Shorten Your Risk Exposure Time With Market Timing

One of the most difficult tasks that traders have is determining the right amount of risk exposure when entering a trade. Since every trade should be accompanied by a protective stop-loss order, the question always comes down to "how much room should I allow the market to move against me before getting stopped out?"

Some traders rely on previous support and resistance levels as a place to put their stops. However, often these areas are gunned for because floor traders know that there are plenty of orders waiting there for the taking.

Some traders will draw lines below or above sloping trends and use that as a stop-loss reference, often expecting the market to continue with that pattern. But then, how many times do we see that pattern get violated right when we discover it is there?

Others will use some percentage value, either based on some fixed profit expectation or a percentage of available funds, to determine their initial stop-loss.

There are many different approaches to picking a stop-loss. My personal preference and what I believe to be the best approach most times is to use the expected and confirmed swing price.

What do I mean by 'expected and confirmed' swing price?

As of 2019, it has been 30 years that I have focused on the science and mathematics of market behavior. More specifically, forecasting market swings (aka turns) in advance. This approach requires a firm understanding of several methods of forecasting, including the popular and well-exposed techniques involving Fibonacci and Gann ratios, to name just two. There are so many more!

By learning and applying various market timing techniques that are designed to expose the underlying cyclic behavior of the markets, the trader can then use this information to 'shorten the risk exposure' of any given trade.

Here is how this works.

Suppose by way of using some proven method of determining high-probability market turns you arrive at the expectation that a swing bottom is highly likely to occur in the next day or two (at the very latest). Your method is usually 80% or better in accuracy, so you do not have to concern yourself with whether it will be on time (say tomorrow), or one day late (the following day).

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Disclaimer: The analysis provided is not a recommendation or suggestion to buy or sell any commodity, index, or derivatives but for information purposes only. No trading advice is being offered or ...

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