<s> CandlestickandPivot PointTradingTriggersSetups for Stock, Forex,and Futures Markets
JOHN L. PERSON
John Wiley & Sons, Inc.
Additional Praise for
Candlestick and Pivot PointTrading Triggers“Coming from the trading floor, it wasn’t until we started building chartingsoftware that I realized how little I knew about the retail trader’s passionfor technical analysis. John’s latest book clearly defines many of the delicate intricacies of trading patterns and key turning points. I’m a junkie forthis type of stuff and I learned a ton from this book.”—Tom SosnoffCEO, thinkorswim Group“As a professional options trader and teacher, I have always told my students that to be consistently successful in the markets, you must firstidentify the opportunity and then apply the best strategy for you that fitsthat opportunity. Candlestick and Pivot Point Trading Triggers is the answer to the first step: finding and identifying the best opportunities to trade.John breaks down pivot points, a sophisticated form of technical analysis,in a surprisingly simple way, and then combines it with candlesticks to create a simple and easy-to-use system. This system, unlike most others, isconsistently able to predict highs and lows of stocks and other securitiesfor multiple timeframes with amazing accuracy. This is a great book fortraders of all experience levels and I am making it mandatory reading for allof my students.”—Ron IanieriChief Options Strategist, The Options University“John Person has built his career on teaching investors how to understandand use technical analysis. The strategies described in Candlestick andPivot Point Trading Triggers are employed by professional traders everytrading session and are the lifeblood of futures and forex investors. If youwant a complete guide to why the smart money buys at this level and sellsat that, you must read John’s book. I heartily endorse it!”—Jon “Doctor J” Najarianco-founder of www.optionmonster.com
Founded in 1807, John Wiley & Sons is the oldest independent publishingcompany in the United States. With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketingprint and electronic products and services for our customers’ professionaland personal knowledge and understanding.The Wiley Trading series features books by traders who have survivedthe market’s ever-changing temperament and have prospered—some byreinventing systems, others by getting back to basics. Whether a novicetrader, professional, or somewhere in-between, these books will providethe advice and strategies needed to prosper today and well into the future.For a list of available titles, visit our Web site at www.WileyFinance.com.
CandlestickandPivot PointTradingTriggersSetups for Stock, Forex,and Futures Markets
JOHN L. PERSON
John Wiley & Sons, Inc.
Copyright © 2007 by John L. Person. All rights reserved.Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form orby any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior writtenpermission of the Publisher, or authorization through payment of the appropriate per-copy fee to theCopyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 6468600, or on the web at www.copyright.com. Requests to the Publisher for permission should beaddressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030,(201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts inpreparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantabilityor fitness for a particular purpose. No warranty may be created or extended by sales representatives orwritten sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall beliable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.RealTick® graphics used with permission of Townsend Analytics, Ltd. © 1986–2006 Townsend Analytics,Ltd. All rights reserved. RealTick is a registered trademark of Townsend Analytics, Ltd. Any unauthorized reproduction, alteration, or use of RealTick is strictly prohibited. Authorized use of RealTick doesnot constitute an endorsement by Townsend Analytics of this book. Townsend Analytics does not guarantee the accuracy of or warrant any representations made in this book.Designations used by companies to distinguish their products are often claimed as trademarks. In allinstances where John Wiley & Sons, Inc., is aware of a claim, the product names appear in initial capitalor all capital letters. Readers, however, should contact the appropriate companies for more completeinformation regarding trademarks and registration.For general information on our other products and services or for technical support, please contact ourCustomer Care Department within the United States at (800) 762-2974, outside the United States at (317)572-3993 or fax (317) 572-4002.Wiley also publishes its books in a variety of electronic formats. Some content that appears in print maynot be available in electronic books. For more information about Wiley products, visit our web site atwww.wiley.com.Library of Congress Cataloging-in-Publication Data:Person, John L.Candlestick and pivot point trading triggers : setups for stock, forex, and futures markets / John L.Person.p. cm. — (Wiley trading series)Includes index.ISBN-13 978-0-471-98022-3 (cloth)ISBN-10 0-471-98022-6 (cloth)1. Stocks—charts, diagrams, etc. 2. Investment analysis. 3. Futures. 4. Options (Finance).I. Title. II. Series.HG4638.P468 2007332.63'2042--dc222006011098Printed in the United States of America.10
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To my wife, Mary,who is always by my side and who gave meencouragement and assistance in completing this book.Thank you from the bottom of my heartand with all my love.
