Stops and Profit Taking
General rule: Exit when Always-In Direction Shifts
This means if you entered market because it is AIL, exit immediately when market became clearly AIS, or vice versa, exit shorts immediately when market becomes AIL. As a general rule, when your promise is no longer valid, get out immediately. For e.g. if you think market is AIL and you entered the trade, and then market formed 2 big BRBCL and became AIS, you need to get out, even it has not get to your stop. On the other hand, if the market stays AIL even though there is a deep pullback, you should stick to original stop. For e.g. on the chart of 20120924 below, market is AIL at bar 18, if you bought 17 or 18, your stop is far below 10 or 12, the pullback from 19 is deep, but market never became clearly AIS, you should stick to original stop. (Al brooks mentioned this in old course 29 Protective Stops)
Stops
"Stop is to protect you against yourself", as Al Brooks said, because emotions can influence our decision making, what usually happens is that when market goes against us, we tend to deny it, not admitting we were wrong, if one don't have a hard stop, the lost will be much bigger.
At end of the day when you review your traders, you might be asking yourself "why would I take that trade?", that could be an example.
Strong BO
- trail to below prior HL
- if prior HL is too far, trail below the most recent strong bull trend bar or support level
Intermediate Bull trends
Stop should be below prior HL.
Trading range
Traders need to use wide stop if they are trading TR, but they will never let that wide stop be hit. Only experienced trader can correctly handle this.