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Friday, October 14, 2005

Why I always use a stop-loss...

1.) What did I see?
A gap down and weak first bar. The second and third bars were weak and narrow range, with a bearish candle on the third bar.
2.) What is the entry?
A break of the third bar low.
3.) What is the exit?
The Fibonacci extension of the previous day's high to the opening range low. It was not hit, as WAT went into a sideways consolidation and eventually took out my stop. This set-up is usually reliable, but nothing is 100%...which is why I always use a stop-loss*.

*stops are always a break of the high (if short) or low (if long) of the entry bar, unless otherwise noted.

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