Once you enter a trade, the result is out of your hands. We might not control the outcome, but we can decide when to get out. If prices turn the wrong way, we can get out, or better yet, we can have a stop in place to make it automatic.
Setting stops allows you to control how much you can lose. This might not sound like a profound statement, but it is the basis for domesticating risk. Once we enter a position, we lose objectivity so we must have some sort of way to enforce the game plan.
Controlling Distance – in this excerpt from Ron’s webinar (1:25), he describes distance from the dots as a trade filter for daytrading:
Here’s the key take-aways:
- We set our stops based on the dots, blue dots below the price for an uptrend & above the red dots during a downtrend
- We only want to trade when there is very little risk & we can get straight to low risk by only taking trades when the price is close to the dots
- We can quantify that for ourselves to personalize the signals: ie Ron will only take trade signals on ES when the price is less than 3 points away from the dots
- Ron’s distance filter: ES – 3 points ($150 risk/contract), NQ – 6 points ($120 risk/contract), CL – 0.20 ($200/contract)
- This is not a static stop placement, ie 2% or $200. It is combining your personal comfort zone as a filter for AbleTrend signals
- These ideas aren’t limited to day trading – swing traders can also control distance at entry as well.
I think there is considerable value in doing this exercise for yourself. It is really an exercise in personalizing the AbleTrend signals for yourself & it can help you to succeed using the signals in the long run. It doesn’t matter if something works theoretically; if the risk makes you feel uncomfortable, you’re not going to be able to follow it when the pressure is on. Using this filter gets you straight there, so that no one loss will ever put you out of your comfort zone.
You might miss some moves, don’t worry, they were someone else’s. Capping the downside is always more important. Real moves often have multiple setup or entry points. If the first one was too high risk, you may get a second chance that fits your rules.
You can view complete session here: https://www.youtube.com/watch?v=Jw_eroVPetA
Also, as a reminder, we have a special Summer sale is on now (ending July 31). If you aren’t using AbleTrend yet, our 30-day trial offer will be $99 instead of $199 for the next few days. Take advantage of time-limited offer now.
Best Regards,
Jesse Wang