Sticking to stop loss is a must to do when ((BUYING the DIP))
Updated
Opening a position without setting a stop loss is a big mistake and it can be disastrous when buying the dip !
Here, we show a tempting setup to open a long position in rectangle (1). It is of course OK to go long in this setup in the hope of catching possible up coming up going wave shown in green. But without setting a stop loss? Not at all ! Followings are just two simple possible scenario which may happen:
Rectangle (2) shows a scenario which may happen if lucky. Although it will bring us profit, believe me it bothers all the traders a lot emotionally. Lots of hopes and fears which makes us nervous. This not only ruin our current trade but also has a powerful negative impact on our next trades.
Rectangle (3) shows a terrifying scenario which can whip out all our capital ! Please keep it in mind that " Preserving capital is a first rule of trading ". If you think this is an unrealistic scenario just take a look at ETSY, SHOP, SQ and ROKU.
Be aware my friends : what we consider a possible abc form of correction can just be waves 1,2 and 3 of a larger degree wave 1 or A. This concept is shown on the rectangle (3) scenario. It is worth to note what is labeled as wave 1 or A in this rectangle is not end of down side move .There will be another at least same size down side move after a wave 2 or B counter trend correction. See the charts carefully to find out what is next after waves 1 or A.
There are 4 major rules in trading :
1. preserving the capital
2. preserving the capital
3. preserving the capital and if successful then:
4. making profit.
Hope to be helpful and good luck.
Here, we show a tempting setup to open a long position in rectangle (1). It is of course OK to go long in this setup in the hope of catching possible up coming up going wave shown in green. But without setting a stop loss? Not at all ! Followings are just two simple possible scenario which may happen:
Rectangle (2) shows a scenario which may happen if lucky. Although it will bring us profit, believe me it bothers all the traders a lot emotionally. Lots of hopes and fears which makes us nervous. This not only ruin our current trade but also has a powerful negative impact on our next trades.
Rectangle (3) shows a terrifying scenario which can whip out all our capital ! Please keep it in mind that " Preserving capital is a first rule of trading ". If you think this is an unrealistic scenario just take a look at ETSY, SHOP, SQ and ROKU.
Be aware my friends : what we consider a possible abc form of correction can just be waves 1,2 and 3 of a larger degree wave 1 or A. This concept is shown on the rectangle (3) scenario. It is worth to note what is labeled as wave 1 or A in this rectangle is not end of down side move .There will be another at least same size down side move after a wave 2 or B counter trend correction. See the charts carefully to find out what is next after waves 1 or A.
There are 4 major rules in trading :
1. preserving the capital
2. preserving the capital
3. preserving the capital and if successful then:
4. making profit.
Hope to be helpful and good luck.
Note
If you are a dip buyer I strongly recommend you to review this publication. Good luck.
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