"Thank you and Eoin for a great service as always- I have recently begun to attempt to educate myself on the skills of spread trading and am fully aware it is not for the faint hearted. In relation to the trades you opened yesterday in both gold and silver can you let me know at what level below the purchase price you set your stops and have you a strict rule of thumb for this in all trades."

David Fuller's view Thanks for your kind words.

The short answer is that I do not have "a strict rule of thumb for this [stops] in all trades." Price change activity is highly variable and one needs to adapt to circumstances.

In common with many people who trade, I have always felt that stops were the most difficult part of the challenge. This has increased due to high frequency trading in recent years which has expanded intraday volatility for high-beta instruments such as silver. I illustrated this yesterday and you can also see it on today's intraday price swings. A tight stop on a newly opened position in silver will most likely result in a loss.

I have compensated by reducing the size of my positions somewhat, allowing me to participate with looser stops and if I am going to increase exposure, I prefer to do so by leveraging up behind trailing stops within an ongoing trend. Incidentally, I have often mentioned this and if you use the Archive Search facility (shown upper-left, fourth item down) and type in trailing stops, you will find 163 entries.

The best rule for trading is: Do not trade with money that you cannot afford to lose. Otherwise, the stress will be intolerable.