{"id":54607,"date":"2016-06-19T02:00:04","date_gmt":"2016-06-19T09:00:04","guid":{"rendered":"https:\/\/brookstradingcourse.com\/?p=54607"},"modified":"2019-01-24T23:59:51","modified_gmt":"2019-01-25T07:59:51","slug":"skunk-stops","status":"publish","type":"post","link":"https:\/\/www.brookstradingcourse.com\/es\/ask-al\/skunk-stops\/","title":{"rendered":"Ask Al: Skunk stops"},"content":{"rendered":"<h2>Skunk stops\u2014taking the middle road<br \/>\nBPA trading room Q&amp;A: April 13 &amp; June 9, 2016<\/h2>\n<p class=\"content-box-green\">Question 1: I sold the 14 close, okay, and scaled in, closed out above 13. [That makes perfect sense. I think that\u2019s reasonable.] I bought the 26 close and scaled in, closed out below 24. [Okay.] Can you comment on these decisions? Is this representative of how many tradings tend to play out? Really trying to follow along.<br \/>\n<em>Video duration: 6min 14sec<\/em><\/p>\n<div style=\"position: relative; height: 0; padding-bottom: 56.25%;\"><iframe class=\"sproutvideo-player\" style=\"position: absolute; width: 100%; height: 100%; left: 0; top: 0;\" src=\"\/\/videos.sproutvideo.com\/embed\/e89adfbb1318e7cc60\/2410f7e4ea6bea6a?playerTheme=dark&amp;playerColor=\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/div>\n<\/p>\n<p class=\"caption\">You can also view this video on <a href=\"https:\/\/youtu.be\/kprorGhESKk\" target=\"_blank\" rel=\"noopener\">Al&#8217;s YouTube Channel<\/a> if needed.<\/p>\n<h3>Skunk stop trading<\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-full wp-image-54610\" src=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/skunk-road.jpg\" alt=\"Dead skunk in road\" width=\"300\" height=\"225\" title=\"\">Yeah, I think what you\u2019re doing is, you\u2019re using skunk stops. Stops that stink or dead skunk stops, right? This comes up all the time. So I think selling the 14 close, you\u2019re taking a chance that you\u2019re going to get the breakout below the moving average and that you get follow through selling below 1. I think that is okay. I think most traders who did that would exit above 13. So I think selling the 14 close, getting out above 13 is reasonable. Other traders will say, \u201cNah, it\u2019s a trap; it\u2019s a trading range. It will go above 13 and stay below the 5 high,\u201d and 5 high is not much above the 13 high, so if you\u2019re going to sell 14 close, put your stop above 5. And I don\u2019t have a problem with that either. You know, you just never know in hindsight.<\/p>\n<h3>Choose your stop<\/h3>\n<p><a href=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160416-ES-Chart-Skunk-Stops-1.png\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-54612\" src=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160416-ES-Chart-Skunk-Stops-1-300x234.png\" alt=\"Ask Al Brooks ES Chart Skunk Stops Example 1\" width=\"300\" height=\"234\" title=\"\" srcset=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160416-ES-Chart-Skunk-Stops-1-300x234.png 300w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160416-ES-Chart-Skunk-Stops-1-600x468.png 600w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160416-ES-Chart-Skunk-Stops-1.png 748w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>If I sold the 14 close, I would be concerned about 15 and 16. And I probably would get out above 16, and that\u2019s why 17 looks that way.\u00a0 A lot of the bears did that; they were not happy with 15, not happy with 16, and they decided if it was up one more bar, \u201cI\u2019m out of here.\u201d\u00a0 So a lot of the bears exited above that.<\/p>\n<p>As far as buying the 26 close, I talk about that at the time.\u00a0 I said, \u201cIf you\u2019re buying up here, you really need a wide stop because this has the potential to be followed by a deep pullback and a trading range.\u201d\u00a0 So if you\u2019re buying above 26, either you get out below 27 or on the 29 close, the early exits. Or you have to use a really wide stop, like below 14. And that 24 was a magnet at the bottom of the most recent buy climax &#8212; 24, 25, 26 &#8212; and if we start going down, it\u2019s probably going to go below the 24 close.\u00a0 So that\u2019s the one place where you do not want to put your stop.\u00a0 Either you get out before then or you use a stop at the bottom of the bull leg, 14.<\/p>\n<h3>Focusing on risk only<\/h3>\n<p>So that\u2019s my thought there.\u00a0 I understand when traders start out they only think one thing:\u00a0 <a href=\"https:\/\/www.brookstradingcourse.com\/how-to-trade-manual\/traders-equation\/\" target=\"_blank\" rel=\"noopener\">Risk<\/a>.\u00a0 \u201cI don\u2019t want to lose &#8212; I cannot lose much money,\u201d and therefore, beginners tend to use tight stops.\u00a0 But they also are kind of torn.\u00a0 \u201cOkay, Al keeps saying swing.\u00a0 I got to use a swing stop, but I want to use the smallest possible swing stop so that I\u2019m not risking too much.\u201d And the result is they end up using a skunk-type stop.\u00a0 An in-between stop.\u00a0 They don\u2019t want to take the early exit, below 27.\u00a0 They want to give their trade time, but they don\u2019t want to really risk all the way down here [below 14] because it\u2019s just too much. And they end up getting out somewhere in the middle, which is around a 50 percent pullback. And that\u2019s where strong bulls are starting to buy.\u00a0 And I said at the time, \u201cStrong bulls will buy the 24 low and bears will take profits at the 24 low, so we\u2019ll probably get at least a little bit of a bounce.