Contents
Introduction
CHAPTER 1
1
Trading Vehicles, Stock, ETFs,Futures, and Forex
5
Determining Market Condition:Bullish, Bearish, or Neutral
77
How to Read Oscillators to SpotOverbought or Oversold Conditions
93
Momentum Changes: How toSpot Divergence or Convergence
111
Pivot Points: Determine Key PriceSupport and Resistance Areas andthe Importance of Confluence
121
CHAPTER 6
Pivot Point Moving Average System
159
CHAPTER 7
Candle Charts and TopReversal Patterns
187
CHAPTER 2
CHAPTER 3
CHAPTER 4
CHAPTER 5
vii
viiiCHAPTER 8
CONTENTS
Setups and Triggers: CombiningCandles and Pivots
213
CHAPTER 9
Risk Management: Setting Stops
257
CHAPTER 10
Projecting Entry and Exit Points:Learn to Scale Out
269
The Sample Analysis: The ProofIs in the Back-Testing
279
Confidence to Pull the TriggerComes from Within
307
CHAPTER 11
CHAPTER 12
Glossary
317
About the CD-ROM
335
Index
339
Acknowledgments
want to thank Pamela van Giessen and Jennifer MacDonald of JohnWiley & Sons for allowing me to share my work. I would also like tothank Cindy Cromwell, Mike Felix, Sarah Neis, and Joanna Pak fromRealTick Software—what a great team! I also extend my sincere gratitudeto Glen Larson and Peter Kilman from Genesis Software for testing my theories and for helping me to develop my trading library on their software.Between these two charting software companies, any serious trader willhave the best support and the most advanced trading tools to succeed! Ialso wish to thank the folks at eSignal.com.I wish to thank all my past students for taking the initiative to applythese principles and for testing me while trading. I wish you all the verymost life has to offer!To my son John, you have made your father proud! Then to Mary, mywife of 19 years, your help in fixing all my computer and technical issueswas instrumental in helping me finish this project, including completing thePivot Point Calculator CD.
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JOHN L. PERSON
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CandlestickandPivot PointTradingTriggers
Introduction
o all the individual traders reaching out to learn how to invest andtrade wisely and to all those who are looking for new ideas and whohave been around looking to learn a more positive approach, I saythat after reading this material, you will find a great approach to trading andwill learn the importance of or at least will expand your knowledge on howto develop your personalized mechanical trading system and learn why thatis important. You will learn specifically what methods and parameters touse with time-tested material. My first book, A Complete Guide to Technical Trading Tactics, was released in April 2004. It was a great introductoryon how to incorporate pivot point analysis with other forms of technical indicators and how it related to trading commodities. The foresight that bookoffered suggested that we would see resurgence in commodity activity andthat commodity markets would soon be in vogue. I had chart examples ofsilver at 4.50 per ounce and gold at 350 per ounce. On page 211, I gave an example of a potentially great scale trading opportunity in coffee when it wasas low as 49.00. Sugar was at 7.00. Crude oil was at 21.00. The 30-year bondswere at 111. The Federal Funds interest rate was at 1.0 percent. There weregreat trading opportunities, many of which I was able to take advantage.
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THINGS CHANGETimes changed, as did prices of these raw commodities. Other hard assetproducts, including housing and real estate, besides the commodity markets, skyrocketed in value. Things changed; global tensions mounted as we1
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CANDLESTICK AND PIVOT POINT TRADING TRIGGERS
invaded Iraq trying to set a country free. Nations’ economies grewas new opportunities emerged in places such as China and India. Globaleconomic growth pushed demand for products through the roof, creatingspectacular price gains. Things changed alright, even intermarket relationships. Gold went up on fears of inflationary pressures in light of the FederalReserve (Fed) raising interest rates. In turn, the U.S. dollar rallied as the interest rate differentials widened here in the United States against foreigncentral banks.
