I was on the road on Friday. One of the interesting things I learned is some guy gave a seminar recently on how banks and brokers do nothing but live off the stops of the retail investor, with trading desks gleefully pushing prices just far enough to stop out the “little guy”.
Nonsense.
It”s the big guys stops they are after!
But seriously folks, stop obsessing over the idea that there is some organized effort afoot to drain your account. In reality, most firms couldn’t be bothered, knowing full well you’ll drain it all by yourself.
The markets are like the African savannah. Wounded baby antelopes are consumed by larger, stronger predators. It’s the circle of life, to coin a phrase.
The idea is to become a healthy, fully-grown antelope, able to avoid predators. How do they survive and prosper? By being smarter and more nimble than their brutish pursuers.
Want to avoid getting stopped out at every turn? Don’t place your stops in obvious places.
Are you long for a bounce after the market bottomed at 50? Don’t place your stop at 47: you’re just begging to be harvested.
Stops tend to gather in very obvious places: just below support and above resistance.
So be the hunter, not the hunted.
Has the market bounced to 40 three times? Guess where the stops are? 45/50. If you want to get short (hopefully with the established trend), sell into the stops and “feed the chickens when they’re hungry”.
Soon the chickens will have indigestion and the prevailing trend will return, with you in a position of strength rather than weakness.