\u201d<\/p>\n<h3>Out early or wide stop<\/h3>\n<p>I hope that\u2019s clear.\u00a0 So you either have to decide that \u201cI\u2019m going to get out early and then if it keeps going up, I\u2019ll buy again.\u201d Or \u201cI\u2019m going to use that swing stop &#8212; which is really far away and I don\u2019t want to use it, but that\u2019s my choice. I\u2019m either going to trade small enough so that I can use the swing stop and scale in lower. Or I\u2019m going to get out early, like below 27 or on the 29 close.\u201d\u00a0 And anything in between those two choices is, I think, a losing strategy.<\/p>\n<p class=\"content-box-green\">Question 2: I bought the close of 46 [that\u2019s okay] stop below 45. [Okay.] I scaled in once more and I got stopped out on my stop loss.\u00a0 Should I have exited earlier? [Okay.]<\/p>\n<h3>Another day, another skunk stop<\/h3>\n<p><a href=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160609-ES-Chart-Skunk-Stops-2.png\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-54613\" src=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160609-ES-Chart-Skunk-Stops-2-300x224.png\" alt=\"Ask Al Brooks ES Chart Skunk Stops Example 2\" width=\"300\" height=\"224\" title=\"\" srcset=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160609-ES-Chart-Skunk-Stops-2-300x224.png 300w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160609-ES-Chart-Skunk-Stops-2-768x574.png 768w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160609-ES-Chart-Skunk-Stops-2-600x448.png 600w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/06\/Ask-Al-64-160609-ES-Chart-Skunk-Stops-2.png 780w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>Every now and then, I talk about a skunk exit, and that\u2019s an example of a skunk exit, okay?\u00a0 You have a buy climax, okay, and there are going to be a whole bunch of stops below 46, below 45, right?\u00a0 So you know that if it starts going down, it\u2019s going to get at least a tick below 46.\u00a0 However, you also know that there\u2019ll be buyers down there as well. And then because we might be getting a test at the open of the day, there probably will be buyers at the open of the day.\u00a0 I bought at the open of the day.\u00a0 I bought a couple ticks above the open of the day for a scalp.<\/p>\n<h3>Middle of two good choices<\/h3>\n<p>So when I say a \u201cskunk exit,\u201d I\u2019m talking about one in the middle of two good choices, and usually you get killed if you\u2019re in the middle.\u00a0 So to me, the choices are &#8212; you can see what happened:\u00a0 46 close; bulls did not like 47, they hated 48, and then look what happened 49, right?\u00a0 It went back above the 46 close and came back down.\u00a0 So that tells you that a lot of the <em>Buy the Close<\/em> bulls\u2019 46 were disappointed 48 and they got out on 49. And more and more bulls started to get out here.\u00a0 So to me, I\u2019m either getting out below 48 or I\u2019m getting out below 50 or 49, or I\u2019m going to use a really wide stop down here [below 33].<\/p>\n<p>And what bulls do is they either get out here [B48] or they get out down here [below 33], and as it\u2019s selling off they can be buying one, two, three points down.\u00a0 A lot of bulls don\u2019t do that.\u00a0 Instead, they wait for a bull bar &#8212; 54 &#8212; and then they buy above the bull bar. And then they try to get out breakeven around their original entry.\u00a0 That\u2019s what caused this big tail here [B60].\u00a0 Or they just hold part or all to see if we get a swing up.<\/p>\n<h3>Understand what is going on<\/h3>\n<p>So back to your question, you buy that close [46] stop down here [below 45].\u00a0 That\u2019s the one place I would not put my stop.\u00a0 I would either get out below 48 or below 49, below 50. Or I would just use a wide stop down here [below 33] and wait for a bull bar and buy more above the bull bar.\u00a0 Hard to do, especially when you see a collapse like 53. But if you understand what\u2019s going on, then it\u2019s simply a test of the open in a trading range day, it\u2019s easier to rely on the wide stop, okay?<\/p>\n<p><em>Al Brooks<\/em><\/p>\n<p><a title=\"Al Brooks&#039; trading room\" href=\"https:\/\/www.brookstradingcourse.com\/online-day-trading-room\/\">Information on Al&#8217;s Online day trading room<\/a><\/p>\n<hr \/>\n","protected":false},"excerpt":{"rendered":"<p>Skunk stops\u2014taking the middle road BPA trading room Q&amp;A: April 13 &amp; June 9, 2016 Question 1: I sold the 14 close, okay, and scaled in, closed out above 13. [That makes perfect sense. I think that\u2019s reasonable.] I bought the 26 close and scaled in, closed out below 24. [Okay.] Can you comment on [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[159],"tags":[],"class_list":{"0":"post-54607","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-ask-al","7":"entry","8":"has-post-thumbnail","9":"override"},"featured_image_src":null,"author_info":{"display_name":"BTC Admin","author_link":"https:\/\/www.brookstradingcourse.com\/es\/author\/richardhk\/"},"_links":{"self":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/posts\/54607","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/comments?post=54607"}],"version-history":[{"count":0,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/posts\/54607\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/media?parent=54607"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/categories?post=54607"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/es\/wp-json\/wp\/v2\/tags?post=54607"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}