I'm a new subscriber, trying to figure out the best way to follow your strategy. The main point that I'm struggling with now is stops. I agree with the wisdom of using them, but am not sure about the mechanics. Here are some of my questions:
1) How do you figure out the "recent swing low"? Do you just look at a daily chart and find the lowest recent intraday price? Is there an automatic indicator that will do it?
Answer: Yes, the Swing Low is where the down move ENDS and reverses up… Many times StockCharts with put a price label at that point.
That is recent Support of Buyers, when it bounces. So if Buyers run out (falls below Support, EXIT).
2) You mention that stops should always be triggered by closing prices. My understanding is that this is a way to avoid being stopped out by market movers or unusual volatility. However, it makes the mechanics trickier (more difficult to use automated stops)
a) Can you explain more about why to trigger on the close price?
b) Is the result of a trigger a market order that will be executed either during extended hours or at the beginning of the next day?
c) Would you recommend trying to execute the sell before market close if it looks like it will close below the stop?
Answer: Many times the Market Makers will push the Investment below Support during the day… Many will EXIT (which is ok), but if it Closes BACK ABOVE SUPPORT, you should GET BACK IN.
End of Day traders don’t see all of that… Closing below support keeps you from getting whipsawed, but everyone can have THEIR OWN STYLE. Do what makes you Money…
Most would probably get out near the Close if it is obvious that Investment is no longer bouncing at Support, and Closing Below… Main point is try to AVOID early day Dips below Support that end up Closing back Above Support.
Good trading, and tell your friends!