Types of money management stops

Risk:

Controls risk - the amount of risk that can be determined and defined by the money management stop.
Types of money management stops:
1st fixed dollar amount
2nd function of the average true range
3rd price level (ie, bar high / low)
Uncontrolled risk:
1st Overnight exposure (near the open risk). You can exit the position when the market is not trading. Thus, you are subject to unwanted gaps, which may be exaggerated by the news and events.
2nd Slippage risk. Fast market conditions or thin, volatile markets often cause a trader to be filled at prices much worse than expected.
In general, the numbers behind most systems are very dependent on capturing a few good trades. You can not afford to miss a good trade that can make your month.
Here are some tips for trading this or any other system:
1st Gain confidence by first trading system on paper.
2nd Make sure you can successfully replace the mechanical system before you try to add discretion.
3rd Track your actual performance against the mechanical system at the end of each day, rating your success, whether you can match the performance of the system.
4th Monitor performance over an adequate sample, perhaps 100 trades or a set number of weeks. Do not let down week or trade deter you.
5th Managing exits rather than filter the entries. It is impossible to tell in advance which trades will be good. In one entry skipped might be great, and nobody can afford to miss. Managing exit means two things: first, to learn when it is okay to let that occasional great trade run an extra hour or two before leaving, and the second (which really depends on skill level), learn to recognize when a little early trade is not working and exit just before the station is hit.
6th All systems display subtle nuances and insights into market behavior over time. Keep a notebook of observations and patterns you notice. This way you can truly "make your own system.
7th Never worry about how many other people are shopping systems. If it seems too much slippage, it often suggests a significant breakout from a triangle or a period of slowdown. Remember: Something had to drive the market far enough to penetrate the breakout point in the first place!

If you are interested in reading more on the principle of range expansion / contraction range, Toby Crable pioneered some of the best research in this area. I would strongly recommend his book Day Trading with short-term Price Patterns and Opening Range breakouts. The research in this book provides one of the most solid platform for developing volatility breakout system based on the opening price. Toby is a CTA who now manages more than $ 100 million based on some of these techniques. Another excellent book value is Curtis Arnold, PPS trading system. He discovers another kind of system based on breakouts of traditional chart patterns as identified in the book of Edwards and Magee's Technical Analysis of Stock Trends (another classic book that should be in every serious library market technician is!) . Curtis original system was sold for over $ 2,000. The book is essentially the same and sell for $ 50 less! These books, in addition to many others (including street smarts), can be ordered online by clicking below: