Post of the Day: The Two Day Stop

[B]Student’s Question:[/B][B][/B]

When I hear about strategies for placing a stop, I have come across something called the “Two Day Low Stop”. Would you provide some insight on that?



[B]Power Course Instructor’s Response:[/B][B][/B]


Take a look at the chart below for a visual. In this example a long position was taken. On this Daily chart, the trader would count back two candles from the currently open candle and place the stop several pips below the lowest point to which that candle traded. As you can see from this example, when the current open candle closes, the trader will move one candle to the right and adjust the stop up accordingly. This process can continue until a profit target (limit) is hit or until price action retraces to the level of the advancing stop.

As you can see, the method functions best in a trending market.