Position Trading – Stops and Money Management

VantagePoint Learning Center

Stops and Money Management

Welcome to the “Stops and Money Management” Learning Session. In this session, we’ll cover:

Risk propensity
Setting stops
Using the predicted high and predicted low

Learn about the importance of having a personal plan for money management and setting stops.

Preserving your trading capital is easy to understand but often difficult to do. This is where your risk propensity will come into play. You have to be prepared to have the losses along with the wins.

One aspect of money management is developing a trading strategy and sticking to it. By being consistent with a trading plan that balances your risk propensity, market knowledge, and technical analysis, you will be able to identify what works well for you and what may need to be changed. We believe that disciplined traders DO NOT chase a market. Instead, they wait for the opportunities where the risk vs. reward is in line with their trading criteria.

Upon entering a trade, many traders feel that it’s a good idea to protect their position using stops. This is another important aspect of money management. By setting a stop, you are determining how much money you feel comfortable losing if the market goes against you.

In a market that is trending up, you may want to use VantagePoint’s predicted next day low as your guidepost. As you can see this chart shows an upward trend. Now I’ll switch over to the daily report to see the predicted next day low. Depending on your risk propensity, you can set your stop somewhere around the predicted low, thereby protecting your profits without running a high risk of getting stopped out too early.

Likewise, in a market that is trending down, you may want to use VantagePoint’s predicted next day high as your guidepost. As you can see this chart shows a downward trend. Now I’ll switch to the daily report to see the predicted next day high. Depending on your risk propensity, you can set your stop somewhere around the predicted high, thereby protecting your profits without running a high risk of getting stopped out too early.

How far above or below VantagePoint’s predicted next day high and predicted next day low is up to you, but try paper trading this for a while first. Then once you get the hang of it, you can try a real trade in the open markets.

Thank you for watching this lesson. Please return to the Market Technologies Learning Center for additional tutorials.