On Moving Stops

Moving stops on your trades is not necessarily problematic as long as you have a solid reason with high probability and most importantly your entry is realistic. On Tuesday, we raised the stop on our short DOW30 trade for Premium Insights subscribers to 25960 from 25870 based on several proprietary metrics suggesting equity indices will be forced back down. One of these metrics was the Dow Transportation 20 index (see chart below), which failed to confirm the upmove in the DOW Industrials 30. Entering the short DOW30 on Monday may have been poor timing, but the decision to raise the stop the following day was based on 3 objective metrics—one of which was the TRAN20 “misconfirmation”. Understanding intermarket dynamics is key, but applying it to technicals and trading is the more crucial and challenging task. What do we do next with the existing short? Close here? Go the other way? Enter a risk-equivalent trade in FX. Stay tuned.

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