
Lecture Description
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A lesson on how to incorporate multiple support or resistance levels into a trading strategy for the stock, futures, or forex market to reduce the chances of being stopped out on a trade.
In our last lesson we looked at how many successful traders incorporate support and resistance into their trading strategies. In today's lesson we are going to expand on this concept by looking at how many traders look for multiple support or resistance levels when placing trades as well as how many chart patterns incorporate this concept already, providing traders with areas in which they can place their stops.
As we learned about in our last lesson, when setting a stop many traders will find a level of support if they are buying to enter the trade or resistance when they are selling to enter the trade and place there stop outside of this level. When entering trades many successful traders will also look for trades which have few if any levels of support/resistance in the direction they are trading, but several levels of support/resistance in the direction in which they are placing their stop.
Chart example:
As we have also learned in previous lessons, one of the key reason's why traders favor or recognize certain chart patterns is because they often times signal what is next to come in the market. What is often overlooked however about almost all of the most popular chart patterns, but perhaps just as important, is their ability to point out potential places where you want to place your protective stop loss.
As you can see from the below chart the head and shoulders pattern is a perfect example of this. By entering the trade on a break of the neckline and placing the stop just above the right shoulder of the pattern traders ensure that there are at minimum two resistance levels in between their entry price and their stop level if not more.
Chart Example
For patterns such as the triangle pattern which do not already incorporate this multiple support/resistance levels between your entry and your stop concept, it is often wise to find entry opportunities which provide these additional levels naturally in addition to the setup when looking at the chart pattern in isolation:
That's our lesson for today. In tomorrow's lesson we are going to look at another way traders use to set their stops: Indicator based stops so we hope to see you in that lesson.
As always if you have any questions or comments please leave them in the comments section below so we can all learn to trade together, and have a great day!
Course Index
- Intro to Technical Analysis
- Introduction to Dow Theory
- Second 3 Tenets of Dow Theory
- How to Read Stock Charts
- How to Trade Support and Resistance
- Multi Time Frame Analysis
- Introduction to the Double Top and Double Bottom Charting Pattern
- How to Trade Double Tops Like a Pro
- How to Trade the Head and Shoulders Pattern Part 1
- How to Trade the Head and Shoulders Pattern Part 2
- How to Trade the Wedge Chart Pattern Like a Pro Part 1
- How to Trade the Wedge Chart Pattern Like a Pro Part 2
- How to Trade the Flag/Pennant Patterns Like a Pro Part 1
- How to Trade the Flag/Pennant Patterns Like a Pro Part 2
- How to Trade Triangle Chart Patterns Like a Pro Part 1
- How to Trade Triangle Chart Patterns Like a Pro Part 2
- Learn to Trade with Technical Indicators
- How to Trade Moving Averages Like a Pro (Part 1)
- How toTrade Moving Averages Like a Pro (Part 2)
- How to Trade the MACD Indicator Like a Pro (Part 1)
- MACD Indicator: Trade it Like a Pro (Part 2)
- How to Trade the Relative Strength Index (RSI) Like a Pro
- How to Trade Stochastics Like the Pro's Do
- The Difference Between the Fast, Slow and Full Stochastic
- How to Trade Bollinger Bands - Stocks, Futures, Forex
- How to Trade the Average Directional Index (ADX)
- How to Trade the Parabolic SAR
- How to Trade Candlestick Chart Formations Part 1
- How to Trade Spinning Tops and Doji Candlestick Patterns
- How to Trade the Bullish/Bearish Engulfing Candlesticks
- How to Trade the Hammer Hanging Man Candlesticks
- How to Trade the Morning/Evening Star Candlestick Pattern
- How to Trade the Inverted Hammer/Shooting Star Patterns
- Why Most Traders Lose Money and The Solution
- Why Traders Hold On to Losing Positions
- Two Trading Mistakes Which Will Destroy Your Account
- Herd Mentality is the Psychology That Leads to Big Trading Losses
- Profit Expectations: What Millionaire Traders Know
- How to Join the Minority of Traders Who Are Successful
- How To Determine Where to Put Your Initial Stop Loss Order
- How to Use the Average True Range (ATR) To Set Stops
- How to Up Your Chances for Profit When Setting Stops
- How to Reduce the Chances of Being Stopped Out on a Trade
- How Successful Traders Use Indicators to Place Stops
- Stop Your Mind From Causing You to Take Profits Too Soon
- How To Use Trailing Stops
- Why Position Sizing is So Important in Trading
- Why Fixed Position Sizing Is Not the Best Way to Trade
- Trading The Martingale and Anti Martingale Strategies
- How to Set Trade Position Size for Maximum Profits
- Maximize Trading Profits with Correct Position Sizing 2
- Fundamental Analysis and The US Economy
- A Simple Explanation of the US Economy for Traders
- Simple Explanation of The US Economy For Traders Part 2
- The Business Cycle and Fiscal Policy - What Traders Know
- How Interest Rates Move Markets
- What Traders Know About Interest Rates Part 2
- What Traders Need to Know About The Structure of The Fed
- How the Fed Changes Interest Rates
- How to Determine When the Fed is Going to Change Rates
- Why Markets Move Ahead of Interest Rate Announcements
- How to Trade the GDP Number (Part 1)
- The Components of the Gross Domestic Product (GDP)
- Intro to Trading Non Farm Payrolls (NFP's)
- Trading the News - Economic Numbers - Retail Sales
- Trading the News - Economic Numbers - ISM Manufacturing
- The Producer Price Index (PPI)
- The Consumer Price Index (CPI)
- Trade the News - Existing Home Sales Index
- How To Interpret the Consumer Confidence Index (CCI)
- How to Interpret the Index of Leading Economic Indicators
- The Advantages and Disadvantages of Day Trading
- The Advantages and Disadvantages of Swing Trading
- The Advantages and Disadvantages of Position Trading
- How to Keep a Trading Journal
- The Most Important Attributes of a Good Trading Journal
- The 20 Components of a Successful Trading Plan
Course Description
This is a series of 77 short video lessons meant to give traders an introduction to the basics of trading as well as the components necessary to develop a profitable trading plan.