the perfect filter with zero defects! The trader eventually
realizes that his or her so‐called perfect filter has in fact filtered out nearly all price
action, making any potential entry most improbable.
Below are the four most commonly applied entry filters, which were covered
in great detail in an earlier chapter:- Closing Filter
- Price Filter
- Time Filter
- Algorithmic Filter
Refer to Figure 26.12. The point of entry into the market depends entirely
on the type of filter and the parameter setting employed. It is also possible and
sometimes preferable to apply one filter on another, but as mentioned previous-
ly, care must be taken to not overcomplicate the entry process. A valid breakout