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Question of the Week: 3/12/2008
Why is it that hourly, daily and weekly traders sometimes begin with the same entry and stop? Aren't hourly traders expected to be more adept and use smaller stops than daily or weekly traders?
Answer:
When I recommend the exact same entry and stop on various time frames it is almost always because an important wave pattern has ended and a large, new trend has begun.
For example, in August of 2007, NEoWave told me Gold was about to begin a $200+ advance over several months! As a result, the appropriate strategy was for all traders to go Long immediately (which we did), which means we all entered at the same price. Since the structural starting point for the advance was the same on all time frames, the initial stop on all time frames was identical. But, as Gold advanced, the stop on the hourly time frame moved higher faster than the stop for daily traders and the stop for weekly traders moved up even slower. That caused hourly traders to get stopped out first with weekly traders holding the longest.
When a market is near the middle of a trend and structure is not clear, I normally use Neely River theory to guide trading, which usually provides a different stop for each time frame. If both NEoWave and Neely River are not clear, I don't recommend a trade.
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