Commodity Services

Observations & Stop-Loss Technique . . . the following statements are opinion of a trader only:

In thin, wild markets, such as "Bellies," do not enter "on the open." It is not unusual to see 40 to 70 point opening ranges in this market! Try to time your entry to catch as much favor in your direction as you can.

A little over a week ago, I took a "Swing Catcher" signal which later proved to be right, and entered about the time of the day the lows were usually "in" by. The market slapped me with a $600 loss in about an hour (I was trading smaller than the recommended stop), but I believed in the signal and re-entered.

This is a vital key to any new trader. You must not become gun shy in markets such as these. If you have done your homework (or even if you haven't and you own "Swing Catcher"), you should begin to have a feel for the market you are attempting to trade, and re-enter after being stopped out. That re-entry was a winner!

It was simply a matter of believing and not being scared. Futures are not for you if you are searching for 100% winners. But again, don't feel you have to enter on the open.

The following is a little stop placement yardstick I use in some markets. It has just experienced some good results.

To avoid redundancy, this idea is based more on the open and closing prices to aid in stop placement. Also, I try not to use daily or true range as this again would be redundant, as most traders have thrust or breakout systems already in place although you could use an average daily range as a multiplier.

This is not a system for entry timing! This only works during a trend and is not designed to determine the direction of the market, rather simply a guide to good stop placement. Look also at soybeans, gold, cotton and whatever else you wish.

I have this programmed on a spreadsheet for ease of use. The following is for a "bull" trend. Begin using after a confirmed swing low and once you have entered long. It is extremely simple.

In this idea positive or negative is not the point, treat all figures as positive.

1. Subtract yesterday's open from today's open=
2. Subtract yesterday's close from today's close=
3. Add the resulting numbers from #1 & #2 together and divide by 1.8
4. Subtract the answer from #3 from today's close. Place your open order stop at this point.

Reverse the process for short positions, i.e. add to today's close.

When today's stop is much below yesterday's (above in a "Bear"), leave your stop where it is to protect profits. This often signals the end of a swing! Don't be afraid to re-enter if the trend continues however. Markets such as bellies are known to bend your eyebrows often. Hang tough.

Variations:
1. For short positions add your result to today's open.
2. Use a balance price (0+h+l+c)/4, minus a percentage of today's range
3. Use a 22 day (or any length you wish) average range in place of the 1.8 multiplier.????
I'd like to see your readers variations! Why 1.8. Ask your readers