THE CONUNDRUMOne favorite word among economists in 2005 was conundrum, which wasused by then-chairman of the Federal Reserve Alan Greenspan. This wasthe term he used to describe the event of Treasury yields declining whilethe Fed was raising interest rates. The Federal Reserve moved to raise interest rates 14 consecutive times in 0.25 percent increments in an effort toreduce inflationary pressures. Bond yields, instead of moving in tandemwith the Fed’s rate hikes, declined. Short-term Treasury instruments wereyielding more than longer-term, and what developed was known as a flattening of the yield curve. At some points, we even had an inversion effect,where longer-term interest rate instrument yields were lower than shorterterm. Throughout history, that is a sign that the economy will soon proceedinto a recession.
HISTORY SHOULD REPEAT ITSELFOften it is said that history repeats itself. Economies and the world move incycles. Based on the market’s price behavior and the climb that commodity prices had, intermarket relationships were not moving in a traditionalway in 2005, or at least not in a manner in which they had in the past. History should have repeated itself, but it did not; or if it does, it will be a delayed reaction. Due to this keen observation, there was one solid piece ofadvice I was constantly giving to people through our trading room or in mynewsletter advisory service. It was, “Trade the markets independently ofeach other.” One reason for this advice was this: Not much was makingsense at times in the traditional way. Let’s face it, when crude oil or energies shoot to the moon, it is inflationary and has a taxing effect on consumers. We would have expected stocks to sell off sharply, and they did not(they did not rally much either in 2005). When federal deficits soar, it creates inflationary pressures; when the Fed raises interest rates, yields should
Introduction
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go up and Treasury prices should go down. The key word is “should godown.” What happened was just the opposite. Gold was the only mover thatacted in response to investors’ demand for protection on resurgence in inflation. In fact, at times, price swings of gold interacted well with crude oil.
DELAYED REACTIONAs of February 2006, the U.S. economy was in its third year of an economicrecovery. It remained a stock picker’s market, as we did see stellar movesfrom Apple, Rambus, AMD, and other lost hopefuls. But there were otherinvestors who were expanding their knowledge in trading other investmentassets, such as foreign currencies. There were others who made fortunes inreal estate. Unemployment in January 2006 was reported at 4.7 percent.Times were good and were probably going to remain good forever! Well,that’s where I must say, “You can’t cheat history.” As the old saying goes, ifit’s got four legs and a tail, it’s probably an animal. I see a delayed reactionand an economic downturn. Will it be the end of civilization as we know ittoday? I doubt it. However, I believe we will go into a period of an economicslowdown. Why? For starters, usually we see energy and commodity pricesrally near the peak of an economic upturn. Then, as the Fed fights inflation,they will continue to put the brakes on and continue to raise interest rates.Since no one knows for sure how soon or by how much consumers will adjust their spending habits, usually the Fed will go too far. That will slow borrowing and increase debt payments, especially on all those adjustablemortgage rates (ARMs) that so many people have. Yes, I believe an economic downturn will occur. I just believe it will be a delayed reaction. Itseems that most cycles have stretched a little further than people believe.Just ask all the folks who predicted a stock market crash in 1999. Theywere right, but quite a bit off in their timing. That leaves one to wonderwhere to go to make money.
TRADING FOR A LIVINGIf you don’t already know of my past, I started in the business as a runneron the floor of the Chicago Mercantile Exchange back in the late 1970s. Ihad the privilege of working with a true master trader, George Lane, thecreator of stochastics. I had a knack for the financial markets and learnedto trade the 30-year bonds. I also discovered how to use pivot points andhow to incorporate longer-term time periods in my analysis. Then came options on commodities; and in 1986 I made a fortune for myself and others in
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CANDLESTICK AND PIVOT POINT TRADING TRIGGERS
the bond market. I gradually improved my techniques; and through the understanding of candle charts while using them in conjunction with pivotpoints, I have developed quite a methodology that shows a high frequencyof recurring patterns. This is what I believe is one of the single best methods for identifying market moves for various trading vehicles. Trading for aliving is a fabulous career. Now more than ever, we have global market influences, advanced technology, equal access, market liquidity, and, best ofall, diversified markets investment vehicles. We have forex, or foreign currency exchange; futures products to day trade; and commodities that allowspeculators to participate in a structured, regulated, open marketplace thatoffers leverage. Then we have stocks to participate in investing for longterm growth. And there is a new breed of investment asset, exchangetraded funds. Most of these products offer options so as to hedge or speculate to fully capture a market opportunity and develop the right strategy toenhance rewards wile reducing risks.
