Stop & Reverse
Jan 20, 2021
One of the ideas behind placing a stop on a trade is the idea that a stock is qualified as a Long as long as certain conditions exist on the chart and that, when those conditions no longer exist, then an exit of the long position is the right move to make. But often, the right action is to do a stop and reverse. You stop out of the old position and you enter a new trade in the direction of the new trend.
Most traders are reluctant to do this. Instead, we want to hold onto the losing trade, hoping that it will work out...hoping we will get lucky. We hide our heads in the sand regarding what is happening on the chart because, when faced with a monetary loss, we prefer to hide our heads in the sand and act as though things will work out.
To put this into perspective, think back about your most recent losing trades and ask these questions: (1) when did I know it was a losing trade? (2) if I had done a stop and reverse, then would I have recouped the loss from the original trade?
My reason for saying these things is presented on today's chart:
In the chat room today, I posted ACRS as a high probability long before it crossed below the red line on this chart. It made a small bounce, but it did not hit the target. Once it fell below the red line (the area of support that was part of the basis for the trade), then it became qualified as a short with red candles "across the board". The short position, if held, would have more than recouped the loss on the original long trade.
Interested in Bob Joiner's day trading chat room?
At the following link, you'll find a 2-minute video overview and a link below that video to receive more information.
