Know to the Tick Where to Place Your Protective Stops? Hubba-Hubba

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Know to the Tick Where to Place Your Protective Stops? Hubba-Hubba
Elliott Wave Junctures' newest video trading lesson shows you how the rules and guidelines of the Wave Principle allow you to manage risk

By Nico Isaac
Fri, 11 May 2012 13:45:00 ET

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See if this scenario sounds familiar:

You go online, or call your broker and tell him to buy "x" amount of shares of "XYZ." Then, you pick your protective stop. Basically, you choose an arbitrary, least-coronary-inducing number you'd be semi-comfortable with losing should your trade go sour. For example, you say "put the stop 10% below my entry point," thus limiting your losses to 10% -- all the while sweating bullets.

It ain't perfect. But you suck it up because the notion that you could actually calculate a specific break point is the white unicorn of the trading world. OR is it?

In the new, May 10 Elliott Wave Junctures video trading lesson titled "Points of Ruin," EWI's senior analyst Jeffrey Kennedy reveals that said unicorn does in fact exist via the Wave Principle. "Hello and welcome," Jeffrey begins, and gets right to it:

"One of the key aspects of the Wave Principle is that it is governed by a specific set of rules and guidelines.

"These allow us to identify precise [price] levels to the tick -- to the pip [in forex] -- where we are wrong and right; these are excellent points where we can actually put our protective stops...

"Quantitative and fundamental analysis does not do this, and very few forms of technical analysis do this."

Jeffrey then demonstrates to you an important Elliott wave rule, one that pertains to the price action following a triangle wave pattern. In Jeffrey's words:

"Prices cannot fall below the extreme of wave E, or else the triangle interpretation is not viable."

Then, Jeffrey applies this rule to the real-world price charts of 2 major financial markets. The second of the two, reprinted below, shows that critical wave E extreme which makes or breaks a triangle labeling.

And guess what -- this price level is also your protective stop for the bullish post-triangle thrust scenario:

The second real-world example you find in Jeffrey's May 10 Elliott Wave Junctures video lesson is of the Dow Jones Transport Average.

So, what are you waiting for? Don't pick another random stop again. Watch this new, 6-minute May 10 Elliott Wave Junctures video lesson online now -- and know, to the tick, how to limit your position risk.

FREE BONUS: Subscribe today and get instant access to the complete Elliott Wave Junctures video library going back to April 2, 2010 -- that's over 20 unique trading lessons!

Get Real-World Trading Lessons to Help You in Real-Life Trading Scenarios

"The best way to learn how to spot Elliott wave opportunities is to find an experienced mentor to teach you using real-life examples. That's what Elliott Wave Junctures does, and Jeffrey Kennedy is one of the best teachers I know." - Robert Prechter

Let veteran Elliott wave analyst Jeffrey Kennedy be your trading mentor. 3-5 times per week, Jeffrey walks you through REAL market junctures with one overarching goal: to help you master the critical aspects of spotting and acting on high-probability trading opportunities in the markets you follow.

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Tags: Elliott wave, Elliott Wave trading, fundamental analysis, Jeffrey Kennedy, technical analysis

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The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.