😱What's a Stop?
A price action guide based on live trades and a YOLO of the day
Stops do matter and here’s a window into the style we use for price action. I was taught by my mentor, which I personally find to be more effective than a percentage-based stop.
Trade: 745c
We took this trade for a couple reasons -- first you can see that there is upward momentum pushing the level -- you can see in yellow on the third hourly touch overnight the trend has established itself.
2 -- SPY Magic is also pumping out calls (this is our proprietary 90% accurate SPY Whale Filter) with almost no brakes -- a strong signal we’re bouncing for sure, especially given Friday’s movement.
So where do we stop? It’s hard in volatility, but ultimately I look for a) the worst case scenario and b) what signals that scenario is in action to determine where to stop, which is almost always B.
The worst case scenario would be the gap fill to the downside that was left open here overnight -- lately they’ve been leaving bearish gaps open for weeks rather than hours or days, but we note it as a real possibility if havoc is coming.
Our signal that that would be coming, then, would be the dual level on both SPY and ES around 7429 breaking…
Dual Level to Watch ~ 7429 ES // 740.5 SPY
A -- ES: You can see on the pump they just missed the hourly backtest on ES, meaning there is a decent percentage chance at some point they will check it off -- and they do just that.
B -- This also represents a monthly level on SPY, meaning that it is now doubly important.
So, when determining our stop what we’re looking for is the dual ES/SPY level to fail -- that would signal the upside is broken, at least for now. Anything outside of that -- say an hourly bounce here -- would mean the level of importance held through what was, essentially, a mechanical backtest that has timing which was seemingly random to you or I but always a real possibility.
Later in the session they did just that. Does that mean the trade immediately becomes a winner? Not necessarily. Does it mean we understood where our stops are and reacted accordingly to give us a better exit than a panic on a dip below the level? Yes.