THE NEW AGE TECHNICIANAs a technician, one who practices the art of technical analysis, I have nowmore than at any time in the past a greater edge in the marketplace.Through electronic market access and charting software with the power oftoday’s computers, I can take my refined market analysis methods and implement these strategies and apply them to all markets. As long as there isliquidity and a structured environment, and as long as I keep my tradingcapital intact, follow specific trading rules to manage risk, there will be abonanza of opportunities in the years ahead. I fully expect the techniquesthat I am sharing with you in this book to help you discover how to be aconsistently profitable trader. This book opens the door to how you canlearn to read charts and rely on price rather than on indicators. You willlearn what triggers momentum and what to look for in order to spot whena market changes direction. Another important element of this book is thatit will help you learn techniques to cut your losses quickly and to stay withthe winning trend, to ride a winning tide.
CHAPTER 1
Trading Vehicles,Stock, ETFs,Futures,and Forex
elcome to Trading Triggers. If you are an active trader or a firsttime investor looking for a trading method that suits your personality, then you have the right book. Trading for a living is anamazing and yet risky business. There is more to trading than buying andselling. There are often-missed but important issues that many books donot mention, such as not only how to make money in the market but alsohow to keep it and create a positive cash flow. The purpose of this book isto take you to a new level of trading knowledge by giving detailed explanations of technical tools that will help you develop your own trading systemso you can cultivate and extract money from the market, especially thosetraders who want high alpha (big returns) with reasonable standard deviation (volatility). I will explain some of the most obvious yet simple conceptsof how to interpret technical analysis and improve your chart-reading skillsso you can make money in the markets.There are two theories on how markets perform: efficient market theory and random walk theory.
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1. Efficient market theory lends to the belief that markets are always
priced correctly because the current price reflects all factual information. If the markets are efficient, then no fundamental information willgive an investor an edge in the market.2. Random walk theory lends to the belief that price movements do notfollow any pattern or trend and that past price behavior cannot be used
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CANDLESTICK AND PIVOT POINT TRADING TRIGGERS
to predict future price movements. In other words, the markets arecompletely unpredictable.I fall in the category of believing that history can and does repeat itself.People can and do make money based on technical analysis, and I am hereto help prove it.
IMPORTANCE OF A RULE-BASED APPROACHYou may have heard of Jesse Livermore, who was immortalized by EdwinLefèvre’s book Reminiscences of a Stock Operator (G. H. Doran, 1923;Wiley, 2006). Jesse was considered one of the greatest speculators of hisday. Many of his principles and ideas are still used. His three key conceptsof trading are (1) timing, (2) risk management, and (3) emotional control.This quote from Richard Smitten’s Trade Like Jesse Livermore (Wiley,2005, p. 70) sticks with me because it is as true now as it ever was (keep inmind that Jesse committed suicide in 1940, so this was stated nearly 70years ago): “All through time, people have basically acted the same way inthe stock and commodity markets as a result of greed, fear, ignorance, andhope: that is why the formations and patterns recur on a constant basis. Thepatterns the traders and technicians observe are simply the reflections ofhuman emotional behavior.”Most traders who are consistently profitable have learned to develop arule-based approach that doesn’t change. They have within their arsenal oftrading tools, definitive, recognizable, and frequently reoccurring patternsthat can be used to trade by a set of established trading rules. They canclearly define, without guessing or using a vague approach, support and resistance levels and what to do once prices reach those levels. Moreover,they have the ability to clearly define their entry, stop-loss, or risk parameters and their profit objectives in a consistent, repetitious fashion each timethey place a trade. This is what I do when trading my own account and whatI have taught my son and even my own father. My dad used to think tradingcommodities was like gambling until I showed him a method. This is thesame method that will be disclosed in these pages.It is important for you to realize that it is the emotional balance thathelps keep you on the profitable side of the ledger. You must never anticipate what the market might do, but rather wait for confirmation onyour triggers.Most traders who are profitable are flexible as to the anticipated outcome that may occur on each trade. Successful traders have the mindset todevelop the perspective that their trading business is to manage their
Trading Vehicles, Stock, ETFs, Futures, and Forex
7
money rather than to predict the future. Successful traders can emotionallyhandle losing trades or the negative trades that result from an error ortrading equipment malfunction. Remember that the business of tradingfor a living requires that you establish some kind of structure in a marketplace with countless variables. Why not consider trading by a set of rules?Most traders do not trade by a system; the term “black box” just meansthat a trader has input a set of trading parameters and automatically executes a trade based on a specific set of criteria—strict rules to automatically trade by.
