Dynamic Trader Daily Report: Protective Stop Adjustment

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Dynamic Trader Daily Report

Comprehensive Analysis and Education For the Serious Trader and Investor

Published By Thursday, July 06, 2000


Dynamic Traders Group, Inc.
DynamicTraders.com
dt@dynamictraders.com Prepared by: Stephen Griffiths
520-797-3668 Steve@dynamictraders.com

The analysis and trading strategies described in this report are for educational purposes only. The
commentary in this report may or may not relate to a specific trade recommendation made in the
Dynamic Trader Report. The weekday issues of the Dynamic Trader Report are prepared by Stephen
Griffiths and are primarily for trading education purposes with alerts for potential trade set -ups for
markets described in the Saturday issue prepared by Robert Miner.

Protective Stop Adjustment


I have received a few questions over the past few weeks on how we adjust
the protective stop position as a trade progresses in our favour. Therefore
today I would like to have a look at how the protective stop has been lowered
in the trade on the Yen since the initial short position on Jun 26.

The initial protective stop always goes at the point where the market would
prove our analysis incorrect. In this example, this would be a trade above the
Reversal Day high of Jun 23 at .9774.
Dynamic Trader Daily Report - 7/6/00
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In a situation where a market makes a sharp initial move off the entry point,
the first adjustment of the protective stop can be to just above the 78.6% price
retracement.

As we saw yesterday, the Yen rallied off the Jun 28 low to make a Wave 2 or
B high on Jun 29:

Once the Wave 2 or B high is complete the stop can be lowered again.
Confirmation that the Wave 2 or B high is complete is on a close below the
Wave 1 or A low - .9595 in this example. This was triggered on Jun 30. The
stop could then be lowered to one tick above the Wave 2 or B high of .9694.

The Yen continued lower over the next two days, closing below the 100%
alternate price projection on Jul 5. A close below the 100% alternate price
projection is the initial confirmation that the current decline is more likely to be
a Wave 3 and not a Wave C.

Once a market has provided initial confirmation that the current swing is more
likely to be a Wave 3 rather than a Wave C, the protective stop may be
lowered to just above the Wave 1 low of .9595 in this example. Why? A wave-
4 should not trade into the trading range of the wave-1. Please see the chart
on the next page.

Copyright 2000, Dynamic Traders Group, Inc. (520-797-3668, www.dynamictraders.com).


Trading futures is risky. Past performance is no guarantee of future performance. Trade at your own
risk. This information is supplied for the paid subscriber and may not be copied or distributed in any
manner.
Dynamic Trader Daily Report - 7/6/00
Page 3 of 5

The stop will remain at this level until a Wave 4 correction is complete. When
the Yen has confirmed the Wave-4 is complete, the stop will be lowered
again, closer to the market to protect open profits.

Today’s tutorial considers the stop loss adjustment on just one unit. In the
report we use two units, a short-term (ST) and intermediate-term unit (IT).
Next week I will address the differences between and the trade objectives of
each of these two units.

Lessons Learned
How to adjust the protective stop position as a trade moves in your favour, to
protect open profit.

Good Trading,

Steve
Steve@dynamictraders.com

Copyright 2000, Dynamic Traders Group, Inc. (520-797-3668, www.dynamictraders.com).


Trading futures is risky. Past performance is no guarantee of future performance. Trade at your own
risk. This information is supplied for the paid subscriber and may not be copied or distributed in any
manner.
Dynamic Trader Daily Report - 7/6/00
Page 4 of 5

Specific Trade Recommendations Summary For July 6


This table only includes those markets with outstanding trades and new specific trade
recommendations.
Market New Trade Recommendations or Stop-Loss For Existing
Positions
Euro IT Unit : Maintain the stop on the IT unit at .9430.
L – 6/26, .9430
Yen Correction to ST unit – this was stopped out on the close at .9596 on Monday
as per the instructions in the Saturday report.
S – 6/26, 96.13
IT Unit : Maintain the buy-stop on the IT unit at .9596.
AD On Wed., the AD reached the ideal price target for Wave-C. Today the AD
New Rec. made an inside day therefore providing an alternate go-long strategy. See the
chart below.

ST&IT Units: As long as the AD does not trade below .5897 (the low of Jul 5)
Buy on a .5954 stop and place the initial protective sell-stop at .5903
OR

Buy on the close if the close is above the current day’s open and the prior
day’s close. Place the initial protective sell-stop one tick below the recent low.
CD Today the Canadian Dollar made a reversal confirmation day electing a new
L – 7/6, .6748 long trade on the close at .6748

ST&IT Units. Place the initial protective sell-stop, at 0.6711, one tick below
the recent low.

Summary of Open Trade Positions as of July 6


Market Month L/S Unit Opened Price Closed Price # Ctr P/L O/C
Euro Sep L ST 6/26 0.9430 7/3 0.9536 1 $1325 C
Euro Sep L IT 6/26 0.9430 - 0.9548 1 $1475 O
Yen Sep S ST 6/26 96.13 7/3 95.96 1 $212 C
Yen Sep S IT 6/26 96.13 - 94.26 1 $2337 O
Gold Aug L ST&IT 6/26 285.5 7/5 287.9 2 $480 C
S&P Sep S ST&IT 6/29 1463.25 7/3 1474 2 ($1075) C
Bonds Sep S ST&IT 7/3 97.07 7/3 97.26 2 ($1075) C
CD Sep L ST&IT 7/6 .6748 - .6748 2 $0 O

Continued on next page.

Copyright 2000, Dynamic Traders Group, Inc. (520-797-3668, www.dynamictraders.com).


Trading futures is risky. Past performance is no guarantee of future performance. Trade at your own
risk. This information is supplied for the paid subscriber and may not be copied or distributed in any
manner.
Dynamic Trader Daily Report - 7/6/00
Page 5 of 5

Other Markets of Interest Summary For July 6


Market Other Markets of Interest
S&P Probable Wave-5 of B top on June 19, which projects a continued bear trend
to below the May 24 low. The short-term pattern remains unclear.
A close below the Jun 26 low of 1452 would confirm a continued bear trend.
If this unfolds we will look to position short on trend continuation sell set-ups

Nasdaq 100 Basically the same position as the S&P.

DJIA No change from last Saturday’s report.


Dollar Index A close below 106.08 (Sept.) signals the continuation of the bear trend.
Beans Probable low by July 12 and ideally by July 5.
Wheat Probable seasonal low by mid-July. Ideally, July 2-7 or July 14-18.

(Sep) AD – daily chart

Copyright 2000, Dynamic Traders Group, Inc. (520-797-3668, www.dynamictraders.com).


Trading futures is risky. Past performance is no guarantee of future performance. Trade at your own
risk. This information is supplied for the paid subscriber and may not be copied or distributed in any
manner.

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