Hi all,
I have been doing my studying but am a little confused by the info on the page below re Pivot Points:
school/middle-school/pivot-points/range-trading-with-pivot-points.html
It states the following:
In the chart above, you see that price is testing the S1 support level. If you think it will hold, what you can do is buy at market and then put a stop loss order past the next support level.
If you’re [B]conservative, you can set a wide stop just below S2[/B]. If price reaches past S2, chances are it won’t be coming back up, as both S1 and S2 could become resistance levels.
If you’re a little more [B]aggressive [/B]and confident that support at S1 would hold, you can [B]set your stop just below S1[/B].
Is it me or is this advice the wrong way around?
Personally, if I was conservative, I’d put my stop loss just below S1 rather than S2!
Thanks for the responses!
Al
Hi Al! Conservative traders usually prefer wider stops to give a larger leeway for additional volatility hence the larger stops while aggressive traders don’t mind putting a tight stop since they feel very confident that the support level would hold.
This assumes the same amount of risk for that position, though, so if both the conservative and aggressive traders are risking 1% of their account on the support level bounce, the conservative position has a lower chance of getting stopped out in case price suddenly makes a big spike but has potentially lower gains per pip movement in favor of the trade. On the other hand, the aggressive position has a higher chance of getting stopped out if volatility is high but has potentially higher gains per pip movement in favor of the trade.
Hope this clarifies things!
Hi PipDiddy!
Many thanks for the clarification, I’ll go back to the lesson and go through it again using your explanation.
Cheers.
Al