START TRADING AS A BUSINESSIf you are currently trading for a living or if you are expanding your knowledge to learn how to trade for a living, remember that this is a business. Youneed to treat it like a business. Therefore, some considerations need to bemade, for example, forming a corporation in order to deduct such expensesas your computer equipment, quote feed, DSL (digital subscriber line), office rent, travel to investment conferences, and continued education seminars. What matters most to every trader and investor is creating a positivecash flow. You wouldn’t want to finally start learning to make money consistently in the market and find out that you cannot take any expense deductions. You should seek advice from a tax specialist so that you can takeadvantage of all regular and necessary expenses as business deductionsand save thousands of dollars each year.Let’s add up the examples I mentioned: Suppose your quote feed is$200 per month and your DSL is $40 per month. Renting a small one-roomoffice could run $500 to $700 per month. Then there are equipment expenses, such as your desktop computers, a laptop for travel, monitors andprinters and ink cartridges and general office supplies to purchase and upgrade from time to time, say $2,000. Attending an investment conferencecould mean $700 roundtrip airfare, plus $250 per night for hotel and meals.If you have business entertaining expenses and went to at least two conferences per year, you could be talking as little as $5,000 to as much as$25,000 in actual business expenses that can be deducted if you are runningtrading as a business.If you are a first-time smaller investor and decide that trading for a living is something you have the financial resources, time, and emotionalmakeup to do, what business plan do you have in place to protect themoney you make in the market? Where will you put your profits as a shortterm trader? Some traders have had many problems with this issue; it issimilar to the old expression of “Robbing Peter to pay Paul.” After all, who
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CANDLESTICK AND PIVOT POINT TRADING TRIGGERS
wants to make money in a buy-and-hold long-term position strategy only togive it back day trading, and vice versa.I am going to show you a trading method based on combining candlecharts, to help identify shifts in momentum, and pivot point analysis. I willteach you very succinct rules, which is what I have taught to professionaltraders on the floor of the exchanges and introduced to thousands of private investors, including other leading trading educators who now effectively teach my trading methods. I will walk you through deciding whatinvestment vehicles are available, when and how to decide which investment vehicle would better suit a trader under various market conditions,and how to develop a trading strategy based on the specific trading triggers.
EDUCATION IS THE KEY TO SUCCESSTraders need and, moreover, have an obligation and responsibility to understand as much as possible about how the markets that they trade workand what makes them function. It is vital to your success that you continueto learn not only about the market but also about your trading hardware orcomputer equipment. For example, if you trade off a laptop, you shouldknow how to disable the tapping feature on the touch pad. After all, whowants to accidentally place the wrong order on line? That has happened totraders because the touch pad is ultrasensative. Simply moving your fingeror having your shirt sleeve touch the pad can act as an action click. Tradersshould know how to set up and troubleshoot office or home Internet connections or at least have a brokerage account that offers assistance in taking over-the-phone orders.Traders need to learn and comprehend all the features and benefitsthat charting software packages offer and should know all about the orderentry platforms and, more specifically, the brokerage firm rules and procedures for trading. Traders should make sure the brokerage firm has thetitle of the account set up so if ever there is a situation where you wish towire money into an account, it matches the name on the bank to your trading account. You don’t want an important wire to be rejected. In a situationwhere you want to either put on more positions or add a second account totrade a great opportunity, how sad it would be for back-office personnel toreject the wire, resulting in a lost opportunity.A great trader is always looking to learn. One of the best processes tolearn is asking a series of questions; evaluating the dynamics of a situationor event; and seeking out how to take advantage of that event within the financial resources, risk factors, and time constraints in place.The traits that most professional and consistently profitable traders
Trading Vehicles, Stock, ETFs, Futures, and Forex
9
possess are that they follow a trading plan on extensively tested researchand limit losses while letting winning positions ride. Winning traders exhibit the qualities of patience and discipline. The techniques that will betaught in this book will help you master those two qualities.Other traits that winners possess are that they diversify into varioustrading positions, while committing only 10 to 40 percent of accounts equityin the markets. Successful traders commit their full attention to the markettrends and prices, and they act on trading signals immediately.They also seem to possess the ability to accept winners and embracelosers, and they don’t let either of these outcomes generally influence theirnext trade decision. They stay in the now and react to what the market iscurrently doing. Winning traders take breaks from trading. Through continued education and the process of asking questions, they gain an edge andstay on top of their competition through diversification or other more advanced trading strategies.
