Article: Protective Stops Strategy

Initial Stop:

1. Upon entering the market Long, place a stop-loss below the low of the V or W bottom turn.
2. Upon entering the market Short, place a stop-loss above the high of the V or W top turn.
3. The stop is placed to avoid exiting a correct position during a normal retest of the turn.

Stop Adjustment (assuming a Long position):

1. On the 5th bar from the turn, move your stop-loss to your entry price so that your position becomes a 'no-risk' trade.  If the low of the 5th bar is below your entry price, then place the stop at the low of the 5th bar instead of at your entry price.
2. On the 8th bar, raise your stop to the low of the last 5 bars.
3. On the 13th bar, raise your stop to the low of the last 4 bars.
4. On the 21st bar, raise your stop to the low of the last 3 bars.
5. On the 34th bar, raise your stop to the low of the last 2 bars, and adjust with each succeeding bar.

Exiting A Position:

1. Using the strategy for the protective stops, the exit will take care of itself.

The illustration shows theoretical stop adjustments numbered according to the strategy statements given for the stop adjustment.  X marks the turning point the bar counting is made from and the initial stop placement.   Disclaimer:  This stop strategy has not been sufficiently researched.  It might be worthless.

Article by Howard Arrington