Trading is a business of probability. Every trader will take losses, so we need to use protective stops.

Many traders take profits quickly but hold on to losing trades - it's human nature. We take profits because it feels good, and we try to hide from the pain of losses.

3 BAD TYPES OF PROTECTIVE STOPS:

* Above/below support/resistance.

This can be previous highs/lows, pivot levels, Fibonacci, etc.
Too obvious:
Stop running.
S/R aren’t lines but zones.

* Percentage move against entry.

Meaningless with regard to the chart and price action.
HOWEVER, #1 rule: Must be within your money management rules: No more than ½ of 1% of your trading account.

* Volatility stops

 ATR
Parabolic SAR
Some traders use this technique because they say you have to allow room for the “noise of the market.
Seems logical, except for one huge problem:
It violates one of the most well-known rules of trading:
“Cut your losses short and let your winners run.”
So how do you keep that rule and still allow for the noise of the market?
You don’t! You need a way of identifying the noise of the market and trade when it is removed from price action so you get more low-risk, precise entries.
A BETTER ANSWER: Stops go where you’re wrong

When the reason for your trade no longer exits, then your trade should no longer exist.
The best risk management is an excellent entry.
For me, it’s always a Cycle High/Low.
Email me to get info on my Cycle indicator at Barry@TopDogTrading.com
Gives laser-sharp accuracy so risk is only the range of a bar to a bar and a half on every trade.

Get my free gift for you, for FREE, Top Dog Trading’s
“Top 10 Trading Rules for Success.”
These are 10 things I changed in my trading to become successful over the last 50 years. They’re also the top 10 things that have helped my students shift from losing money to making money.

Bottom line, no general theories or abstract ideas here. This is the practical stuff that can really work to bring real and dramatic change to your trading results.

It’s a mini-course that contains a pdf Special Report and 3 videos. Get right now by simply going to: http://www.onlinetradingtowin.com/tenrules

Go get it for free while the show is still new.