Sunday, June 12, 2005

Stop

Stop loss Q&A
Question: Where do I place my stop loss when shorting a stock that gaps down?

Answer: The most obvious place is just above the price level where the gap would be filled. But that's a generic answer. It's more effective to place the stop loss on top of converging resistance, such as highs, Fibonacci retracements and moving averages. A bouncing stock will have a very hard time getting through those levels.
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