| Experienced traders understand that money and risk | | | | would have got home from work (or the golf course |
| management, coupled with strict disciplined use of | | | | etc.) and found that many of their conditional orders |
| stop losses are the main keys to survival and long | | | | to sell if prices hit a certain value would have been |
| term profitability in the market - in fact I believe | | | | triggered. Their trades would have been closed by |
| these are more important than which stocks you | | | | their conditional stop loss facility, e.g. as provided by |
| buy. | | | | DFS Equities, a licensed broker in Sydney. |
| The main advantage in going one step further and | | | | The main advantage in using such a service is that |
| using 'Conditional Order Trading Strategies is that you | | | | you can carry on your day to day activity, 'safe' in |
| can carry on your day to day activity, 'safe' in the | | | | the knowledge that if any stock or stocks fall to |
| knowledge that if any stock or stocks fall to your | | | | your predetermined levels, then they will act as a |
| predetermined levels, then your stop loss broker will | | | | third party on your behalf - and close the trade. |
| act as a third party on your behalf -and close the | | | | For those who waited for closes below stop loss |
| trade if your predetermined stop loss level has been | | | | levels in recent weeks, they may have experienced a |
| triggered. | | | | different level of emotion than their counterparts |
| Some of the popular resource stocks have fallen | | | | who use conditional stop loss orders and who had |
| savagely in recent weeks. Many experienced traders | | | | closed their trades much sooner. |
| would have exited before the loss in open profits or | | | | The real test then came for those who found their |
| capital became too great | | | | stocks trading well below their stops. For the |
| Others may have frozen as per my article at on | | | | conditional stop loss user, they did not have to go |
| "Difficulty in taking Stop Losses". If so, they have | | | | through this test as their trades had already been |
| subscribed to the BHP approach - they have Bought | | | | closed days earlier. There are advantages in both |
| and are now frantically Hoping and Praying. When | | | | approaches. The main lesson here is that we each |
| individual stocks or whole markets turn, they often | | | | need to work out, as part of our own personal |
| turn quickly, such that months of gradual growth can | | | | trading plan, whether we use: |
| be wiped off the board in days - and sometimes | | | | Weekly charts and weekly stops or |
| hours. | | | | Daily charts with closes 1 or 2 days below the stops |
| In my articles I teach Jim Berg's and others' | | | | or |
| strategies which all incorporate the use of initial stop | | | | Weekly or daily charts with intraday conditional stops |
| losses to protect capital and then trailing stop losses | | | | Traders and investors who know they have a |
| to protect open profits. We have discussed the use | | | | 'freezing problem' may make the decision to use |
| of various types of stop losses: | | | | intraday stops regardless. They know from personal |
| Weekly stops for long term investors - for which | | | | experience that they would rather have someone |
| two consective closes at the end of the week | | | | else act on their behalf at predetermined levels than |
| signifies a "sell" on the Monday of the following week. | | | | go through the anguish of not being able to pull the |
| Daily stops for short term trading - using Jim Berg's | | | | trigger themselves when they are put to the real |
| strategies these are actioned as follows: | | | | test. |
| Initial stop - set under the most recent significant low | | | | For those who choose conditional stops, then be |
| before entry (and not more than 10% below current | | | | aware that there is one significant risk other than the |
| price, otherwise choose another stock) - sell next | | | | possibility of early closing of the trade. |
| day if closes one day below. This initial stop is also | | | | If there are very few buyers queued in the 'bid |
| used for long term investors after the stock has first | | | | stack', then there is a real possibility that there could |
| been bought. | | | | be an unnecessary and artificial cascading of prices, |
| Trailing stop - after stock price have moved up | | | | caused by electronic broker's computers dumping |
| sufficiently - sell next day if closes two days below | | | | stock in a domino effect in hundredths of a second |
| Intraday conditional stops - usually used by live day | | | | and prices subsequently rebounding, often only |
| traders but can also be used by short term traders | | | | minutes later as bargain hunters chase up prices. |
| and long term investors, as defined and discussed | | | | I wrote about Exit Strategies and this subject at |
| below. | | | | length in my original work for Daryl Guppy's |
| We have shown that in a rising bullish market there | | | | newsletter before Jim Berg and I started our own. |
| have been occasions whereby the use of intraday | | | | These are now re-republished in my 'Atkinson-Guppy |
| conditional stops have resulted in premature closing | | | | Articles' ebook in which I called this phenomenon |
| of the trade - as some of these stocks have | | | | "avalanche selling". |
| rebounded during the day and continued their rise. | | | | I showed that a major advantage we had found in |
| A trader using conditional stops at that time would | | | | using DFS Equities was that they provide a 'hybrid' |
| have had two ways to look at this:i) The -ve | | | | service - such that they have humans to actually |
| viewpoint- disappointment of being ejected from the | | | | place the sell order once the audible automated |
| trade too earlyii) The +ve viewpoint - pleased that | | | | conditional stop trigger alarm goes off. |
| his insurance policy was working and protecting him in | | | | Their experienced staff can then monitor the screen |
| case of a sudden downturn. | | | | and see if automated avalanche selling is occurring or |
| For those who used intraday conditional stops in | | | | not - then decide whether or not to place a sell order |
| recent weeks, their insurance really kicked in as they | | | | on your behalf, depending on your instructions. |