Friday, February 13, 2015

Stop gunning: The most frustrating aspect of swing trading

Here is a note I sent Trade Report members a few days ago related to "stop gunning". 

I have received a few questions about TWTR this morning.  Some of you set your stops around $45.70-90 and were stopped out.

In today's morning report I mentioned setting it around $45.50.  It got down to $45.57.  I have a mental stop in place, not a hard stop.  If I feel there is stop gunning going on, I will wait a bit to see if the level holds.  In this environment where market makers are not even trying to hide stop gunning, you have to be careful.

This is why I give stop ranges and not a specific number.  First, your stop depends on your position size and how much you are willing to risk and second, you don't want a bunch of people at the same exact level.  When "they" see that, they start salivating.  Therefore, you must always think about where everybody else is placing there stops and adjust accordingly.

The cat and mouse "stop game" with market makers/algos is the most frustrating aspect of trading.  If you do get stopped out, take comfort in the fact that you have taken only a small loss and it does not impact your account much.  Then go back and devise a plan to win the game.

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1 comment:

Anonymous said...

Do you believe market makers can see stop orders?