Dynamic Trader Daily Report: Protective Stop Adjustment
Dynamic Trader Daily Report: Protective Stop Adjustment
Dynamic Trader Daily Report: Protective Stop Adjustment
Comprehensive Analysis and Education For the Serious Trader and Investor
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.
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
Page 2 of 5
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.
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
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.