? Time Based
? Indicator Based
Stops that are priced based are generally used when the other two have not functioned. To make this work you will need to make hypothesis?s about the trade and identify a low point in that particular market. Then you will set your trade entries near your points, thus making sure that losses will not be overly excessive if the hypothesis fails.
Time Based stops constitutes making use of your time. Designate a holding period you allow to capture a certain number of points. If you have no achieved your desired profit within that time limit, you should stop the trade. If effectively used you should stop even if the price stop limit has not been achieved.
The Indicator based stop makes use of market indicators. As a trader, you should be aware of these indicators and utilize them extensively within your trading experiences. Look at indicators such as, volume, advances, declines, and new highs and lows.
Experts in trading psychology say that setting stops and rehearsing them mentally is a good psychological tool to use and will help ensure that you follow through.