Posted: Feb 22, 2010 5:00
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 is the Dow Transportation 20 index, which failed to confirm the DOW Industrials 30 brief upmove. 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”. What do we do next with the existing short? Close here? Go the other way? Enter a risk-equivalent trade in FX. Stay tuned.