GO
Loading...

» more from Futures Now

Setting Stops

When setting stops, Ilczyszyn recommends referencing key technical levels.

Ilczyszyn suggests traders set their sell stop below key technical support. Set the buy stop just above key technical resistance, he said.

"These levels represent prices at which your investment thesis might change," Ilczyszyn explained.

To illustrate his point, Ilczyszyn gave an example. If a trader buys a gold futures contract at $1,665, the price target on the upside is $1,785. A sell stop should be placed at just below key technical support of $1,600, he continued, for a stop loss specifically at $1,599.

So how does this trade make money?

"I'm risking one to potentially make two. So, on the upside I'm looking to take 120 bucks profit. On the downside, I'm risking $66," Ilczyszyn said. "So this game plan allows you to make more money than you can lose. So that's why stops matter — they allow you to succeed."

Photo: Getty Images