TRADERS NEED TO ASK MORE QUESTIONSThe process of asking questions is what is needed in order to gain moreknowledge. The trouble is, most traders do not have enough experience toknow what the right questions are. If you apply simple common sense,then you will be on a great start to learn how to identify investing or trading opportunities and find the right strategy to take advantage of thoseopportunities.Some questions traders need to ask themselves include, just forstarters: How much time do I have to dedicate to the markets? If I enter aday trade, do I have the time to watch this position, or do I have an appointment or meeting scheduled for that day? What are the possible outcomes of what I am about to do, based on what I have control over?Focus on what it is you want to achieve, write it out, and concentrateon that goal. Think of the consequences or possible outcomes of your actions so you will have a more balanced emotional reaction if the outcomeis not as positive as you expected. Ask questions such as:• Do market conditions warrant increasing or decreasing my positionsize?• Are there reports coming out that may impact the market or my position?• Are my entry and exit targets justified?• If the market is so bearish, why won’t it go down?• If the market is so bullish, why won’t it rally?
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CANDLESTICK AND PIVOT POINT TRADING TRIGGERS
Trading without asking questions or without probing leads to tradingblindly or without a plan. It opens the door for destructive emotional interference. Another quote from Jesse Livermore helps confirm this: “There isnothing new on Wall Street or in stock speculation. What has happened inthe past will happen again and again and again. This is because human nature does not change, and it is human emotion that always gets in the wayof human intelligence. Of this I am sure.” (Smitten, Trade Like Jesse Livermore, p. 167)That statement was made over 65 years ago and is without a doubt stillapplicable to this day. Do not let your emotions get in the way of your trading decisions. If you ask the right question before placing a trade, you standto gain an edge on winning the emotional battle of trading. It is generallythose who are afraid of losing through fear itself who stand to lose becausethat emotion will interfere with rational, well-thought-out trading plans.Asking yourself the right questions will help you to choose a more apropriate investment vehicle or trading strategy. For example, ask yourself before entering a trade: What are the time expectations for a result to occur?Do I have availability of time to see the trade through? Would short-termday trading or swing trading be possible if I have a regular day time job? Inwhat time zone do I start work? This is relevant because a person living onthe West Coast could trade an early morning market such as the ChicagoBoard of Trade (CBOT) bond contract opening session; however, a personwith an early morning job may want to consider foreign currency or forex(Foreign Exchange) trading on the European session starting at night.In order to know what time demands you need, you should also askyourself if you have the tolerance for trading a leveraged product and ifyou have the tolerance for the risks: Should I use a time period stop—if themarket does not move or react within a specified time period, should I exitthe position? Should I use a conditional stop, such as a “stop-close only”order? Does my order platform take such orders, or do I need to manuallywatch and then implement such an order? (In intraday trading, the answeris yes, you need to manually watch the close of the time period you are trading in.) Can I afford to place a stop, say, 10 or 20 percent of my overall account value?You need to be clear and honest with yourself when answering theseevaluation questions. Remind yourself by asking: Why am I trading? Whatare my expectations? (I have met too many people that look at trading as aneasy and quick way to make money or to replace their current career.)Based on your trading account size or your risk capital