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YTC Price Action Trader (www.ytcpriceactiontrader.com)

  #5 (permalink)

Elite Member
London, UK
 
Futures Experience: Beginner
Platform: NinjaTrader, home-grown Java
Broker/Data: IB/IQFeed
Favorite Futures: EUR/USD
 
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Posts: 1,085 since Dec 2010
Thanks: 471 given, 778 received

That's right, and that's what I'm teaching myself now. He describes his strategy for the stop placement in detail - based on which of those 5 setups you're dealing with. The principle is that the stop is placed on the opposite side of the formation that you're trading.

e.g. for a pull-back in a trend where you think there's going to be some counter-trend traders trying to jump on a potential reversal, assuming you're looking at a stall in the pull-back where there's a high probability that the trend's going to resume, you put your stop at a point beyond the stall where the market would obviously be reversing and where your theory of a pull-back and trend resumption is invalidated. I guess you need examples to explain it best!

You can discover what your enemy fears most by observing the means he uses to frighten you.
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