No matter what technical system you use, always remember the first rule of successful trading and investing: Cut your losses short. The SMR Cluster Tool (SMRCL) was developed to help you quickly find basic support and resistance levels in a market, which in turn will help in the placement of the stop loss order.
You begin by choosing which price levels you want the cluster tool to use: Highs, Lows, Closes, Etc. You then decide over which time period you want the SMRCtr to scan. After you have clicked on the SMRCtr and chosen the appropriate time periods, market values will begin to appear on the chart (Figure 14). You will see re-occurring values that can be identified as support, if they are under the current market price, or resistance, if they are above the current market price. Your stop loss orders can now be placed at levels above resistance or below support. Also keep in mind, to always place your stop order far enough away from the current price, so that normal price fluctuation will not stop you out. When you are trading with the trend and using the SMR Momentum Indicators, the market shouldn’t go an average daily range against you. While you don’t want your stop too tight, you also don’t need to place it too far away, especially if you have entered the trade correctly.
No one can trade or invest without losses. Danger is always present in every trade that you make, whether it is for investment purposes or speculation. Once in the market, you must be constantly on your guard, always expecting the unexpected. Stop loss orders are a mark of a professional attitude, one that acknowledges the ability to falter and has the wisdom of money management.
An essential part of trading a market is for a trader to make a commitment only if the probable profit exceeds the potential risk. A stop order should be placed on every trade you make, and the placement price should be determined before a commitment to a market is made. Once you have entered a trade, there is a tendency to change the way you look at it. So, if you have not placed a stop prior to entering a market, you may not be able to determine the correct placement for the stop or you may not even place it at all. Stop orders are an aid to judgment, allowing a trader to operate with less concern and more mental poise. We cannot overemphasize that stop loss orders should be used with every transaction. You should never carry a trade through a losing period just to prove to yourself and/or others that you were right. This type of trading will sooner or later eat up all of your trading capital.
Cluster Parameters
•Color and Weight
•Period: Allows the user to choose the number of days to be evaluated.
•Value: The value used for the projection line. The user may choose either the Open, High, Low, or Close.
•Date
•Time
•ID: Includes a checkbox to allow the user to choose Current Only.
•IdWt: Sets the thickness for the Id label.
•ScaleLabel: If selected the vertical scale values for the lines will be highlighted.