Use pivot points as a guide for setting stoploss orders from "summary" of Secrets of a Pivot Boss by Franklin O. Ochoa
When it comes to managing risk in trading, one of the most valuable tools at your disposal are pivot points. These key levels can be used not only to determine potential entry and exit points, but also to help you set appropriate stoploss orders to protect your capital. Pivot points are calculated based on the previous day's trading range, and act as markers for potential support and resistance levels. By using these points as a guide, you can place stoploss orders at strategic locations that align with the market's natural ebb and flow.
For example, if you are going long on a trade and the price breaks below a key pivot point, this could be a signal to exit the trade and cut your losses. By setting your stoploss order just below this pivot point, you are giving yourself a buffer to protect against sudden price reversals.
Conversely, if you are shorting a stock and the price breaks above a pivot point, this could indicate that the trade is no longer valid. Placing your stoploss order just above this pivot point can help limit your losses in case the price continues to move against you.
It's important to remember that pivot points are not foolproof indicators, and should be used in conjunction with other forms of analysis to make informed trading decisions. However, by incorporating pivot points into your risk management strategy, you can increase your chances of success in the market.
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